VICTOR, N.Y., July 1 /PRNewswire-FirstCall/ --
- Achieves comparable basis diluted EPS of $0.38 and reported basis diluted EPS of
$0.22; comparable basis results
reflect favorable tax rate
- U.S. distributor program gains traction
- Initiates $300 million
accelerated stock buyback and updates full-year diluted EPS
guidance to reflect transaction benefits
- On target to achieve free cash flow of $350 - $400 million
|
|
|
First Quarter 2011 Financial
Highlights*
(in millions, except per share
data)
|
|
|
|
|
Comparable
|
%
Change
|
Reported
|
%
Change
|
|
|
Consolidated net sales
|
$788
|
-1%
|
$788
|
-1%
|
|
|
|
|
|
|
|
|
Operating income
|
$103
|
-17%
|
$96
|
14%
|
|
|
|
|
|
|
|
|
Operating margin
|
13.1%
|
-270
bps
|
12.2%
|
150 bps
|
|
|
|
|
|
|
|
|
Equity in earnings of equity method
investees**
|
$55
|
-12%
|
$55
|
-13%
|
|
|
|
|
|
|
|
|
Earnings before interest and taxes
(EBIT)
|
$158
|
-16%
|
NA
|
NA
|
|
|
|
|
|
|
|
|
Net income
|
$83
|
14%
|
$49
|
NM
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
$0.38
|
15%
|
$0.22
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constellation Brands, Inc. (NYSE: STZ, ASX: CBR), the world's
leading wine company, reported today its first quarter fiscal 2011
results.
(Logo:
http://www.newscom.com/cgi-bin/prnh/20040119/STZLOGO )
"I am pleased with our first quarter results that are in line
with our expectations," said Rob
Sands, president and chief executive officer, Constellation
Brands. "We are beginning to see benefits from our focus on
profitable organic growth. Our U.S. distributor initiative gained
traction in the first quarter as we experienced improved results at
retail. We also increased brand investments and promotional
activities and launched several new products, all of which drove an
improvement in depletion trends. Examples of new products
introduced during the quarter include blufeld German riesling,
Black Box malbec, Woodbridge by Robert
Mondavi brut sparkling wine and the Arbor Mist White Pear
pinot grigio."
|
|
|
First Quarter 2011 Net Sales
Highlights*
(in millions)
|
|
|
Reported
|
Organic
|
|
|
Net
Sales
|
% Change
|
Constant
Currency
Change
|
Net
Sales
|
% Change
|
Constant
Currency
Change
|
|
|
Consolidated
|
$788
|
-1%
|
-5%
|
$788
|
5%
|
-
|
|
|
Wine
|
$729
|
-
|
-5%
|
$729
|
4%
|
-1%
|
|
|
North America
Wine
|
$532
|
1%
|
-2%
|
$532
|
1%
|
-2%
|
|
|
Australia and Europe
Wine
|
$198
|
-5%
|
-13%
|
$198
|
10%
|
1%
|
|
|
Spirits
|
$58
|
-3%
|
-3%
|
$58
|
28%
|
28%
|
|
*Definitions of reported,
comparable, organic and constant currency, as well as
reconciliations of non-GAAP financial measures, are contained
elsewhere in this news release.
** Hereafter referred to as
"equity
earnings."
NM=Not meaningful; NA=Not
applicable
|
|
|
|
|
|
|
|
|
|
Net Sales Commentary
Reported consolidated net sales decreased one percent due
primarily to the divestitures of the U.K. cider and value spirits
businesses partially offset by the favorable impact of
year-over-year currency exchange rate fluctuations.
Consolidated wine organic net sales on a constant currency basis
decreased one percent. North
America wine net sales on a constant currency basis
decreased two percent as a slight increase in volume was more than
offset by higher promotion costs. Australia and Europe wine net sales on an organic constant
currency basis increased one percent versus the prior year first
quarter.
Total spirits organic net sales increased 28 percent for the
quarter, led by a 40 percent gain for SVEDKA vodka. "Our first ever
SVEDKA television advertising campaign which asks consumers "R.U.
bot or not?" generates excitement around this phenomenal vodka
brand," said Sands. "The unique campaign featuring the SVEDKA
fembot continues to resonate well with consumers."
Operating Income, Net Income, Diluted EPS Commentary
The consolidated comparable basis operating income decline was
primarily driven by a $15 million
decrease in the North America wine
segment due primarily to higher promotion spending.
Constellation's equity earnings from its 50 percent interest in
the Crown Imports joint venture totaled $54
million, a decrease of 14 percent from the prior year first
quarter. For first quarter 2011, Crown generated net sales of
$622 million, a decrease of three
percent, and operating income of $109
million, a decrease of 14 percent. Net sales for Crown were
impacted primarily by higher promotions, unfavorable mix and lower
volume. Operating income for Crown decreased primarily due to
timing of promotional and marketing investments, a contractual
product cost increase, unfavorable mix and lower volume.
