CONSTELLATION BRANDS, INC. INTRODUCTION
This MD&A provides additional information on our businesses, current developments, financial condition, cash flows, and results of operations. It should be read in conjunction with our consolidated financial statements and notes thereto included herein (the "Financial Statements") and with our consolidated financial statements and notes included in our 2020 Annual Report. This MD&A is organized as follows:
•Overview. This section provides a general description of our business, which we believe is important in understanding the results of our operations, financial condition, and potential future trends.
•Strategy. This section provides a description of our strategy and a discussion of recent developments, significant investments, acquisitions, and divestitures.
•Results of operations. This section provides an analysis of our results of operations presented on a business segment basis for the three months endedAugust 31, 2020 ("Second Quarter 2021"), andAugust 31, 2019 ("Second Quarter 2020"), and the six months endedAugust 31, 2020 ("Six Months 2021"), andAugust 31, 2019 ("Six Months 2020"). In addition, a brief description of significant transactions and other items that affect the comparability of the results is provided. •Financial liquidity and capital resources. This section provides an analysis of our cash flows, outstanding debt, and a discussion of the amount of financial capacity available to fund our ongoing operations and future commitments, as well as a discussion of other financing arrangements.
OVERVIEW
We are an international beverage alcohol company with a broad portfolio of consumer-preferred high-end imported beer brands, and higher-end wine and spirits brands. Many of our products are recognized as leaders in their respective categories. We are one of the leadingU.S. growth drivers at retail among beverage alcohol suppliers. In the U.S. market, we are the third-largest beer company and a leading higher-end wine and spirits company. Our internal management financial reporting consists of three business divisions: (i) Beer, (ii)Wine and Spirits , and (iii) Canopy and we report our operating results in four segments: (i) Beer, (ii)Wine and Spirits , (iii) Corporate Operations and Other, and (iv) Canopy. OurCanopy Equity Method Investment makes up the Canopy segment. In the Beer segment, our portfolio consists of high-end imported beer, craft beer, and alternative beverage alcohol brands. We have an exclusive perpetual brand license to import, market, and sell our Mexican beer portfolio in theU.S. In theWine and Spirits segment, our portfolio includes higher-margin, higher-growth wine brands complemented by certain higher-end spirits brands. Amounts included in the Corporate Operations and Other segment consist of costs of executive management, corporate development, corporate finance, corporate growth and strategy, human resources, internal audit, investor relations, legal, public relations, and information technology, as well as our 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.
--------------------------------------------------------------------------------
MD&A Table of Contents
STRATEGY
Our overall strategy is to drive industry-leading growth, build unrivaled
shareholder value, and shape the future of our industry by building brands that
people love. We believe sharing a toast, unwinding after a day, celebrating
milestones, and helping people connect, is Worth Reaching For. We position our
portfolio to benefit from the consumer-led trend towards premiumization, which
we believe will continue to result in faster growth rates in the higher-end of
the beer, wine, and spirits categories. We focus on developing our expertise in
consumer insights and category management, as well as our strong distributor
network, which provides an effective route-to-market. Additionally, we leverage
our scale across the total beverage alcohol market and our level of
diversification hedges our portfolio risk. In addition to growing our existing
business, we focus on targeted acquisitions of, and investments in, businesses
that are higher-margin, higher-growth, consumer-led, have a low integration
risk, and/or fill a gap in our portfolio. We also strive to identify, meet, and
stay ahead of evolving consumer trends and market dynamics. See "Investments,
acquisitions, and divestitures" below.
We strive to strengthen our portfolio of higher-end beer, wine, and spirits brands and differentiate ourselves through:
•leveraging our leading position in total beverage alcohol and our scale with wholesalers and retailers to expand distribution of our product portfolio; •strengthening relationships with wholesalers and retailers by providing consumer and beverage alcohol insights; •investing in brand building and innovation activities; •positioning ourselves for success with consumer-led products that identify, meet, and stay ahead of evolving consumer trends and market dynamics; •realizing operating efficiencies through expanding and enhancing production capabilities and maximizing asset utilization; and •developing employees to enhance performance in the marketplace. Our business strategy for the Beer segment focuses on leading the high-end segment ofU.S. beer and includes continued focus on growing our beer portfolio in theU.S. through expanding distribution for key brands, as well as new product development and innovation within the existing portfolio of brands, and continued expansion, construction, and optimization activities for ourMexico beer operations. Additionally, in an effort to more fully compete in growing sectors of the high-end segment of theU.S. beer market, we have leveraged our innovation capabilities to introduce new brands that align with consumer trends. We continue to refine our options to optimize the value of our Beer segment and drive increased focus on our high-performing import portfolio and new product introductions. See "Investments, acquisitions, and divestitures -Ballast Point Divestiture" below. In connection with our business strategy for the Beer segment, we have more than tripled the production capacity of our brewery located inNava, Coahuila, Mexico (the "Nava Brewery ") since itsJune 2013 acquisition. Additionally, we are continuing to invest to expand our brewery operations in Obregon,Sonora, Mexico (the "Obregon Brewery "), where expansion is expected to be completed by the end of Fiscal 2021, although further COVID-19 containment measures may alter that timeline. At this time, we have paused allMexicali Brewery construction activities, following a negative result from a public consultation held inMexico , see "Capital expenditures" below. Expansion, construction, and optimization efforts inMexico continue to align with our anticipated future growth expectations. Our business strategy for theWine and Spirits segment is to build an industry-leading portfolio of higher-end wine and spirits brands. We are investing to meet the evolving needs of consumers; building brands through consumer insights, sensory expertise, and innovation; and refreshing existing brands, as we continue to focus on moving our branded wine and spirits portfolio towards a higher-margin, higher-growth portfolio of brands. We dedicate a large share of our sales and marketing resources to well-known wine and spirits brands sold in theU.S. , which comprise theU.S. Power Brands ("Power Brands"), as they represent a majority of ourU.S. wine and spirits
--------------------------------------------------------------------------------
MD&A Table of Contents
revenue and profitability, and generally hold strong positions in their
respective price categories. These brands and/or portfolio of brands include:
Wine Portfolio
Wine Brands of Brands Spirits Brands
? 7 Moons ? Drylands ? SIMI ? Charles Smith ? Casa Noble
? Auros ? Kim Crawford ? Spoken Barrel ? Prisoner ? High West
? Champagne Palmer & Co ? Meiomi ? Robert Mondavi ? Mi CAMPO
? Cooper & Thief ? Mount Veeder ? Schrader ? Nelson's Green Brier
? Crafters Union ? Nobilo (1) ? SVEDKA
? Cuvée Sauvage ? Ruffino ? The Real McCoy
(1)See "Business transformation - Wine and Spirits Transactions" below.
We focus our innovation and investment dollars on those brands within our
portfolio which position us to benefit from the consumer-led trend towards
premiumization. Additionally, in connection with the Wine and Spirits
Transactions, Paul Masson Transaction, and Concentrate Business Transaction, we
expect to optimize the value of our wine and spirits portfolio by driving
increased focus on our higher-end Power Brands to accelerate growth and improve
overall operating margins. In markets where it is feasible, we entered into
contractual arrangements to consolidate our U.S. distribution network in order
to obtain dedicated distributor selling resources which focus on our U.S. wine
and spirits portfolio to drive organic growth. This consolidated U.S.
distribution network currently represents about 70% of our branded wine and
spirits volume in the U.S. Throughout the terms of these contracts, we generally
expect shipments on an annual basis to these distributors to essentially equal
the distributors' shipments to retailers.
Marketing, sales, and distribution of our products are managed on a geographic
basis in order to fully leverage leading market positions. In addition, market
dynamics and consumer trends vary across each of our markets. Within our primary
market in the U.S. , we offer a range of beverage alcohol products across the
imported beer, craft beer, alternative beverage alcohol, branded wine, and
spirits categories, with generally separate distribution networks utilized for
(i) our beer portfolio and (ii) our wine and spirits portfolio. The environment
for our products is competitive in each of our markets.
We complemented our total beverage alcohol strategy in an adjacent category by
making investments in Canopy, a world-leading, diversified cannabis company.
These investments are consistent with our long-term strategy to identify, meet,
and stay ahead of evolving consumer trends and market dynamics, and they
represent a significant expansion of our strategic relationship to position
Canopy as a global leader in cannabis production, branding, intellectual
property, and retailing.
We remain committed to our long-term financial model of: growing sales,
expanding margins, and increasing cash flow in order to achieve earnings per
share growth, maintain our targeted leverage ratio, and deliver returns to
shareholders through the payment of quarterly cash dividends and periodic share
repurchases.
Recent Developments
U.S. West Coast wildfires
In August 2020 , significant wildfires broke out in California , Oregon , and
Washington states which are affecting the U.S. grape harvest. Currently, none of
our facilities have been damaged, however, we may take protective actions
including temporarily closing certain facilities. At this time, we expect no
material impact to our ability to meet customer demand. We are monitoring the
impact of the smoke damage from the wildfires as we progress through our harvest
season. Most of our annual grape requirements are satisfied by supply contracts
from independent growers which, in many cases, allow for us to reject grapes
that do not meet required quality specifications, including from smoke damage.
