Business Context and Reporting Period
This Form 8-K filing by Constellation Brands, Inc. (STZ) dated November 12, 2021, serves as a Regulation FD disclosure regarding the Company's equity method investment in Canopy Growth Corporation ("Canopy"). The report details the recognition of Canopy's second fiscal quarter 2022 results (July 1, 2021, through September 30, 2021) in Constellation's financial statements for the three and nine months ended November 30, 2021, reflecting a standard two-month reporting lag.
Key Financial Metrics
The filing provides specific impacts on Constellation's net income attributable to the Canopy investment, distinguishing between GAAP (reported) and Non-GAAP (comparable) bases. All figures are in U.S. dollars in millions.
| Metric | Three Months Ended Nov 30, 2021 | Nine Months Ended Nov 30, 2021 |
|---|---|---|
| Equity in Earnings (Losses) - GAAP | $(4.2) | $(39.5) |
| Net Income (Loss) Attributable to CBI - GAAP | $3.0 | $(9.6) |
| Equity in Earnings (Losses) - Non-GAAP | $(68.4) | $(142.6) |
| Net Income (Loss) Attributable to CBI - Non-GAAP | $(58.8) | $(119.3) |
Note: The filing does not provide total company revenue, cash flow, or debt metrics; it focuses exclusively on the Canopy investment impact.
Material Changes and Adjustments
The significant variance between GAAP and Non-GAAP results is driven by specific adjustments applied to the equity in earnings. Key comparable adjustments for the nine months ended November 30, 2021, include:
- Net (gain) loss on fair value financial instruments: $(138.7) million.
- Restructuring and other strategic business development costs: $70.7 million.
- Other (gains) losses, net: $(39.1) million.
- Acquisition costs: $4.0 million.
Ownership percentages applied to Canopy's results varied during the period: 37.2% (Jan-Mar 2021) and 36.2% (Apr-Sep 2021).
Guidance, Outlook, and Risks
The filing contains forward-looking statements regarding expected actions and results, which are subject to risks and uncertainties. Management utilizes the Non-GAAP "comparable" measures to monitor the investment and evaluate year-over-year trends. The effective tax rate applied to these earnings is based on current information and is subject to change upon the final determination of results for the quarter ended November 30, 2021. The Company explicitly states it does not undertake an obligation to update these forward-looking statements.
Investor Verification Checklist
- Verify the final effective tax rate applied to the Canopy investment for the quarter ended November 30, 2021, as the current rate is preliminary.
- Review the full Canopy Growth Corporation Q2 fiscal 2022 earnings release to understand the underlying drivers of the $(138.7) million loss on fair value financial instruments.
- Confirm the exact ownership percentage of Canopy held by Constellation as of the most recent reporting date.
- Assess the impact of the two-month reporting lag on the timing of earnings recognition in Constellation's consolidated statements.