"After successfully executing the Cinco
de Mayo holiday programming and kicking off promotions tied
to World Cup Soccer, Crown launched its largest promotion ever with
the 'Win A Beach Getaway.' This summer consumer sweepstakes event
is the first time that Crown has fully integrated television
advertising, packaging and promotional displays in both on and off
premise channels," said Sands. "We believe these programs and other
activities helped to drive positive depletion growth during the
quarter."
For first quarter 2011, pre-tax restructuring charges and
unusual items totaled $7 million
compared to $40 million for the prior
year first quarter.
Interest expense totaled $49
million, a decrease of 29 percent. The decrease was
primarily due to lower average interest rates and borrowings during
the quarter.
The comparable basis effective tax rate for the quarter was 24
percent which reflects the favorable outcome of various tax items
and compares to a 39 percent rate for the prior year first quarter.
The company continues to anticipate a full year comparable basis
effective tax rate of 35 percent. The reported basis effective tax
rate for the quarter reflects a $0.13
diluted EPS charge associated with a valuation allowance against
deferred tax assets in the U.K.
Common Stock Repurchase
On April 16, 2010, the company
entered into a $300 million
accelerated stock buyback (ASB) transaction. During the first
quarter, the company received 13.8 million shares of Class A Common
Stock, representing the minimum number of shares that will be
received under the ASB transaction. The final number of shares to
be received under the ASB transaction will be determined at the
close of the transaction. The company used its revolving credit
facility to fund the ASB transaction.
"For fiscal 2011, the company anticipates generating strong free
cash flow in the range of $350-$400
million," said Bob Ryder,
chief financial officer, Constellation Brands. "While we plan to
continue to pay down debt in fiscal 2011, we have redeployed a
portion of free cash flow to repurchase stock as we believe
Constellation shares represent good value. We are increasing our
EPS guidance by $0.10 to reflect the
estimated benefit of the stock buyback."
Summary
"The first quarter represents a solid start to the year," said
Sands. "We are on track to achieve our strategic and financial
goals, the most important of which is to drive profitable organic
growth. While macroeconomic and competitive challenges persist, we
are encouraged by improving market trends in our U.S. wine and beer
businesses."
Outlook
The table below sets forth management's current diluted EPS
expectations for fiscal year 2011 compared to fiscal year 2010
actual results, both on a reported basis and a comparable basis.
|
Constellation Brands Fiscal Year 2011
Diluted Earnings Per Share Outlook
|
|
|
Reported
Basis
|
Comparable
Basis
|
|
|
FY11
Estimate
|
FY10
Actual
|
FY11
Estimate
|
FY10
Actual
|
|
|
Fiscal Year
Ending Feb. 28
|
$1.33-$1.48
|
$0.45
|
$1.63 -
$1.78
|
$1.69
|
|
|
|
|
|
|
|
|
|
Full-year fiscal 2011 guidance includes the following current
assumptions:
- Interest expense: approximately $210 -
$220 million
- Tax rate: approximately 40 percent on a reported basis, as
compared to 35 percent on a comparable basis, primarily due to a
provision of five percentage points associated with the recognition
in first quarter 2011 of a valuation allowance against deferred tax
assets in the U.K.
- Weighted average diluted shares outstanding: approximately 212
million
- Free cash flow: $350 - $400
million
Conference Call
A conference call to discuss first quarter fiscal 2011 results
and outlook will be hosted by President and Chief Executive Officer
Rob Sands and Executive Vice
President and Chief Financial Officer Bob
Ryder on Thursday, July 1,
2010 at 10:30 a.m. (eastern).
The conference call can be accessed by dialing +973-935-8505
beginning 10 minutes prior to the start of the call. A live
listen-only webcast of the conference call, together with a copy of
this news release (including the attachments) and other financial
information that may be discussed in the call will be available on
the Internet at Constellation's Web site: www.cbrands.com under
"Investors," prior to the call.
Explanations
Reported basis ("reported") operating income, net income and
diluted EPS are as reported under generally accepted accounting
principles. Operating income, net income and diluted EPS on a
comparable basis ("comparable"), exclude restructuring charges and
unusual items. The company's measure of segment profitability
excludes restructuring charges and unusual items, which is
consistent with the measure used by management to evaluate
results.
The company discusses additional non-GAAP measures in this news
release, including constant currency net sales, organic net sales,
comparable basis EBIT and free cash flow.
Tables reconciling non-GAAP measures, together with definitions
of these measures and the reasons management uses these measures,
are included in this news release.
About Constellation Brands
Constellation Brands is the world's leading wine company that
achieves success through an unmatched knowledge of wine consumers,
storied brands that suit varied lives and tastes, and talented
employees worldwide. With a broad portfolio of widely admired
premium products across the wine, beer and spirits categories,
Constellation's brand portfolio includes Robert Mondavi, Hardys, Clos du Bois,
Blackstone, Arbor Mist, Estancia, Ravenswood, Jackson-Triggs,
Kim Crawford, Corona Extra, Black
Velvet Canadian Whisky and SVEDKA Vodka.