We continue to assess when to use our rights under law and our supply contracts
to reject grapes that are damaged from wildfires. We also have insurance
coverage that partially covers losses for grapes in our own vineyards. However,
we expect that decreased production levels at certain facilities will result in
unfavorable fixed cost absorption of approximately $25 million to $35 million
during the
--------------------------------------------------------------------------------
MD&A Table of Contents
third quarter of fiscal 2021 and an additional estimated $10 million to
$15 million during the fourth quarter of fiscal 2021 which will be recognized in
cost of product sold within our consolidated results of operations rather than
capitalized in inventories.
COVID-19
We have an existing Crisis Management Committee that since January 2020 has been
closely monitoring the impact of the virus that causes COVID-19, on our Company
and our workforce. In March 2020 , the World Health Organization ("WHO")
recognized COVID-19 as a pandemic. COVID-19 has severely restricted the level of
economic activity around the world. In response to COVID-19, the governments of
many countries, states, cities, and other geographic regions took preventative
or protective actions, such as imposing restrictions on travel and business
operations and advising or requiring individuals to limit or forgo their time
outside of their homes. Temporary closures of businesses were ordered, and
numerous other businesses temporarily closed voluntarily. Further, individuals'
ability to travel was curtailed through mandated travel restrictions and may be
further limited through additional voluntary or mandated closures of
travel-related businesses. In the key markets where we sell our products, the
beverage alcohol industry has been classified as an essential business.
We have implemented various measures to reduce the spread of the virus including
working from home, restricting visitors to our production locations, splitting
our production workforces, reducing the on-site production workforce levels,
screening workers before they enter facilities, implementing social distancing,
and encouraging employees to adhere to prevention measures recommended by the
Center for Disease Control ("CDC") and the WHO . These prevention measures have
been effective as evidenced by the minimal number of COVID-19 cases within our
workforce. Since our non-production workforce is able to work remotely using
various technology tools, we are able to maintain our operations and internal
controls over financial reporting and disclosures.
COVID-19 containment measures have affected us primarily in the reduction of
(i) depletion volume on our products in the on-premise business due to bar and
restaurant closures and (ii) shipment volume related to the reduced production
activity at our major breweries in Mexico . The on-premise business has
historically been about 10% to 15% of our depletion volume for beer, wine, and
spirits. Various U.S. states are in the process of reopening their economies
including bars and restaurants which we expect to begin increasing our
on-premise depletion volumes. Additional temporary closures of businesses may
occur in the future. The decrease in the on-premise business was partially
offset by an increase in off-premise.
Currently, our breweries, wineries, and bottling facilities are open and
operational. However, certain select facilities may experience occasional
temporary closures due to applicable local conditions. In June 2020 , beer
production at our major breweries in Mexico returned to normal levels. The
impacts from the COVID-19 related slowdown of beer production in Mexico extended
into the second quarter of fiscal 2021. We have recently begun reopening our
hospitality, tasting rooms, retail, restaurants, and other non-essential public
facilities. Our supply chains and distribution channels have not been materially
impacted and we are working to rebuild our supply of products to meet forecasted
demand. As a result of decreased production levels, we are closely monitoring
distributor inventory to optimize stock levels. Product inventories are expected
to return to more normal levels by the end of the third quarter of fiscal 2021.
We have also been impacted by the containment actions imposed by the Mexican
government, including a temporary halt on expansion activities at the Obregon
Brewery . In June 2020 , we resumed construction on a planned additional five
million hectoliters expansion. Expansion is expected to be completed by the end
of Fiscal 2021, although any further containment actions associated with
COVID-19 may alter that timeline.
We are not able to estimate the long-term impact of COVID-19 on our business,
financial condition, results of operations, and/or cash flow. We believe we have
sufficient liquidity available from operating cash flow, cash on hand, and
availability under our $2.0 billion revolving credit facility. We expect to have
continued access to capital markets and to continue to return value to
shareholders.
--------------------------------------------------------------------------------
MD&A Table of Contents
Investments, acquisitions, and divestitures
Canopy segment Canopy investments InMay 2020 , we exercised theNovember 2017 Canopy Warrants at an exercise price ofC$12.98 per warrant share forC$245.0 million , or$173.9 million , which increased our ownership interest in Canopy to 38.6%. We expect the value of the Canopy investments accounted for at fair value to be volatile in future periods. Unrealized net gain (loss) from the changes in fair value of our Canopy investments accounted for at fair value in income (loss) from unconsolidated investments, are as follows: Second Second Six Six Date of Quarter Quarter Months Months Investment Investment 2021 2020 2021 2020 (in millions) Nov 2017 Warrants (1) $ -$ (316.7) $ (61.8) $ (450.8) Jun 2018 Convertible debt securities 10.0 (48.8) (2.5) (81.4) Nov 2018 Warrants (2) (57.6) (473.6) (180.6) (1,134.4)$ (47.6) $ (839.1) $ (244.9) $ (1,666.6) (1)For additional information on theMay 2020 Canopy Investment , refer to Note 8 of the Financial Statements. (2)InJune 2019 , the Canopy Shareholders approved the modification of the terms of theNovember 2018 Canopy Warrants. For additional information refer to Note 8 of the Financial Statements. Second Quarter 2020 and Six Months 2020 includes a$1,176.0 million unrealized gain resulting from theJune 2019 Warrant Modification. We expect Canopy's earnings to be volatile in future periods. We evaluated theCanopy Equity Method Investment as ofAugust 31, 2020 , and determined that there was not an other-than-temporary-impairment. Equity in earnings (losses) and related activities for ourCanopy Equity Method Investment are recognized on a two-month lag. Accordingly, we recognized our share of Canopy's earnings (losses) for the periods (i) April throughJune 2020 , in our Second Quarter 2021 results, (ii) April throughJune 2019 , in our Second Quarter 2020 results, (iii) January throughJune 2020 , in our Six Months 2021 results, and (iv) January throughJune 2019 , in our Six Months 2020 results. As ofAugust 31, 2020 , the conversion of Canopy equity securities held by its employees and/or held by other third parties, excluding ourNovember 2018 Canopy Warrants,Canopy Debt Securities , and the Acreage Financial Instrument would not have a significant effect on our share of Canopy's reported earnings or losses. Additionally, under an amended and restated investor rights agreement, we have the option to purchase additional common shares of Canopy at the then-current price of the underlying equity security to allow us to maintain our relative ownership interest. If we exercised all of ourNovember 2018 Canopy Warrants, expiringNovember 1, 2023 , andNovember 1, 2026 , it could have a significant effect on our share of Canopy's reported earnings or losses and our ownership interest in Canopy would be expected to increase to greater than 50%. In connection with the Acreage Transaction, Canopy and Acreage have entered into the Acreage Financial Instrument, which would require the issuance of Canopy shares. If Canopy exercised the Acreage Financial Instrument, under existing terms prior to the modification, it could have a significant effect on our share of Canopy's reported earnings or losses and our ownership interest in Canopy would decrease and no longer be expected to be greater than 50%.
As previously noted, these investments are consistent with our long-term strategy to identify, meet, and stay ahead of evolving consumer trends and market dynamics, and they represent a significant expansion of our strategic relationship to position Canopy as a global leader in cannabis production, branding, intellectual property, and retailing.
--------------------------------------------------------------------------------
MD&A Table of Contents
Beer segment
Ballast Point Divestiture
In March 2020 , we sold the Ballast Point craft beer business, including a number
of its associated production facilities and brewpubs. Accordingly, our
consolidated results of operations include the results of operations of our
Ballast Point craft beer business through the date of divestiture. This
divestiture is consistent with our strategic focus on our high-performing import
portfolio and new product introductions.
Wine and Spirits segment
Empathy Wines acquisition
In June 2020 , we acquired Empathy Wines, which primarily included the
acquisition of goodwill, trademarks, and inventory, plus an earn-out over five
years based on performance. This acquisition, which included a digitally-native
wine brand, strengthened our position in the direct-to-consumer and eCommerce
markets. The results of operations of Empathy Wines are reported in the Wine and
Spirits segment and have been included in our consolidated results of operations
from the date of acquisition.
Booker Vineyard investment
In April 2020 , we invested in Booker Vineyard , a super-luxury,
direct-to-consumer focused wine business that is accounted for under the equity
method. We recognize our share of their equity in earnings (losses) in our
consolidated financial statements in the Wine and Spirits segment.
Black Velvet Divestiture
In November 2019 , we sold the Black Velvet Canadian Whisky business and the
brand's associated production facility, along with a subset of Canadian whisky
brands produced at that facility, and related inventory at a transaction value
of $266.3 million . Accordingly, our consolidated results of operations include
the results of operations of our Canadian whisky business through the date of
divestiture. We received cash proceeds of $269.7 million , subject to payment of
final working capital adjustments. This divestiture is consistent with our
strategic focus on higher-margin, higher-growth brands. We recognized a net gain
of $70.5 million on the sale of the business primarily in the third quarter of
fiscal 2020.
Nelson's Green Brier acquisition
In May 2019 , we increased our ownership interest in Nelson's Green Brier to 75%,
resulting in consolidation of the business and recognition of a 25%
noncontrolling interest. This acquisition included a portfolio of award-winning,
Tennessee -based craft bourbon and whiskey products. The fair value of the
business combination was allocated primarily to goodwill, trademarks, inventory,
and property, plant, and equipment. The results of operations of Nelson's Green
Brier are reported in the Wine and Spirits segment and have been included in our
consolidated results of operations from the date of acquisition.