Constellation Brands (NYSE: STZ and STZ.B; ASX: CBR) is an
S&P 500 Index and Fortune 1000® company with more than 100
brands in our portfolio, sales in about 150 countries and
operations at more than 40 facilities. The company believes that
industry leadership involves a commitment to our brands, to the
trade, to the land, to investors and to different people around the
world who turn to our products when celebrating big moments or
enjoying quiet ones. We express this commitment through our vision:
to elevate life with every glass raised. To learn more about
Constellation, visit the company's web site at www.cbrands.com.
Forward-Looking Statements
The statements made under the heading Outlook, and all
statements other than statements of historical facts set forth in
this news release regarding Constellation's business strategy,
future operations, financial position, estimated revenues,
projected costs, prospects, plans and objectives of management, as
well as information concerning expected actions of third parties,
are forward-looking statements (collectively, the "Projections")
that involve risks and uncertainties that could cause actual
results to differ materially from those set forth in or implied by
the Projections.
During the current quarter, Constellation may reiterate the
Projections. Prior to the start of the company's quiet
period, which will begin at the close of business on August 31, 2010, the public can continue to rely
on the Projections as still being Constellation's current
expectations on the matters covered, unless Constellation publishes
a notice stating otherwise. During Constellation's "quiet
period," the Projections should not be considered to constitute the
company's expectations and should be considered historical,
speaking as of prior to the quiet period only and not subject to
update by the company.
The Projections are based on management's current expectations
and, unless otherwise noted, do not take into account the impact of
any future acquisition, merger or any other business combination,
divestiture, restructuring or other strategic business
realignments, financing or share repurchase that may be completed
after the date of this release. The Projections should not be
construed in any manner as a guarantee that such results will in
fact occur.
In addition to the risks and uncertainties of ordinary business
operations, the Projections of the company contained in this news
release are subject to a number of risks and uncertainties,
including:
- completion of various portfolio actions; implementation of
consolidation activities and actual U.S. distributor transition
experience;
- fluctuations in the volume weighted average price of the
Company's Class A Common Stock during the remainder of the
calculation period under the ASB transaction;
- actual date of the termination of the calculation period under
the ASB transaction;
- final number of shares of Class A Common Stock received as a
result of the ASB transaction;
- achievement of all expected cost savings from the company's
various restructuring plans and realization of expected asset sale
proceeds from the sale of inventory and other assets;
- accuracy of the bases for forecasts relating to joint ventures
and associated costs and capital investment requirements;
- restructuring charges, acquisition-related integration costs
and other one-time costs associated with integration and
restructuring plans may vary materially from management's current
estimates due to variations in one or more of anticipated headcount
reductions, contract terminations, costs or timing of plan
implementation;
- raw material supply, production or shipment difficulties could
adversely affect the company's ability to supply its
customers;
- increased competitive activities in the form of pricing,
advertising and promotions could adversely impact consumer demand
for the company's products and/or result in lower than expected
sales or higher than expected expenses;
- general economic, geo-political and regulatory conditions,
prolonged downturn in the economic markets in the U.S. and in the
company's major markets outside of the U.S., continuing instability
in world financial markets, or unanticipated environmental
liabilities and costs;
- changes to accounting rules and tax laws, and other factors
which could impact the company's reported financial position or
effective tax rate;
- changes in interest rates and the inherent unpredictability of
currency fluctuations, commodity prices and raw material costs;
and
- other factors and uncertainties disclosed in the company's
filings with the Securities and Exchange Commission, including its
Annual Report on Form 10-K for the fiscal year ended Feb. 28, 2010, which could cause actual
future performance to differ from current expectations.
|
Constellation Brands, Inc. and
Subsidiaries
|
|
|
CONDENSED CONSOLIDATED BALANCE
SHEETS
|
|
|
(in millions)
|
|
|
|
|
|
|
|
May
31,
2010
|
|
February
28,
2010
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
Cash and cash
investments
|
$
20.9
|
|
$
43.5
|
|
|
Accounts
receivable, net
|
636.5
|
|
514.7
|
|
|
Inventories
|
1,795.6
|
|
1,879.9
|
|
|
Prepaid expenses
and other
|
109.0
|
|
151.0
|
|
|
|
|
|
|
|
Total current
assets
|
2,562.0
|
|
2,589.1
|
|
|
|
|
|
|
|
Property, plant
and equipment, net
|
1,522.9
|
|
1,567.2
|
|
|
Goodwill
|
2,570.9
|
|
2,570.6
|
|
|
Intangible assets,
net
|
922.7
|
|
925.0
|
|
|
Other assets,
net
|
317.6
|
|
442.4
|
|
|
|
|
|
|
|
Total
assets
|
$
7,896.1
|
|
$
8,094.3
|
|
|
|
|
|
|
|
Liabilities and Stockholders'
Equity
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
Notes payable to
banks
|
$
564.7
|
|
$
371.2
|
|
|
Current maturities
of long-term debt
|
252.1
|
|
187.2
|
|
|
Accounts
payable
|
224.8
|
|
268.8
|
|
|
Accrued excise
taxes
|
50.8
|
|
43.8
|
|
|
Other accrued
expenses and liabilities
|
441.8
|
|
501.6
|
|
|
|
|
|
|
|
Total current
liabilities
|
1,534.2
|
|
1,372.6
|
|
|
|
|
|
|
|
Long-term debt,
less current maturities
|
3,201.0
|
|
3,277.1
|
|
|
Deferred income
taxes
|
547.5
|
|
536.2
|
|
|
Other
liabilities
|
316.0
|
|
332.1
|
|
|
|
|
|
|
|
Total
liabilities
|
5,598.7
|
|
5,518.0
|
|
|
|
|
|
|
|
Total
stockholders' equity
|
2,297.4
|
|
2,576.3
|
|
|
|
|
|
|
|
Total liabilities
and stockholders' equity
|
$
7,896.1
|
|
$
8,094.3
|
|
|
|
|
|
|
|
Constellation Brands, Inc. and
Subsidiaries
|
|
|
CONSOLIDATED STATEMENTS OF
OPERATIONS
|
|
|
(in millions, except per share
data)
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
May
31,
2010
|
|
May 31,
2009
|
|
|
|
|
|
|
|
Sales
|
$
976.2
|
|
$
1,003.8
|
|
|
Excise taxes
|
(188.7)
|
|
(212.2)
|
|
|
Net
sales
|
787.5
|
|
791.6
|
|
|
|
|
|
|
|
Cost of product sold
|
(517.5)
|
|
(522.9)
|
|
|
Gross
profit
|
270.0
|
|
268.7
|
|
|
|
|
|
|
|
Selling, general and administrative
expenses
|
(168.8)
|
|
(165.1)
|
|
|
Restructuring charges
|
(4.9)
|
|
(18.9)
|
|
|
Operating
income
|
96.3
|
|
84.7
|
|
|
|
|
|
|
|
Equity in earnings of equity method
investees
|
54.5
|
|
62.8
|
|
|
Interest expense, net
|
(48.5)
|
|
(68.4)
|
|
|
Income before
income taxes
|
102.3
|
|
79.1
|
|
|
|
|
|
|
|
Provision for income taxes
|
(53.2)
|
|
(72.6)
|
|
|
Net
income
|
$
49.1
|
|
$
6.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Common
Share:
|
|
|
|
|
|
Basic - Class A
Common Stock
|
$
0.23
|
|
$
0.03
|
|
|
Basic - Class B
Common Stock
|
$
0.21
|
|
$
0.03
|
|
|
|
|
|
|
|
Diluted - Class A
Common Stock
|
$
0.22
|
|
$
0.03
|
|
|
Diluted - Class B
Common Stock
|
$
0.21
|
|
$
0.03
|
|
|
|
|
|
|
|
Weighted Average Common Shares
Outstanding:
|
|
|
|
|
|
Basic - Class A
Common Stock
|
192.713
|
|
195.233
|
|
|
Basic - Class B
Common Stock
|
23.726
|
|
23.744
|
|
|
|
|
|
|
|
Diluted - Class A
Common Stock
|
218.856
|
|
219.820
|
|
|
Diluted - Class B
Common Stock
|
23.726
|
|
23.744
|
|
|
|
|
|
|
|
Constellation Brands, Inc. and
Subsidiaries
|
|
|
CONSOLIDATED STATEMENTS OF CASH
FLOWS
|
|
|
(in millions)
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
May
31,
2010
|
|
May 31,
2009
|
|
|
Cash Flows From Operating
Activities
|
|
|
|
|
|
Net
income
|
$
49.1
|
|
$
6.5
|
|
|
Adjustments to
reconcile net income to net cash provided by (used in)
operating activities:
|
|
|
|
|
|
Deferred tax
provision (benefit)
|
35.3
|
|
(27.1)
|
|
|
Depreciation of
property, plant and equipment
|
30.9
|
|
34.1
|
|
|
Equity in earnings
of equity method investees, net of distributed earnings
|
23.1
|
|
(23.6)
|
|
|
Stock-based
compensation expense
|
11.0
|
|
12.2
|
|
|
Amortization of
intangible and other assets
|
3.7
|
|
3.1
|
|
|
Loss on business
sold
|
-
|
|
0.8
|
|
|
(Gain) loss on
disposal or impairment of long-lived assets, net
|
(1.4)
|
|
0.4
|
|
|
Change in
operating assets and liabilities, net of effects
from purchases and sales
of businesses:
|
|
|
|
|
|
Accounts
receivable, net