Business transformation
Wine and Spirits Transactions InApril 2019 , we entered into a definitive agreement withE. & J. Gallo Winery ("Gallo") to sell a portion of our wine and spirits business, including approximately 30 lower-margin, lower-growth wine and spirits brands, wineries, vineyards, offices, and facilities. InDecember 2019 , we agreed to revise and supersede the Original Wine and Spirits Transaction. The revisions to the transaction address competitive concerns raised by theFTC specifically related to the sparkling wine, brandy, dessert wine, and concentrate categories. As a result, the brandsCook's California Champagne ,J. Roget American Champagne ,Paul Masson Grande Amber Brandy , and our concentrate business will be excluded from the Original Wine and Spirits Transaction. InMay 2020 , we further revised the Original Wine and Spirits Transaction to also exclude theMission Bell Winery inMadera, California and certain related real estate, equipment, contracts, and employees, resulting in an adjusted base transaction price of approximately$783 million , subject to purchase price and closing adjustments, with the potential to earn an incremental$250 million of contingent consideration if certain brand performance provisions are met over a two-year period after closing. The Further Revised Wine and Spirits Transaction is expected to close by the end of third quarter of fiscal 2021 and
--------------------------------------------------------------------------------
MD&A Table of Contents
is subject to FTC review and clearance. Additionally, in a separate, but
related, transaction we entered into a definitive agreement to sell the New
Zealand -based Nobilo Wine brand and certain related assets for a base
transaction price of $130 million , subject to purchase price and closing
adjustments, to Gallo. The Nobilo Wine Transaction is expected to close by the
end of third quarter of fiscal 2021 and is subject to FTC review and clearance.
Completion of the Nobilo Transaction is also conditioned on completion of the
Further Revised Wine and Spirits Transaction. We expect to use the net cash
proceeds from the Wine and Spirits Transactions primarily to reduce outstanding
borrowings. The Wine and Spirits Transactions are consistent with our strategic
focus on higher-margin, higher-growth brands.
We have communicated our intent to retain the brands Cook's California Champagne
and J. Roget American Champagne and the Mission Bell Winery contemplated to be
sold in the Original Wine and Spirits Transaction. The FTC is currently
reviewing our business plans to support these brands in the future. The Mission
Bell Winery has the production capability to support the production of these
retained brands.
Paul Masson Transaction
In June 2020 , we entered into the Paul Masson Transaction. The Paul Masson
Transaction is subject to FTC review and clearance, and is expected to close by
the end of third quarter of fiscal 2021. We expect to use the net cash proceeds
from the Paul Masson Transaction primarily to reduce outstanding borrowings.
Concentrate Business Transaction
In June 2020 , we entered into the Concentrate Business Transaction. The
Concentrate Business Transaction is subject to FTC review and clearance, and is
expected to close by the end of third quarter of fiscal 2021.
Primarily in connection with the Wine and Spirits Transactions, the Paul Masson
Transaction, and the Concentrate Business Transaction, we have wine and spirits
net assets of $982.1 million that met the held for sale criteria as of
August 31, 2020 .
Selected financial information included in our results of operations for the
portion of the business that we expect will no longer be part of our
consolidated results after the closing of the Wine and Spirits Transactions, the
Paul Masson Transaction, and the Concentrate Business Transaction is as follows:
Net Sales Gross Profit Marketing (1)
(in millions)
Second Quarter 2021
Wine and Spirits segment results $ 181 $ 71 $ 4
Six Months 2021
Wine and Spirits segment results $ 368 $ 149 $ 5
(1)Included in selling, general, and administrative expenses within our consolidated results of operations.
For additional information on these recent developments, investments, acquisitions, and divestitures, and business transformation updates refer to Notes 3, 5, and 8 of the Financial Statements.
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q #WORTHREACHINGFOR I 41
--------------------------------------------------------------------------------
MD&A Table of Contents
RESULTS OF OPERATIONS
FINANCIAL HIGHLIGHTS
References to organic throughout the following discussion exclude the impact of
divested brand activity in connection with the Ballast Point Divestiture (beer),
and Black Velvet Divestiture (wine and spirits), as appropriate.
For Second Quarter 2021 compared with Second Quarter 2020:
•Our results of operations benefited from (i) the decrease in unrealized net loss from the changes in fair value of our investments in Canopy in Second Quarter 2021 as compared with Second Quarter 2020 and (ii) decreased equity in losses from Canopy's results in operations, partially offset by COVID-19 containment measures affecting on-premise sales and reduced production activity inJune 2020 at our major breweries inMexico . •Net sales decreased 4% due to (i)Wine and Spirits net sales led by branded volume decline largely from brands to be divested and (ii) a decrease in Beer net sales driven predominantly by the Ballast Point Divestiture and volume decline largely from COVID-19 containment measures, partially offset by favorable impact from pricing within both theBeer and Wine and Spirits segments. •Operating income increased 17% largely due to charges recognized for Second Quarter 2020 in connection with our business transformation strategy within theWine and Spirits segment, including an impairment of long-lived assets held for sale.
•Net income attributable to CBI and diluted net income per common share attributable to CBI increased largely from the decrease in loss from unconsolidated investments related to our investments in Canopy.
For Six Months 2021 compared with Six Months 2020:
•Our results of operations benefited from (i) the decrease in unrealized net loss from the changes in fair value of our investments in Canopy in Six Months 2021 as compared with Six Months 2020 and (ii) decreased equity in losses from Canopy's results of operations, partially offset by COVID-19 containment measures affecting on-premise sales and reduced production activity for a portion of Six Months 2021 at our major breweries inMexico . •Net sales decreased 5% due to (i)Wine and Spirits net sales led by branded volume decline largely from brands to be divested and the Black Velvet Divestiture, and (ii) a decrease in Beer net sales driven predominantly by volume decline largely from COVID-19 containment measures and theBallast Point Divestiture, partially offset by favorable impact from pricing and product mix shift within both theBeer and Wine and Spirits segments. •Operating income increased 8% largely due to charges recognized for Six Months 2020 in connection with our business transformation strategy within theWine and Spirits segment, including an impairment of long-lived assets held for sale.
•Net income attributable to CBI and diluted net income per common share attributable to CBI increased largely from the decrease in loss from unconsolidated investments related to our investments in Canopy.
COMPARABLE ADJUSTMENTS
Management excludes items that affect comparability 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 segment management compensation are evaluated based on core segment operating income (loss). As such, the performance measures for incentive compensation purposes for segment management do not include the impact of these Comparable Adjustments.
--------------------------------------------------------------------------------
MD&A Table of Contents
As more fully described herein and in the related Notes to the Financial Statements, the Comparable Adjustments that impacted comparability in our segment results for each period are as follows:
Second Second Six Six
Quarter Quarter Months Months
2021 2020 2021 2020
(in millions)
Cost of product sold
Net gain (loss) on undesignated commodity
derivative contracts $ 17.4 $ (10.9) $ (9.4) $ (26.8)
Settlements of undesignated commodity
derivative contracts 13.2 3.4 23.6 5.2
COVID-19 incremental costs (0.9) - (5.5) -
Strategic business development costs (0.8) (18.0) (25.1) (62.5)
Flow through of inventory step-up (0.1) (0.8) (0.1) (1.2)
Recovery of (loss on) inventory write-down - 8.6 - 8.6
Accelerated depreciation - (1.8) - (5.3)
Total cost of product sold 28.8 (19.5) (16.5) (82.0)
Selling, general, and administrative expenses
Restructuring and other strategic business
development costs (5.8) 0.5 (8.9) (23.1)
Transaction, integration, and other
acquisition-related costs (3.1) (3.2) (3.9) (5.5)
COVID-19 incremental costs 1.9 - (4.6) -
Net gain (loss) on foreign currency derivative
contracts - - (8.0) -
Impairment of intangible assets - (11.0) - (11.0)
Other gains (losses) (2.9) (12.3) 4.5 1.1
Total selling, general, and administrative
expenses (9.9) (26.0) (20.9) (38.5)
Impairment of assets held for sale 22.0 (27.0) (3.0) (27.0)
Comparable Adjustments, Operating income (loss)
Income (loss) from unconsolidated investments
Cost of product sold 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. COVID-19 incremental costs We recognized costs for incremental wages and hazard payments to employees, purchases of personal protective equipment, more frequent and thorough cleaning and sanitization of our facilities, and costs associated with the unused beer keg reimbursement program with distributors. Strategic business development costs We recognized costs primarily in connection with losses on write-downs of excess inventory and contract terminations resulting from our ongoing efforts to optimize our portfolio, gain efficiencies, and reduce our cost structure within theWine and Spirits segment.
--------------------------------------------------------------------------------
MD&A Table of Contents
Recovery of (loss on) inventory write-down
Reimbursement from our insurance carriers for losses recognized on the
write-down of certain bulk wine inventory as a result of smoke damage sustained
during the Fall 2017 California wildfires.
Accelerated depreciation We recognized accelerated depreciation for certain assets primarily in connection with the multi-year implementation of a new global enterprise resource planning ("ERP") system which is intended to replace our existing operating and financial systems.