|
(133.3)
|
|
(132.8)
|
|
|
Inventories
|
61.0
|
|
34.5
|
|
|
Prepaid expenses
and other current assets
|
7.0
|
|
4.9
|
|
|
Accounts payable
|
(30.6)
|
|
(28.2)
|
|
|
Accrued excise
taxes
|
8.5
|
|
6.0
|
|
|
Other accrued
expenses and liabilities
|
(0.7)
|
|
55.2
|
|
|
Other,
net
|
(3.9)
|
|
(0.8)
|
|
|
Total
adjustments
|
10.6
|
|
(61.3)
|
|
|
Net cash provided
by (used in) operating activities
|
59.7
|
|
(54.8)
|
|
|
|
|
|
|
|
Cash Flows From Investing
Activities
|
|
|
|
|
|
Proceeds from note
receivable
|
60.0
|
|
-
|
|
|
Proceeds from
sales of assets
|
1.1
|
|
1.2
|
|
|
Investment in
equity method investee
|
(29.6)
|
|
(0.3)
|
|
|
Purchases of
property, plant and equipment
|
(25.6)
|
|
(47.1)
|
|
|
(Repayments)
proceeds from sale of business
|
(1.6)
|
|
270.2
|
|
|
Other investing
activities
|
0.3
|
|
0.3
|
|
|
Net cash provided
by investing activities
|
4.6
|
|
224.3
|
|
|
|
|
|
|
|
Cash Flows From Financing
Activities
|
|
|
|
|
|
Purchases of
treasury stock
|
(300.0)
|
|
-
|
|
|
Principal payments
of long-term debt
|
(1.3)
|
|
(269.5)
|
|
|
Payment of
financing costs of long-term debt
|
(0.2)
|
|
-
|
|
|
Net proceeds from
notes payable
|
194.6
|
|
98.6
|
|
|
Exercise of
employee stock options
|
16.7
|
|
3.4
|
|
|
Excess tax
benefits from stock-based payment awards
|
4.6
|
|
1.2
|
|
|
Net cash used in
financing activities
|
(85.6)
|
|
(166.3)
|
|
|
|
|
|
|
|
Effect of exchange rate changes on
cash and cash investments
|
(1.3)
|
|
0.5
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and
cash equivalents
|
(22.6)
|
|
3.7
|
|
|
Cash and cash investments, beginning
of period
|
43.5
|
|
13.1
|
|
|
Cash and cash investments, end of
period
|
$
20.9
|
|
$
16.8
|
|
|
|
|
|
|
|
Constellation Brands, Inc. and
Subsidiaries
|
|
|
|
|
|
|
SUMMARIZED SEGMENT AND EQUITY EARNINGS
INFORMATION
|
|
|
|
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
May
31,
2010
|
|
May 31,
2009
|
Percent
Change
|
|
|
|
|
|
|
|
|
|
Constellation Wines North
America (1)
|
|
|
|
|
|
|
Wine net
sales
|
$
531.7
|
|
$
524.2
|
1%
|
|
|
Spirits net
sales
|
58.2
|
|
60.1
|
(3%)
|
|
|
Segment net
sales
|
$
589.9
|
|
$
584.3
|
1%
|
|
|
Segment operating
income
|
$
132.5
|
|
$
147.3
|
(10%)
|
|
|
% Net
sales
|
22.5%
|
|
25.2%
|
|
|
|
Equity in earnings
(losses) of equity method investees
|
$
0.1
|
|
$
(1.2)
|
NM
|
|
|
|
|
|
|
|
|
|
Constellation Wines Australia and
Europe (1)
|
|
|
|
|
|
|
Wine net
sales
|
$
197.6
|
|
$
207.3
|
(5%)
|
|
|
Segment net
sales
|
$
197.6
|
|
$
207.3
|
(5%)
|
|
|
Segment operating
(loss) income
|
$
(2.9)
|
|
$
0.3
|
NM
|
|
|
% Net
sales
|
(1.5%)
|
|
-
|
|
|
|
Equity in earnings
of equity method investees
|
$
0.6
|
|
$
1.1
|
(45%)
|
|
|
|
|
|
|
|
|
|
Corporate Operations and Other segment
operating loss
|
$
(26.4)
|
|
$
(22.7)
|
16%
|
|
|
|
|
|
|
|
|
|
Equity in earnings of Crown
Imports (2)
|
$
54.3
|
|
$
62.9
|
(14%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reportable Segment Operating
Income (A)
|
$
103.2
|
|
$
124.9
|
|
|
|
Restructuring
Charges and Unusual Items
|
(6.9)
|
|
(40.2)
|
|
|
|
Consolidated Operating Income
(GAAP)
|
$
96.3
|
|
$
84.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reportable Segment Equity in Earnings
of Equity Method Investees (B)
|
$
55.0
|
|
$
62.8
|
|
|
|
Restructuring
Charges and Unusual Items
|
(0.5)
|
|
-
|
|
|
|
Consolidated Equity in Earnings of
Equity Method Investees (GAAP)
|
$
54.5
|
|
$
62.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Earnings Before
Interest and Taxes (Non-GAAP) (A+B)
|
$
158.2
|
|
$
187.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
In connection with the Company’s
change in its internal management structure for its U.K. and
Australia businesses and the revised strategy within these markets,
the Company changed its internal management financial reporting on
May 1, 2010, to consist of five operating segments:
Constellation Wines North America, Constellation Wines
Australia and Europe, Constellation Wines New Zealand, Crown
Imports and Corporate Operations and Other. For reporting
purposes, the Constellation Wines New Zealand operating segment is
aggregated with the Constellation Wines North America operating
segment due to, among other factors, the vast majority of the wine
produced by the Constellation Wines New Zealand operating segment
is sold in the U.S. and Canada. Prior period results have
been restated to conform with the new segment
presentation.
|
|
|
(2)
|
Crown Imports Joint Venture Summarized
Financial Information
|
|
|
|
|
|
|
Net sales
|
$ 621.5
|
|
$ 639.1
|
(3%)
|
|
|
Operating income
|
$ 108.9
|
|
$ 126.0
|
(14%)
|
|
|
% Net sales
|
17.5%
|
|
19.7%
|
|
|
|
|
|
|
|
|
|
|
Constellation Brands, Inc. and
Subsidiaries
|
|
|
RECONCILIATION OF REPORTED, ORGANIC
AND CONSTANT CURRENCY NET SALES
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
As the company sold certain spirits
value brands and contract production services on March 24, 2009,
and sold its U.K. cider business on January 15, 2010, organic net
sales for the three months ended May 31, 2009, are defined by the
company as reported net sales less net sales of certain spirits
value brands and contract production services and/or net sales of
cider. Organic net sales and percentage increase (decrease)
in constant currency net sales (which excludes the impact of year
over year currency exchange rate fluctuations) are provided because
management uses this information in monitoring and evaluating the
underlying business trends of the continuing operations of the
company. In addition, the company believes this information
provides investors better insight on underlying business trends and
results in order to evaluate year over year financial
performance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constant
|
|
|
|
Three Months
Ended
|
|
|
Currency
|
|
|
|
May
31,
|
|
May 31,
|
Percent
|
Currency
|
Percent
|
|
|
|
2010
|
|
2009
|
Change
|
Impact
|
Change
(1)
|
|
|
Consolidated Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wine
|
$
729.3
|
|
$
731.5
|
-
|
5%
|
(5%)
|
|
|
Spirits
|
58.2
|
|
60.1
|
(3%)
|
-
|
(3%)
|
|
|
Consolidated
reported net sales
|
787.5
|
|
791.6
|
(1%)
|
4%
|
(5%)
|
|
|
Less: Spirits net sales
(2)
|
-
|
|
(14.8)
|
|
|
|
|
|
Less: Cider net sales
(3)
|
-
|
|
(27.7)
|
|
|
|
|
|
Consolidated
organic net sales
|
$
787.5
|
|
$
749.1
|
5%
|
5%
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Wine Net
Sales
|
|
|
|
|
|
|
|
|
Wine
|
$
729.3
|
|
$
731.5
|
-
|
5%
|
(5%)
|
|
|
Less: Cider net sales
(3)
|
-
|
|
(27.7)
|
|
|
|
|
|
Consolidated wine
organic net sales
|
$
729.3
|
|
$
703.8
|
4%
|
5%
|
(1%)
|
|
|
|
|
|
|
|
|
|
|
|
Constellation Wines North America Net
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wine reported net sales
|
$
531.7
|
|
$
524.2
|
1%
|
3%
|
(2%)
|
|
|
|
|
|
|
|
|
|
|
|
Spirits reported net
sales
|
$
58.2
|
|
$
60.1
|
(3%)
|
-
|
(3%)
|
|
|
Less: Spirits net sales
(2)
|
-
|
|
(14.8)
|
|
|
|
|
|
Spirits organic
net sales
|
$
58.2
|
|
$
45.3
|
28%
|
-
|
28%
|
|
|
|
|
|
|
|
|
|
|
|
Constellation Wines Australia and
Europe Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wine reported net sales
|
$
197.6
|
|
$
207.3
|
(5%)
|
8%
|
(13%)
|
|
|
Less: Cider net sales
(2)
|
-
|
|
(27.7)
|
|
|
|
|
|
Wine organic net
sales
|
$
197.6
|
|
$
179.6
|
10%
|
9%
|
1%
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
May not sum due to rounding as each
item is computed independently.
|
|
|
|
|
|
(2)
|
For the period March 1, 2009, through
March 24, 2009, included in the three months ended May 31,
2009.
|
|
|
|
|
|
(3)
|
For the period March 1, 2009, through
May 31, 2009, included in the three months ended May 31,
2009.