Selling, general, and administrative expenses
Restructuring and other strategic business development costs
We recognized costs primarily in connection with costs to optimize our
portfolio, gain efficiencies, reduce our cost structure within the
Transaction, integration, and other acquisition-related costs We recognized transaction, integration, and other acquisition-related costs in connection with our acquisitions, divestitures, and investments.
COVID-19 incremental costs We recognized costs for payments to third-party general contractors to maintain their workforce for expansion activities at theObregon Brewery and recognized costs for incremental wages and hazard payments to employees. Net gain (loss) on foreign currency derivative contracts We recognized a net loss primarily in connection with the settlement of foreign currency forward contracts entered into to fix theU.S. dollar cost of theMay 2020 Canopy Investment . Impairment of intangible assets We recorded trademark impairment losses related to our Beer segment'sBallast Point craft beer trademark asset. For additional information, refer to Note 5 of the Financial Statements. Other gains (losses) We recognized other gains (losses) primarily in connection with (i) loss in connection with working capital adjustments on the sale of the Black Velvet Canadian Whisky business (Second Quarter 2021, Six Months 2021), (ii) a gain recognized on the sale of a vineyard (Six Months 2021), (iii) an increase in estimated fair value of a contingent liability associated with a prior period acquisition (Second Quarter 2020, Six Months 2020), and (iv) and a gain on the remeasurement of our previously held equity interest in Nelson's Green Brier to the acquisition-date fair value (Six Months 2020). Impairment of assets held for sale We recognized an impairment of long-lived assets held for sale in connection with the Wine and Spirits Transactions and the Concentrate Business Transaction. For additional information, refer to Note 5 of the Financial Statements. Income (loss) from unconsolidated investments We recognized an unrealized gain (loss) primarily from (i) the changes in fair value of our securities measured at fair value, (ii) equity in earnings (losses) from Canopy's results of operations, (iii) equity losses from Canopy related to costs designed to improve their organizational focus, streamline operations, and align production capability with projected demand (Six Months 2021), and (iv) the increase in fair value resulting from theJune 2019 modification of the terms of theNovember 2018 Canopy Warrants (Second Quarter 2020, Six Months 2020). For additional information, refer to Notes 5 and 8 of the Financial Statements.
--------------------------------------------------------------------------------
MD&A Table of Contents
SECOND QUARTER 2021 COMPARED TO SECOND QUARTER 2020
Net sales
Second Second
Quarter Quarter Dollar Percent
2021 2020 Change Change
(in millions)
Beer $ 1,635.9 $ 1,640.4 $ (4.5) - %
Wine and Spirits:
Wine 544.9 611.1 (66.2) (11 %)
Spirits 79.6 92.5 (12.9) (14 %)
Total Wine and Spirits 624.5 703.6 (79.1) (11 %)
Canopy 79.7 67.7 12.0 18 %
Consolidation and Eliminations (79.7) (67.7) (12.0) (18 %)
Consolidated net sales $ 2,260.4 $ 2,344.0 $ (83.6) (4 %)
Beer segment Second Second
Quarter Quarter Dollar Percent
2021 2020 Change Change
(in millions, branded product, 24-pack, 12-ounce case equivalents)
Net sales $ 1,635.9 $ 1,640.4 $ (4.5) - %
Shipment volume
Total 90.4 91.9 (1.6 %)
Organic (1) 90.4 91.2 (0.9 %)
Depletion volume (1) (2) 4.7 %
(1)Includes an adjustment to remove volume associated with the Ballast Point
Divestiture for the period June 1, 2019 , through August 31, 2019 .
(2)Depletions represent distributor shipments of our respective branded products
to retail customers, based on third-party data.
[[Image Removed: stz-20200831_g2.jpg]] Beer net sales remained relatively flat as
Divestiture and $15.8 million of volume decline within our Mexican beer portfolio,
was partially offset by a $31.0 million favorable impact from pricing in select
markets within our Mexican beer portfolio. The volume decline resulted from COVID-19
containment measures negatively
affecting production activity in
major breweries in Mexico which led to lower inventory in our distribution channels.
The depletion volume trend outpaced the shipment volume trend for Second Quarter
2021, driven by the reduced production activity. During the third quarter of fiscal
2021, we expect shipment volume will outpace depletion volume as we replenish
distribution channels.
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q #WORTHREACHINGFOR I 45
--------------------------------------------------------------------------------
MD&A Table of Contents
Wine and Spirits segment Second Second
Quarter Quarter Dollar Percent
2021 2020 Change Change
(in millions, branded product, 9-liter case equivalents)
Net sales $ 624.5 $ 703.6 $ (79.1) (11 %)
Shipment volume
Total 11.6 14.4 (19.4 %)
Organic (3) 11.6 13.9 (16.5 %)
U.S. Domestic 10.7 13.5 (20.7 %)
Organic U.S. Domestic (3) 10.7 12.9 (17.1 %)
U.S. Domestic Power Brands 5.7 6.3 (9.5 %)
Depletion volume (2)
U.S. Domestic (3) (3.3 %)
U.S. Domestic Power Brands (0.6 %)
(3)Includes an adjustment to remove volume associated with the Black Velvet
Divestiture for the period
[[Image Removed: stz-20200831_g3.jpg]] The decrease in
decline in branded wine and spirits volume, driven by the brands to be divested, and
$19.3 million from the Black
Velvet Divestiture, partially offset by
increase from favorable product
mix shift and
The Wine and Spirits Second Quarter 2021 results have been negatively impacted by
(i) on-premise and retail tasting room closures as a result of COVID-19 containment
measures and (ii) transition
activities with distributors
ownership of brands upon closing the Wine and Spirits Transactions, partially offset
by an increase in off-premise. During Fiscal 2021, as these transition activities
with distributors continue to occur, we do not expect shipment volume to be aligned
with depletion volume.
[[Image Removed: stz-20200831_g4.jpg]] Canopy segment
Our ownership interest in Canopy allows us to exercise significant influence, but
not control, and, therefore, we account for our investment in Canopy under the
equity method. Amounts included for the Canopy segment represent 100% of Canopy's
reported results on a two-month
lag, prepared in accordance with
converted from Canadian dollars
to
the outstanding shares of Canopy, 100% of the Canopy results are included and
subsequently eliminated in order to reconcile to our consolidated financial
statements. See "Income (loss) from unconsolidated investments" below for a
discussion of Canopy's net sales, gross profit (loss), selling, general, and
administrative expenses, and operating income (loss).
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q #WORTHREACHINGFOR I 46
--------------------------------------------------------------------------------
MD&A Table of Contents
Gross profit
Second Second
Quarter Quarter Dollar Percent
2021 2020 Change Change
(in millions)
Beer $ 910.5 $ 913.3 $ (2.8) - %
Wine and Spirits 276.5 292.1 (15.6) (5 %)
Canopy 4.7 9.8 (5.1) (52 %)
Consolidation and Eliminations (4.7) (9.8) 5.1 52 %
Comparable Adjustments 28.8 (19.5) 48.3 NM
Consolidated gross profit $ 1,215.8 $ 1,185.9 $ 29.9 3 %
NM = Not Meaningful
[[Image Removed: stz-20200831_g2.jpg]] Beer remained flat largely due to
million of volume decline, $4.4 million of unfavorable product mix shift, and a
decrease of $4.1 million in gross profit due to the Ballast Point Divestiture, being
offset by $31.0 million of favorable impact from pricing. The higher cost of product
sold is largely related to COVID-19 containment measures and increased focus on the
production of our fastest moving products and packaging sizes to meet forecasted
demand. This drove a $13.7 million increase in operational costs primarily
consisting of unfavorable fixed cost absorption and higher material costs, including
glass, pallets, and cartons.
[[Image Removed: stz-20200831_g3.jpg]] The decrease in
branded wine and spirits volume, driven by the brands to be divested, a decrease
of $8.7 million in gross profit
due to the Black Velvet Divestiture, and
million higher cost of product
sold, partially offset by
favorable product mix shift,
million driven by lower promotions. Higher cost of product sold was largely
attributable to increased packaging costs, including glass and labels, partially
offset by lower grape raw material costs.
Gross profit as a percent of net sales increased to 53.8% for Second Quarter 2021 compared with 50.6% for Second Quarter 2020. This was largely due to (i) a favorable change of approximately 215 basis points in Comparable Adjustments, (ii) a favorable impact from Beer pricing in select markets, which contributed approximately 70 basis points of rate growth, (iii) favorable impact fromWine and Spirits product mix shift, which resulted in approximately 50 basis points of rate growth, and (iv) approximately 50 basis points of rate growth from volume within theWine and Spirits segment as the decline inWine and Spirits net sales exceeded the decline inWine and Spirits gross profit, partially offset by approximately 60 basis points of rate decline from cost of product sold within the Beer segment.