|
|
|
|
|
|
|
|
|
|
|
|
Constellation Brands, Inc. and
Subsidiaries
RECONCILIATIONS OF GAAP TO NON-GAAP
FINANCIAL MEASURES (1)
(in millions, except per share
data)
|
|
|
Three Months Ended
May 31, 2010
|
|
Three Months Ended
May 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported
Basis
(GAAP)
|
Inventory
Step-up
|
Strategic
Business
Realignment (2)
|
Other
(3)
|
Comparable
Basis
(Non-GAAP)
|
|
Reported
Basis
(GAAP)
|
Inventory
Step-up
|
Strategic
Business
Realignment (2)
|
Other
|
Comparable
Basis
(Non-GAAP)
|
|
Percent
Change
-
Reported
Basis
(GAAP)
|
|
Percent
Change
-
Comparable
Basis
(Non-GAAP)
|
|
|
Net Sales
|
$
787.5
|
|
|
|
$
787.5
|
|
$
791.6
|
|
|
|
$
791.6
|
|
(1%)
|
|
(1%)
|
|
|
Cost of product
sold
|
(517.5)
|
1.0
|
1.0
|
|
(515.5)
|
|
(522.9)
|
2.7
|
4.8
|
|
(515.4)
|
|
(1%)
|
|
-
|
|
|
Gross Profit
|
270.0
|
1.0
|
1.0
|
-
|
272.0
|
|
268.7
|
2.7
|
4.8
|
-
|
276.2
|
|
-
|
|
(2%)
|
|
|
Selling, general
and administrative expenses ("SG&A")
|
(168.8)
|
|
|
|
(168.8)
|
|
(165.1)
|
|
13.8
|
|
(151.3)
|
|
2%
|
|
12%
|
|
|
Restructuring
charges
|
(4.9)
|
|
4.9
|
|
-
|
|
(18.9)
|
|
18.9
|
|
-
|
|
(74%)
|
|
N/A
|
|
|
Operating Income
|
96.3
|
1.0
|
5.9
|
-
|
103.2
|
|
84.7
|
2.7
|
37.5
|
-
|
124.9
|
|
14%
|
|
(17%)
|
|
|
Equity in earnings
of equity method investees
|
54.5
|
|
|
0.5
|
55.0
|
|
62.8
|
|
|
|
62.8
|
|
(13%)
|
|
(12%)
|
|
|
EBIT
|
|
|
|
|
158.2
|
|
|
|
|
|
187.7
|
|
N/A
|
|
(16%)
|
|
|
Interest expense,
net
|
(48.5)
|
|
|
|
(48.5)
|
|
(68.4)
|
|
|
|
(68.4)
|
|
(29%)
|
|
(29%)
|
|
|
Income Before Income
Taxes
|
102.3
|
1.0
|
5.9
|
0.5
|
109.7
|
|
79.1
|
2.7
|
37.5
|
-
|
119.3
|
|
29%
|
|
(8%)
|
|
|
(Provision for)
benefit from income taxes
|
(53.2)
|
(0.4)
|
(1.3)
|
28.1
|
(26.8)
|
|
(72.6)
|
(1.1)
|
27.1
|
-
|
(46.6)
|
|
(27%)
|
|
(42%)
|
|
|
Net Income
|
$
49.1
|
$
0.6
|
$
4.6
|
$
28.6
|
$
82.9
|
|
$
6.5
|
$
1.6
|
$
64.6
|
$
-
|
$
72.7
|
|
NM
|
|
14%
|
|
|
Diluted Earnings Per Common
Share
|
$
0.22
|
$
-
|
$
0.02
|
$
0.13
|
$
0.38
|
|
$
0.03
|
$
0.01
|
$
0.29
|
$
-
|
$
0.33
|
|
NM
|
|
15%
|
|
|
Weighted Average Common
Shares
Outstanding -
Diluted
|
218.856
|
218.856
|
218.856
|
218.856
|
218.856
|
|
219.820
|
219.820
|
219.820
|
219.820
|
219.820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
|
34.3%
|
|
|
|
34.5%
|
|
33.9%
|
|
|
|
34.9%
|
|
|
|
|
|
|
SG&A as a percent of net
sales
|
21.4%
|
|
|
|
21.4%
|
|
20.9%
|
|
|
|
19.1%
|
|
|
|
|
|
|
Operating Margin
|
12.2%
|
|
|
|
13.1%
|
|
10.7%
|
|
|
|
15.8%
|
|
|
|
|
|
|
Effective Tax Rate
|
52.0%
|
|
|
|
24.4%
|
|
NM
|
|
|
|
39.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constellation Brands, Inc. and
Subsidiaries
|
|
|
RECONCILIATIONS OF GAAP TO NON-GAAP
FINANCIAL MEASURES (continued)
|
|
|
NOTES
|
|
|
|
|
|
|
|
|
(1)
|
The company reports its financial
results in accordance with generally accepted accounting principles
in the U.S. ("GAAP"). However, non-GAAP financial measures,
as defined in the reconciliation tables above, are provided because
management uses this information in evaluating the results of the
continuing operations of the company and/or internal goal setting.
In addition, the company believes this information provides
investors better insight on underlying business trends and results
in order to evaluate year over year financial performance.
See the tables above for supplemental financial data and
corresponding reconciliations of these non-GAAP financial measures
to GAAP financial measures for the three months ended May 31, 2010,
and May 31, 2009. Non-GAAP financial measures should be
viewed in addition to, and not as an alternative for, the company's
reported results prepared in accordance with GAAP. Please
refer to the company's Web site at
http://www.cbrands.com/CBI/investors.htm for more detailed
description and further discussion of these non-GAAP financial
measures.
|
|
|
|
|
|
(2)
|
For the three months ended May 31,
2010, strategic business realignment items primarily include costs
recognized by the company in connection with the Global Initiative
of $5.5 million, net of a tax benefit of $1.2 million. For
the three months ended May 31, 2009, strategic business realignment
items primarily include tax expense associated with the March 2009
divestiture of the value spirits business of $37.5 million and
costs recognized by the company in connection with the Global
Initiative of $21.2 million, net of a tax benefit of $9.5
million.
|
|
|
|
|
|
(3)
|
For the three months ended May 31,
2010, other consists of a valuation allowance against deferred tax
assets in the U.K. of $28.1 million.
|
|
|
|
|
|
|
|
|
|
|
|
DEFINITIONS
|
|
|
Global Initiative
|
|
|
The company's plan announced in April
2009 to simplify its business, increase efficiencies and reduce its
cost structure on a global basis (the "Global
Initiative").
|
|
|
|
|
|
Australian Initiative
|
|
|
The company's plan announced in August
2008 to sell certain assets and implement operational changes
designed to improve the efficiencies and returns associated with
its Australian business (the "Australian Initiative").
|
|
|
|
|
|
Fiscal 2008 Plan
|
|
|
The company's plan announced in
November 2007 to streamline certain of its international
operations, primarily in Australia; certain other restructuring
charges incurred during the third quarter of fiscal 2008 in
connection with the consolidation of certain spirits production
processes in the U.S.; and its plan announced in January 2008 to
streamline certain of its operations in the U.S., primarily in
connection with the restructuring and integration of the operations
of Beam Wine Estates, Inc. (collectively, the "Fiscal 2008
Plan").
|
|
|
|
|
|
Fiscal 2007 Wine Plan
|
|
|
The company's plan announced in August
2006 to invest in new distribution and bottling facilities in the
U.K. and to streamline certain Australian wine operations
(collectively, the "Fiscal 2007 Wine Plan").
|
|
|
|
|
|
Constellation Brands, Inc. and
Subsidiaries
|
|
|
|
|
RECONCILIATIONS OF GAAP TO NON-GAAP
FINANCIAL MEASURES (continued)
|
|
|
|
|
GUIDANCE - DILUTED EARNINGS PER SHARE
AND FREE CASH FLOW
|
|
|
|
|
(in millions, except per share
data)
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Share
Guidance
|
Range for the
Year
Ending
February 28, 2011
|
|
|
|
|
|
|
|
|
Forecasted diluted earnings per share
- reported basis (GAAP)
|
$
1.33
|
|
$
1.48
|
|
|
Strategic business realignment
(1)
|
0.17
|
|
0.17
|
|
|
Other (2)
|
0.13
|
|
0.13
|
|
|
Forecasted diluted earnings per share
- comparable basis (Non-GAAP) (3)
|
$
1.63
|
|
$
1.78
|
|
|
|
|
|
|
|
|
|
|
|
Actual for
the
Year
Ended
February 28,
2010
|
|
|
|
|
|
|
|
|
Diluted earnings per share - reported
basis (GAAP)
|
|
|
$
0.45
|
|
|
Inventory step-up
|
|
|
0.02
|
|
|
Strategic business realignment
(1)
|
|
|
0.50
|
|
|
Other (2)
|
|
|
0.71
|
|
|
Diluted earnings per share -
comparable basis (Non-GAAP) (3)
|
|
|
$
1.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes $0.12, $0.04 and $0.01
diluted earnings per share for the year ending February 28, 2011,
associated with the Global Initiative; the Australian Initiative
and the Fiscal 2008 Plan, respectively. Includes $0.23,
$0.17, $0.10, $0.05, $ 0.01 and ($0.06) diluted earnings per share
for the year ended February 28, 2010, associated with the Global
Initiative; tax expense associated with the March 2009 divestiture
of the value spirits business; the Australian Initiative; the
Fiscal 2007 Wine Plan; other previously announced restructuring
plans; and a gain recognized by the company in connection with the
sale of its U.K. cider business, respectively.(3)
|
|
|
|
|
|
(2)
|
Includes $0.13 diluted earnings per
share for the year ending February 28, 2011, associated primarily
with a valuation allowance against deferred tax assets in the U.K.
Includes $0.44, $0.16 and $0.11 diluted earnings per share
for the year ended February 28, 2010, associated with impairment of
certain intangible assets; loss on the contractual obligation
created by the notification by the 9.9% shareholder of Ruffino to
exercise the option to put its entire equity interest in Ruffino to
the Company for a specified minimum value; and the impairment of
the Company’s investment in Ruffino, respectively.
(3)
|
|
|
|
|
|
(3)
|
May not sum due to rounding as each
item is computed independently.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2011
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities (GAAP)
|
$
460.0
|
|
$
530.0
|
|
|
Purchases of property, plant and
equipment
|
(110.0)
|
|
(130.0)
|
|
|
Free cash flow
(Non-GAAP)
|
$
350.0
|
|
$
400.0
|
|
|
|
|
|
|
|
|
|
Actual for the
Three Months Ended May 31, 2010
|
|
Actual for the
Three Months Ended May 31, 2009
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
operating activities (GAAP)
|
$
59.7
|
|
$
(54.8)
|
|
|
Purchases of property, plant and
equipment
|
(25.6)
|
|
(47.1)
|
|
|
Free cash flow
(Non-GAAP)
|
$
34.1
|
|
$
(101.9)
|
|
|
|
|
|
|
|
SOURCE Constellation Brands, Inc.