Selling, general, and administrative expenses
Second Second
Quarter Quarter Dollar Percent
2021 2020 Change Change
(in millions)
Beer $ 214.8 $ 228.0 $ (13.2) (6 %)
Wine and Spirits 115.0 131.7 (16.7) (13 %)
Corporate Operations and Other 59.4 53.7 5.7 11 %
Canopy 129.1 170.3 (41.2) (24 %)
Consolidation and Eliminations (129.1) (170.3) 41.2 24 %
Comparable Adjustments 9.9 26.0 (16.1) (62 %)
Consolidated selling, general, and
administrative expenses $ 399.1 $ 439.4 $ (40.3) (9 %)
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q #WORTHREACHINGFOR I 47
--------------------------------------------------------------------------------
MD&A Table of Contents
[[Image Removed: stz-20200831_g2.jpg]] The decrease in Beer is primarily due to a decrease of
spend that was largely driven by decreased advertising resulting from COVID-19
related event cancellations. Many of our planned investments to support the growth
of our Mexican beer portfolio through media and event sponsorships were suspended or
canceled in Second Quarter 2021. We expect marketing spend will range from 9% to 10%
of net sales for Fiscal 2021, and will exceed those targeted assumptions during the
third quarter of fiscal 2021 with the return of sporting events and our focus on
media and event sponsorships.
[[Image Removed: stz-20200831_g3.jpg]] The decrease in
marketing spend that was largely driven by decreased advertising resulting from
COVID-19 related event cancellations. Many of our planned investments to support the
growth of our Power Brands through media and event sponsorships were suspended or
canceled in Second Quarter 2021. We expect marketing spend will range from 10% to
11% of net sales for Fiscal 2021, and will exceed those targeted assumptions during
the third quarter of fiscal 2021 as we are committed to support our brands as
sponsorship events return.
[[Image Removed: stz-20200831_g5.jpg]] The increase in Corporate Operations and Other is largely due to approximately an
$8 million increase in
compensation and benefits, partially offset by approximately
$2 million of favorable impact
from reduced travel driven by COVID-19 containment
measures.
Selling, general, and administrative expenses as a percent of net sales
decreased to 17.7% for Second Quarter 2021 as compared with 18.7% for Second
Quarter 2020. The decrease is driven largely by (i) a favorable change of
approximately 70 basis points in Comparable Adjustments and (ii) a reduction in
Beer selling, general, and administrative expenses, largely related to decreased
marketing spend, which results in 55 basis points of rate decline.
Operating income (loss)
Second Second
Quarter Quarter Dollar Percent
2021 2020 Change Change
(in millions)
Beer $ 695.7 $ 685.3 $ 10.4 2 %
Wine and Spirits 161.5 160.4 1.1 1 %
Corporate Operations and Other (59.4) (53.7) (5.7) (11 %)
Canopy (124.4) (160.5) 36.1 22 %
Consolidation and Eliminations 124.4 160.5 (36.1) (22 %)
Comparable Adjustments 40.9 (72.5) 113.4 NM
Consolidated operating income (loss)
17 %
[[Image Removed: stz-20200831_g2.jpg]] The increase in Beer is primarily attributable to the favorable pricing impact and
reduced marketing spend, partially offset by the higher cost of product sold, net
sales decline, and the Ballast Point Divestiture.
[[Image Removed: stz-20200831_g3.jpg]]
decreased marketing spend, and favorable pricing impact, partially offset by the
decline in branded wine and spirits volume, the Black Velvet Divestiture, and
higher cost of product sold.
[[Image Removed: stz-20200831_g5.jpg]] As previously discussed, the Corporate Operations and Other increase in operating
loss is due to increased compensation and benefits, partially offset by a
favorable impact from reduced travel.
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q #WORTHREACHINGFOR I 48
--------------------------------------------------------------------------------
MD&A Table of Contents
Income (loss) from unconsolidated investments
General
Second Second
Quarter Quarter Dollar Percent
2021 2020 Change Change
(in millions)
Unrealized net gain (loss) on securities
measured at fair value (1) $ (47.6) $ (839.1) $ 791.5 94 %
Equity in earnings (losses) from Canopy
and related activities (2) (31.0) (484.4) 453.4 94 %
Equity in earnings (losses) from other
equity method investees (2.1) (1.2) (0.9) (75 %)
$ (80.7) $ (1,324.7) $ 1,244.0 94 %
(1) Second Quarter 2020 includes an unrealized net loss from the changes in fair
value of our securities measured at fair value of $2,015.1 million , partially
offset by an $1,176.0 million unrealized gain resulting from the June 2019
Warrant Modification.
(2) Second Quarter 2020 includes our share of Canopy's additional loss resulting
from the June 2019 Warrant Modification of $409.0 million .
[[Image Removed: stz-20200831_g4.jpg]] Canopy segment
Canopy net sales increased to
for Second Quarter 2020. This
increase of
attributable to an increase in other product offering sales and medical sales,
partially offset by a decline in Canadian recreational sales. The increase in other
sales resulted from (i)
vaporizers sold by
skincare, wellness, and sleep
product sales from their
Works Products Limited , and (iii)
sales of sports nutrition beverages, mixes, protein,
gum, and mints from their October 2019 acquisition of BioSteel. The increase in
medical sales largely resulted
from their
largest cannabinoid-based pharmaceuticals company. Canopy gross profit (loss)
decreased to $4.7 million for
Second Quarter 2021 from
2020. This decrease of $5.1 million is primarily driven by higher cost of product sold
related to facilities not yet cultivating or producing cannabis or cannabis-related
products, or having under-utilized capacity. Canopy selling, general, and
administrative expenses decreased
stock-based compensation expense. The combination of these factors were the main
contributors to the increase in
operating income (loss) of
Interest expense Interest expense decreased to$100.2 million for Second Quarter 2021 from$111.6 million for Second Quarter 2020. This decrease of$11.4 million or 10% is predominantly due to lower average borrowings of approximately$1.4 billion primarily attributable to the partial repayment of financing entered into in connection with theNovember 2018 Canopy Transaction. (Provision for) benefit from income taxes Our effective tax rate for Second Quarter 2021 was 20.6% of tax expense as compared with 28.1% of tax benefit for Second Quarter 2020. In comparison to prior year, our taxes were negatively impacted primarily by: •lower net income tax benefits recorded for Second Quarter 2021 as compared with Second Quarter 2020 on the net unrealized loss from the changes in fair value of our investments in Canopy and Canopy equity in earnings (losses), and •higher effective tax rates from our foreign businesses; partially offset by •a larger net income tax benefit from stock-based compensation award activity for Second Quarter 2021 from changes in option exercise activity.
For additional information, refer to Note 10 of the Financial Statements.
--------------------------------------------------------------------------------
MD&A Table of Contents
Net income (loss) attributable to CBI
Net income (loss) attributable to CBI increased to $512.1 million for Second
Quarter 2021 from $(525.2) million for Second Quarter 2020. This increase in net
income (loss) of $1,037.3 million is largely attributable to the decrease in
loss from unconsolidated investments, partially offset by the Second Quarter
2021 provision for income taxes as compared with a benefit from income taxes for
Second Quarter 2020.
SIX MONTHS 2021 COMPARED TO SIX MONTHS 2020
Net sales
Six Six
Months Months Dollar Percent
2021 2020 Change Change
(in millions)
Beer $ 3,020.0 $ 3,117.8 $ (97.8) (3 %)
Wine and Spirits:
Wine 1,044.5 1,146.1 (101.6) (9 %)
Spirits 159.3 177.3 (18.0) (10 %)
Total Wine and Spirits 1,203.8 1,323.4 (119.6) (9 %)
Canopy 160.0 138.4 21.6 16 %
Consolidation and Eliminations (160.0) (138.4) (21.6) (16 %)
Consolidated net sales $ 4,223.8 $ 4,441.2 $ (217.4) (5 %)
Beer segment Six Six
Months Months Dollar Percent
2021 2020 Change Change
(in millions, branded product, 24-pack, 12-ounce case equivalents)
Net sales $ 3,020.0 $ 3,117.8 $ (97.8) (3 %)
Shipment volume
Total 166.6 174.0 (4 %)
Organic (1) 166.6 172.5 (3 %)
Depletion volume (1) (2) 5.1 %
(1)Includes an adjustment to remove volume associated with the Ballast Point
Divestiture for the period March 2, 2019 , through August 31, 2019 .
(2)Depletions represent distributor shipments of our respective branded products
to retail customers, based on third-party data.
[[Image Removed: stz-20200831_g2.jpg]] The decrease in Beer net sales is primarily due to
decline within our Mexican beer portfolio, which was impacted by COVID-19
containment measures negatively affecting on-premise sales and production activity
for a portion of Six Months 2021
at our major breweries in
million from the Ballast Point Divestiture. The decline was partially offset by a
$49.5 million favorable impact
from pricing in select markets within our Mexican
beer portfolio. The depletion volume trend outpaced the shipment volume trend for
Six Months 2021, driven by the reduced production activity in response to COVID-19
containment measures.
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q #WORTHREACHINGFOR I 50
--------------------------------------------------------------------------------
MD&A Table of Contents
Wine and Spirits segment Six Six
Months Months Dollar Percent
2021 2020 Change Change
(in millions, branded product, 9-liter case
equivalents)
Net sales $ 1,203.8 $ 1,323.4 $ (119.6) (9 %)
Shipment volume
Total 22.4 26.8 (16.4 %)
Organic (3) 22.4 25.8 (13.2 %)
U.S. Domestic 20.6 24.8 (16.9 %)
Organic U.S. Domestic (3) 20.6 23.7 (13.1 %)
U.S. Domestic Power Brands 10.7 10.8 (0.9 %)
Depletion volume (2)
U.S. Domestic (3) (2.2 %)
U.S. Domestic Power Brands 1.8 %
(3)Includes an adjustment to remove volume associated with the Black Velvet
Divestiture for the period
[[Image Removed: stz-20200831_g3.jpg]] The decrease in
decline in branded wine and spirits volume, driven by the brands to be divested, and
$38.0 million from the Black
Velvet Divestiture, partially offset by
increase from favorable product
mix shift and
The Wine and Spirits Six Months 2021 results have been negatively impacted by
(i) on-premise and retail tasting room closures as a result of COVID-19 containment
measures and (ii) transition
activities with distributors
ownership of brands upon closing the Wine and Spirits Transactions, partially offset
by an increase in off-premise.
Gross profit
Six Six
Months Months Dollar Percent
2021 2020 Change Change
(in millions)
Beer $ 1,680.2 $ 1,732.8 $ (52.6) (3 %)
Wine and Spirits 540.4 563.8 (23.4) (4 %)
Canopy (52.6) 21.1 (73.7) NM
Consolidation and Eliminations 52.6 (21.1) 73.7 NM
Comparable Adjustments (16.5) (82.0) 65.5 80 %
Consolidated gross profit $ 2,204.1 $ 2,214.6 $ (10.5) - %
[[Image Removed: stz-20200831_g2.jpg]] The decrease in Beer is primarily due to
million of higher cost of product
sold,
to the Ballast Point Divestiture,
and
partially offset by the $49.5 million favorable impact from pricing. The higher cost
of product sold is largely related to COVID-19 containment measures and increased
focus on the production of our fastest moving products and packaging sizes to meet
forecasted demand. This drove a
primarily consisting of higher material costs, including glass, pallets, and
cartons, and unfavorable fixed cost absorption. Unfavorable product mix shift
primarily resulted from increased
sales of our newly-released Corona
and increased focus on larger packaging sizes.
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q #WORTHREACHINGFOR I 51
--------------------------------------------------------------------------------
MD&A Table of Contents
[[Image Removed: stz-20200831_g3.jpg]] The decrease in
branded wine and spirits volume, driven by the brands to be divested, a decrease
of $17.3 million in gross profit
due to the Black Velvet Divestiture, and
million higher cost of product
sold, partially offset by the
favorable pricing and $27.5 million of favorable product mix shift. Higher cost of
product sold was largely attributable to increased packaging costs, including
glass and labels, partially offset by lower grape raw material costs.
Gross profit as a percent of net sales increased to 52.2% for Six Months 2021 compared with 49.9% for Six Months 2020. This was largely due to (i) a favorable change of 155 basis points in Comparable Adjustments, (ii) a favorable impact from bothBeer and Wine and Spirits pricing in select markets, which contributed approximately 60 and 40 basis points of rate growth, respectively, (iii) approximately 35 basis points of rate growth from volume within theWine and Spirits segment as the decline inWine and Spirits net sales exceeded the decline inWine and Spirits gross profit, and (iv) 30 basis points of growth from craft beer, primarily resulting from the Ballast Point Divestiture, as the decline in net sales exceeded the decline in gross profit, partially offset by (i) approximately 45 basis points of rate decline from higher cost of product sold within the Beer segment and (ii) a unfavorable product mix shift for the beer segment contributing approximately 40 basis points of rate decline.
Selling, general, and administrative expenses
Six Six
Months Months Dollar Percent
2021 2020 Change Change
(in millions)
Beer $ 406.7 $ 466.9 $ (60.2) (13 %)
Wine and Spirits 214.9 242.6 (27.7) (11 %)
Corporate Operations and Other 109.9 97.4 12.5 13 %
Canopy 805.0 351.6 453.4 129 %
Consolidation and Eliminations (805.0) (351.6) (453.4) (129 %)
Comparable Adjustments 20.9 38.5 (17.6) (46 %)
Consolidated selling, general, and
administrative expenses $ 752.4 $ 845.4 $ (93.0) (11 %)
[[Image Removed: stz-20200831_g2.jpg]] The decrease in Beer is primarily due to a decrease of
spend that was largely driven by decreased advertising resulting from COVID-19
related event cancellations. Many of our planned investments to support the growth
of our Mexican beer portfolio through media and event sponsorships were suspended or
canceled in Six Months 2021. The favorable marketing spend as a percentage of net
sales recognized in Six Months 2021 is expected to return to targeted assumptions
during the remainder of Fiscal 2021.
[[Image Removed: stz-20200831_g3.jpg]] The decrease in
marketing spend that was largely driven by decreased advertising resulting from
COVID-19 related event
cancellations and
expenses. Many of our planned investments to support the growth of our Power Brands
through media and event sponsorships were suspended or canceled in Six Months 2021.
The favorable marketing spend as a percentage of net sales recognized in Six Months
2021 is expected to return to targeted assumptions during the remainder of Fiscal
2021. The decrease in general and administrative expenses is driven by certain cost
saving initiatives including decreased compensation and benefits.
[[Image Removed: stz-20200831_g5.jpg]] The increase in Corporate Operations and Other is largely due to approximately a
million increase in compensation
and benefits and
currency losses.
Selling, general, and administrative expenses as a percent of net sales
decreased to 17.8% for Six Months 2021 as compared with 19.0% for Six Months
2020. The decrease is driven largely by (i) Beer selling, general, and
administrative expenses, largely related to decreased marketing spend, which
results in approximately 100 basis points of rate decline and (ii) a favorable
change of approximately 40 basis points in Comparable Adjustments.
--------------------------------------------------------------------------------
MD&A Table of Contents
Operating income (loss)
Six Six
Months Months Dollar Percent
2021 2020 Change Change
(in millions)
Beer $ 1,273.5 $ 1,265.9 $ 7.6 1 %
Wine and Spirits 325.5 321.2 4.3 1 %
Corporate Operations and Other (109.9) (97.4) (12.5) (13 %)
Canopy (857.6) (330.5) (527.1) (159 %)
Consolidation and Eliminations 857.6 330.5 527.1 159 %
Comparable Adjustments (40.4) (147.5) 107.1 73 %
Consolidated operating income (loss)
[[Image Removed: stz-20200831_g2.jpg]] The increase in Beer is primarily attributable to the decreased marketing spend
and favorable pricing impact, partially offset by the net sales decline, higher
cost of product sold, and the Ballast Point Divestiture.
[[Image Removed: stz-20200831_g3.jpg]] The increase in
pricing and product mix shift and decreased marketing spend, partially offset by
the decline in branded wine and spirits volume and the Black Velvet Divestiture.
[[Image Removed: stz-20200831_g5.jpg]] As previously discussed, the Corporate Operations and Other increase in operating
loss is due largely to the increase in compensation and benefits and unfavorable
foreign currency losses.
Income (loss) from unconsolidated investments
General
Six Six
Months Months Dollar Percent
2021 2020 Change Change
(in millions)
Unrealized net gain (loss) on securities
measured at fair value (1) $ (244.9) $ (1,666.6) $ 1,421.7 85 %
Equity in earnings (losses) from Canopy and
related activities (2) (408.6) (590.4) 181.8 31 %
Equity in earnings (losses) from other
equity method investees 1.6 1.8 (0.2) (11 %)
Net gain (loss) on sale of unconsolidated
investment 0.0 (0.1) 0.1 NM
$ (651.9) $ (2,255.3) $ 1,603.4 71 %
(1) Six Months 2020 includes an unrealized net loss from the changes in fair
value of our securities measured at fair value of $2,842.6 million , partially
offset by an $1,176.0 million unrealized gain resulting from the June 2019
Warrant Modification.
(2) Six Months 2021 includes $235.4 million of costs designed to improve their
organizational focus, streamline operations, and align production capability
with projected demand and Six Months 2020 includes our share of Canopy's
additional loss resulting from the June 2019 Warrant Modification of $409.0
million .
--------------------------------------------------------------------------------
MD&A Table of Contents
[[Image Removed: stz-20200831_g4.jpg]] Canopy segment
Canopy net sales increased to
for Six Months 2020. This
increase of
attributable to an increase in other product offering sales and medical sales,
partially offset by a decline in Canadian recreational sales. The increase in other
sales resulted from (i)
vaporizers sold by
beauty, skincare, wellness, and
sleep product sales from their
of This Works Products Limited , and (iii) sales of sports nutrition beverages,
mixes, protein, gum, and mints
from their
increase in medical sales largely
resulted from their
Canopy gross profit (loss)
decreased to
$21.1 million or Six Months 2020.
This decrease of
by inventory write-downs related to its organizational and strategic review of their
business and detailed evaluation of inventory. Canopy selling, general, and
administrative expenses increased
close greenhouse facilities as well as other changes related to its organizational
and strategic review of their business. The combination of these factors were the
main contributors to the decrease
in operating income (loss) of
Interest expense Interest expense decreased to$200.2 million for Six Months 2021 from$226.2 million for Six Months 2020. This decrease of$26.0 million , or 11% is predominantly due to lower average borrowings of approximately$1.3 billion primarily attributable to the partial repayment of financing entered into in connection with theNovember 2018 Canopy Transaction. (Provision for) benefit from income taxes Our effective tax rate for Six Months 2021 was 40.7% of tax expense as compared with 33.9% of tax benefit for Six Months 2020. In comparison to prior year, our taxes were negatively impacted primarily by: •lower net income tax benefits recorded for Six Months 2021 as compared with Six Months 2020 on the net unrealized loss from the changes in fair value of our investments in Canopy and Canopy equity in earnings (losses); •higher effective tax rates from our foreign businesses; partially offset by •a larger net income tax benefit from stock-based compensation award activity for Six Months 2021 from changes in option exercise activity.
For additional information, refer to Note 10 of the Financial Statements.
Net income (loss) attributable to CBI Net income (loss) attributable to CBI increased to$334.2 million for Six Months 2021 from$(770.6) million for Six Months 2020. This increase of$1,104.8 million is largely attributable to the decrease in loss from unconsolidated investments, partially offset by the Six Months 2021 provision for income taxes as compared with a benefit from income taxes for Six Months 2020.
FINANCIAL LIQUIDITY AND CAPITAL RESOURCES
General
Our ability to consistently generate cash flow from operating activities is one of our most significant financial strengths. Our strong cash flows enable us to invest in our people and our brands, make appropriate capital investments, provide a quarterly cash dividend program, and from time-to-time, repurchase shares of our common stock, and make strategic investments and acquisitions that we believe will enhance stockholder value. Our primary source of liquidity has been cash flow from operating activities. Our principal use of cash in our operating activities is for purchasing and carrying inventories and carrying seasonal accounts receivable. Historically, we have used cash flow from operating activities to repay our short-term borrowings and fund capital expenditures. Additionally, we have a commercial paper program which we use to fund our short-term borrowing requirements and to maintain our access to the capital markets. We will continue to use our short-term
--------------------------------------------------------------------------------
MD&A Table of Contents
borrowings, including our commercial paper program, to support our working
capital requirements and capital expenditures. COVID-19 has negatively impacted
the global economy and financial markets which could interfere with our ability
to access sources of liquidity at favorable rates and generate operating cash
flows. We are taking advantage of opportunities to temporarily defer some
payments including certain excise and payroll taxes under the CARES Act.
We have maintained adequate liquidity to meet working capital requirements, fund
capital expenditures, and repay scheduled principal and interest payments on
debt. Absent deterioration of market conditions, we believe that cash flows from
operating activities and financing activities, primarily short-term borrowings,
will provide adequate resources to satisfy our working capital, scheduled
principal and interest payments on debt, anticipated dividend payments, and
anticipated capital expenditure requirements for both our short-term and
long-term capital needs.
We plan to sell a portion of our wine and spirits business by the end of third quarter of fiscal 2021. We expect to use the net cash proceeds from closing these transactions primarily to reduce outstanding borrowings.
OnMay 1, 2020 , we exercised theNovember 2017 Canopy Warrants at an exercise price ofC$12.98 per warrant share forC$245.0 million , or$173.9 million . TheMay 2020 Canopy Transaction was funded with cash from operations. Cash flows Six Six Months Months Dollar 2021 2020 Change (in millions) Net cash provided by (used in): Operating activities$ 1,444.9 $ 1,419.4 $ 25.5 Investing activities (455.3) (425.7) (29.6) Financing activities (872.1) (1,005.0) 132.9 Effect of exchange rate changes on cash and cash equivalents 5.7 (1.0) 6.7
Net increase (decrease) in cash and cash equivalents
(12.3)$ 135.5 Operating activities The increase in net cash provided by operating activities for Six Months 2021 is largely due to (i) a benefit from the timing of cash payments for both theBeer and Wine and Spirits segments, (ii) reduced inventory levels for the Beer segment, and (iii) decreased accounts receivable related to net sales decline for theWine and Spirits segment. The increase in net cash provided by operating activities was partially offset by (i) higher finished goods inventory levels for theWine and Spirits segment as well as (ii) higher income tax payments in Six Months 2021 primarily due to the receipt of a federal tax refund in Six Months 2020. Investing activities Net cash used in investing activities for Six Months 2021 increased primarily due to the$173.9 million exercise of theNovember 2017 Canopy Warrants inMay 2020 . The increase in net cash used in investing activities was partially offset by lower capital expenditures of$77.4 million for Six Months 2021 and proceeds of$41.1 million from theMarch 2020 Ballast Point Divestiture.
--------------------------------------------------------------------------------
MD&A Table of Contents
Financing activities
The decrease in net cash provided by (used in) financing activities consists of:
Six Six
Months Months Dollar
2021 2020 Change
(in millions)
Net proceeds from (payments of) debt, current and
long-term, and related activities $ (598.9) $ (688.7) $ 89.8
Dividends paid (287.6) (285.0) (2.6)
Purchases of treasury stock - (50.0) 50.0
Net cash provided by stock-based compensation
activities 24.4 18.7 5.7
Distributions to noncontrolling interests (10.0) - (10.0)
Net cash provided by (used in) financing activities
Debt Total debt outstanding as ofAugust 31, 2020 , amounted to$11,600.6 million , a decrease of$584.0 million fromFebruary 29, 2020 . This decrease consisted of: [[Image Removed: stz-20200831_g6.jpg]] Bank facilities InMarch 2020 , we entered into the 2020 Restatement Agreement that amended and restated the 2018 Credit Agreement. The 2020 Restatement Agreement resulted in (i) the removal of the subsidiary guarantees and termination of the guarantee agreement, (ii) the inclusion of the parent guaranty provisions in connection with the termination of the guarantee agreement, (iii) the removal of certain provisions pertaining to term loans since no term loans are outstanding, and (iv) the revision of the LIBOR successor rate provisions to permit the use of rates based on the SOFR administered by theFederal Reserve Bank of New York . InMarch 2020 , we entered into the Term Loan Restatement Agreement and the 2020 Term Loan Restatement Agreement, that amended and restated the Term Credit Agreement and the 2019 Term Credit Agreement, respectively. The Term Loan Restatement Agreement and the 2020 Term Loan Restatement Agreement each resulted in (i) the removal of the subsidiary guarantees and termination of the respective guarantee agreements and (ii) the revision of the LIBOR successor rate provisions in each to permit the use of rates based on SOFR.
In Second Quarter 2021, we prepaid the remaining outstanding Three-Year Term Facility and Five-Year Term Facility borrowings under our 2020 Term Credit Agreement.
--------------------------------------------------------------------------------
MD&A Table of Contents
Senior notes
In April 2020 , we issued the April 2020 Senior Notes. Proceeds from this
offering, net of discount and debt issuance costs, of $1,183.3 million were
primarily used for the repayment of our 2.25% November 2017 Senior Notes and the
repayment of a portion of the Three-Year Term Facility outstanding obligations
under our 2020 Term Credit Agreement.
General
The majority of our outstanding borrowings as ofAugust 31, 2020 , consisted of fixed-rate senior unsecured notes, with maturities ranging from calendar 2021 to calendar 2050, and a variable-rate senior unsecured term loan facility under ourMarch 2020 Term Credit Agreement, with a calendar 2024 maturity date. Additionally, we have a commercial paper program which provides for the issuance of up to an aggregate principal amount of$2.0 billion of commercial paper. Our commercial paper program is backed by unused commitments under our revolving credit facility under our 2020 Credit Agreement. Accordingly, outstanding borrowings under our commercial paper program reduce the amount available under our revolving credit facility under our 2020 Credit Agreement. We do not have purchase commitments from buyers for our commercial paper and, therefore, our ability to issue commercial paper is subject to market demand. If the commercial paper market is not available to us for any reason when outstanding commercial paper borrowings mature, we will utilize unused commitments under our revolving credit facility under our 2020 Credit Agreement to repay commercial paper borrowings. We do not expect that fluctuations in demand for commercial paper will affect our liquidity given our borrowing capacity available under our revolving credit facility under our 2020 Credit Agreement. We had the following borrowing capacity available under our 2020 Credit Agreement: Remaining Borrowing Capacity August 31, September 28, 2020 2020 (in millions) Revolving Credit Facility (1)$ 1,988.2 $
1,988.2
(1)Net of outstanding revolving credit facility borrowings and outstanding letters of credit under our 2020 Credit Agreement and outstanding borrowings under our commercial paper program.
The financial institutions participating in our 2020 Credit Agreement have complied with prior funding requests and we believe such financial institutions will comply with any future funding requests. However, there can be no assurances that any particular financial institution will continue to do so.
We and our subsidiaries are subject to covenants that are contained in our 2020 Credit Agreement, including those restricting the incurrence of additional 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, both as defined in our 2020 Credit Agreement. As ofAugust 31, 2020 , under our 2020 Credit Agreement, the minimum interest coverage ratio was 2.5x and the maximum net leverage ratio was 4.5x.
The representations, warranties, covenants, and events of default set forth in
our
Our indentures relating to our outstanding senior notes contain certain covenants, including, but not limited to: (i) a limitation on liens on certain assets, (ii) a limitation on certain sale and leaseback transactions, and (iii) restrictions on mergers, consolidations, and the transfer of all or substantially all of our assets to another person.
--------------------------------------------------------------------------------
MD&A Table of Contents
As of August 31, 2020 , we were in compliance with our covenants under our 2020
Credit Agreement, our March 2020 Term Credit Agreement, and our indentures, and
have met all debt payment obligations.
For a complete discussion and presentation of all borrowings and available sources of borrowing, refer to Note 13 of our consolidated financial statements included in our 2020 Annual Report and Note 9 of the Financial Statements.
Common stock dividends
OnSeptember 30, 2020 , our Board of Directors declared a quarterly cash dividend of$0.75 per share of Class A Common Stock,$0.68 per share of Class B Convertible Common Stock, and$0.68 per share of Class 1 Common Stock payable onNovember 20, 2020 , to stockholders of record of each class onNovember 6, 2020 .
We currently expect to continue to pay a regular quarterly cash dividend to stockholders of our common stock in the future, but such payments are subject to approval of our Board of Directors and are dependent upon our financial condition, results of operations, capital requirements, and other factors, including those set forth under Item 1A "Risk Factors" of our 2020 Annual Report.
Share Repurchase Program
Our Board of Directors have authorized the repurchase of up to
As ofAugust 31, 2020 , total shares repurchased under this authorization are as follows: Class A Common Shares Repurchase Dollar Value of Number of Shares Authorization Shares Repurchased Repurchased
(in millions, except share data)
2018 Authorization$ 3,000.0 $ 1,045.9 4,897,605 Share repurchases under the 2018 Authorization may be accomplished at management's discretion from time to time based on market conditions, our cash and debt position, and other factors as determined by management. Shares may be repurchased through open market or privately negotiated transactions. We may fund future share repurchases with cash generated from operations and/or proceeds from borrowings. Any repurchased shares will become treasury shares. We currently expect to continue to repurchase shares in the future, but such repurchases are dependent upon our financial condition, results of operations, capital requirements, and other factors, including those set forth under Item 1A "Risk Factors" of our 2020 Annual Report.
For additional information, refer to Note 18 of our consolidated financial statements included in our 2020 Annual Report and Note 11 of the Financial Statements.
Capital expenditures
Management reviews the capital expenditure program periodically and modifies it as required to meet current business needs. We do not believe it is prudent at this time to provide capital expenditure guidance for Fiscal 2021 as we are not able to estimate the long-term impact of COVID-19, including the demand for our products and the impact on the timeframes for completion of our expansion, construction, and optimization projects inMexico . To the extent possible, we plan to continue capital expenditures during Fiscal 2021 for the Beer segment associated primarily with ourObregon Brewery optimization and expansion.
--------------------------------------------------------------------------------
MD&A Table of Contents
In fiscal 2017, we began construction of the Mexicali Brewery . In March 2020 , a
public consultation on the construction of our Mexicali Brewery was held. We are
in discussions with government officials in Mexico regarding next steps for our
brewery construction project and options elsewhere in the country following the
negative result of the public consultation. These discussions have been positive
and we will continue working with government officials to mutually agree upon a
path forward. At this time, we have paused all construction activities at our
Mexicali Brewery . As of August 31, 2020 , we have capitalized approximately $720
million of construction in progress related to the Mexicali Brewery . We are
continuing to evaluate the constructed assets and future benefit of transferring
them to different locations in Mexico , where possible. Future impairments may
result based upon our plans for these assets for any capitalized amounts that
are not deemed recoverable.
Guidance
Accounting guidance
Accounting guidance adopted for Six Months 2021 did not have a material impact
on our consolidated financial statements.
Disclosure guidance
In May 2020 , the Securities and Exchange Commission ("SEC") issued a final rule
that amends business acquisition and disposition financial disclosure
requirements. Among other modifications, the amendments change certain criteria
in the significance tests used to determine audited financial statements and
related pro forma financial information requirements, the periods audited
financial statements must cover, and the form and content of the pro forma
financial information. We are required to comply with this rule for our annual
and interim periods beginning March 1, 2021 , however early compliance is
permitted. We are currently assessing the impact of this rule on our SEC
filings.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those set forth in, or implied by, such forward-looking statements. All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q are forward-looking statements, including without limitation: •The statements regarding the current global COVID-19 pandemic. •The statements regarding the potential impact to supply, production levels, and costs due to wildfires. •The statements under Part I - Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding: •our business strategy, future operations, future financial position, future net sales and expected volume trends, prospects, plans, and objectives of management; •information concerning expected or potential actions of third parties, including potential changes to international trade agreements, tariffs, taxes, and other governmental rules and regulations; •information concerning the future expected balance of supply and demand for our products; •timing and source of funds for operating activities andNovember 2018 Canopy Warrant exercises, if any; •the manner, timing, and duration of the share repurchase program and source of funds for share repurchases; and •the amount and timing of future dividends. •The statements regarding our beer expansion, construction, and optimization activities, including anticipated costs and timeframes for completion, discussions with government officials inMexico , and potential future impairment of non-recoverable brewery construction assets. •The statements regarding:
--------------------------------------------------------------------------------
MD&A Table of Contents
•the volatility of the fair value of our investments in Canopy measured at fair
value;
•our activities surrounding our investments in Canopy;
•our targeted leverage ratio;
•the November 2018 Canopy Warrants; and
•our future ownership level in Canopy and our future share of Canopy's reported
earnings and losses.
•The statements regarding the Wine and Spirits Transactions, Paul Masson
Transaction, and Concentrate Business Transaction, including expected form and
amount of consideration, amount and use of expected proceeds, estimated
remaining costs, and any expected restructuring charge.
•The statements regarding Canopy's transaction with Acreage.
When used in this Quarterly Report on Form 10-Q, the words "anticipate,"
"intend," "expect," and similar expressions are intended to identify
forward-looking statements, although not all forward-looking statements contain
such identifying words. All forward-looking statements speak only as of the date
of this Quarterly Report on Form 10-Q. We undertake no obligation to update or
revise any forward-looking statements, whether as a result of new information,
future events, or otherwise. Although we believe that the expectations reflected
in the forward-looking statements 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, our forward-looking statements
contained in this Quarterly Report on Form 10-Q are also subject to the risk and
uncertainty that:
•the duration and impact of the COVID-19 pandemic, including but not limited to
the closure of non-essential businesses, which may include our manufacturing
facilities, and other associated governmental containment actions, may vary from
our current expectations;
•the actual impact to supply, production levels, and costs due to wildfires may
vary from our current expectations due to, among other reasons, the actual
severity and geographical reach of wildfires;
•the actual balance of supply and demand for our products will vary from current
expectations due to, among other reasons, actual raw material supply, actual
shipments to distributors, and actual consumer demand;
•the actual demand, net sales, and volume trends for our products will vary from
current expectations due to, among other reasons, actual shipments to
distributors and actual consumer demand;
•the amount, timing, and source of funds for any share repurchases or Canopy
warrant exercises, if any, may vary due to market conditions; our cash and debt
position; the impact of the beer operations expansion activities; the impact of
our investments in Canopy; any future exercise of the November 2018 Canopy
Warrants; the expected impacts of the Wine and Spirits Transactions, Paul Masson
Transaction, and Concentrate Business Transaction; and other factors as
determined by management from time to time;
•the amount and timing of future dividends may differ from our current
expectations if our ability to use cash flow to fund dividends is affected by
unanticipated increases in total net debt, we are unable to generate cash flow
at anticipated levels, or we fail to generate expected earnings;
•the fair value of our investments in Canopy may vary due to market and economic
conditions in Canopy's markets and business locations;
•the accuracy of management's projections relating to the Canopy investment may
vary from management's current expectations due to Canopy's actual results of
operations and market and economic conditions;
•the timeframe and actual costs associated with the beer operations expansion
activities and amount of impairment, if any, for non-recoverable brewery
construction assets in Mexico may vary from management's current expectations
due to market conditions, our cash and debt position, receipt of required
regulatory approvals by the expected dates and on the expected terms, results of
discussions with government officials in Mexico , actual amount of
non-recoverable brewery construction assets, and other factors as determined by
management;
•any consummation of the Wine and Spirits Transactions, Paul Masson Transaction,
or the Concentrate Business Transaction and any actual date of consummation of
any of them may vary from our current expectations; the actual restructuring
charge, if any, will vary based on management's final plans; and the
--------------------------------------------------------------------------------
MD&A Table of Contents
amount of additional loss, if any, on the future write-down of assets held for
sale will vary based on the form of consideration, amount of consideration
actually received, and future brand performance;
•the effect of our reliance upon complex information systems and third party
global networks, our ability to withstand cyber-attacks, and our success in the
design, and ongoing implementation of our new ERP system may vary from
management's current expectations;
•any impact of U.S. federal laws on the transaction between Acreage and Canopy
or upon the implementation of that transaction, or the impact of the Acreage
Transaction upon our future ownership level in Canopy or our future share of
Canopy's reported earnings and losses, may vary from management's current
expectations; and
•our targeted leverage ratio may vary from management's current expectations due
to market conditions, our ability to generate cash flow at expected levels and
our ability to generate expected earnings.
The Wine and Spirits Transactions are subject to the satisfaction of certain
closing conditions. The Nobilo Transaction is also conditioned on completion of
the Further Revised Wine and Spirits Transaction. For additional information
about risks and uncertainties that could adversely affect our forward looking
statements, please refer to Item 1A. "Risk Factors" of our 2020 Annual Report.
--------------------------------------------------------------------------------
OTHER KEY INFORMATION Table of Contents
© Edgar Online, source
