-
Achieves comparable basis EPS
of $1.42 and reported basis EPS of $1.33 driven by beer
business
-
Generates $578 million of free
cash flow and $1.1 billion of operating cash flow
-
Increases fiscal 2016 outlook
driven primarily by strong beer business results; expects
comparable basis EPS of $5.30 - $5.40 and reported basis EPS of
$5.05 - $5.15
-
Increases fiscal 2016 free cash
flow projection to $475 - $525 million including operating cash
flow target of at least $1.35 billion; total capital expenditures
estimated to be $875 - $925 million for fiscal 2016
-
Finalizes plans for
construction of new 10 million hectoliter brewery in Mexicali,
Mexico
-
Completes Ballast Point craft
beer acquisition in December 2015
-
Declares quarterly cash
dividend
Third Quarter 2016 Financial
Highlights* |
|
|
|
|
|
|
|
(in millions, except per share data) |
|
|
|
|
|
|
|
|
Comparable |
|
% Change |
|
Reported |
|
% Change |
Net sales |
$1,641 |
|
6% |
|
$1,641 |
|
6% |
|
|
|
|
|
|
|
|
Operating income |
$476 |
|
15% |
|
$447 |
|
19% |
|
|
|
|
|
|
|
|
Operating margin |
29.0% |
|
+210 bps |
|
27.3% |
|
+290 bps |
|
|
|
|
|
|
|
|
Earnings before interest and taxes (EBIT) |
$503 |
|
15% |
|
NA |
|
NA |
|
|
|
|
|
|
|
|
Net income attributable to CBI |
$289 |
|
16% |
|
$271 |
|
22% |
|
|
|
|
|
|
|
|
Diluted net income per share attributable to CBI
(EPS) |
$1.42 |
|
15% |
|
$1.33 |
|
21% |
*Definitions of reported and comparable, as well
as reconciliations of non-GAAP financial measures, are contained
elsewhere in this news release.
NA=Not Applicable
VICTOR, N.Y., Jan. 7,
2016 - Constellation Brands, Inc. (NYSE: STZ and STZ.B), a
leading beverage alcohol company, reported today its third quarter
2016 results.
"The events of this quarter and the initiatives
announced today mark another dynamic chapter at Constellation. As
our beer business continues to achieve remarkable results, I am
pleased that we have finalized our capital investment plans to
support our future growth through the addition of a new
state-of-the-art brewery in Mexicali, Mexico. We have also reached
a major expansion milestone at our Nava brewery as the first
incremental 5 million hectoliters of production capacity becomes
operational. Furthermore, the completion of the Ballast Point craft
beer acquisition solidifies our position in the high-end segment of
the U.S. beer market," said Rob Sands, president and chief
executive officer, Constellation Brands. "In addition, our wine and
spirits business significantly improved margins driven by the
Meiomi wine acquisition, as well as favorable mix trends and COGS
benefits, while the Canadian business posted solid results, gaining
dollar share across major market segments."
Net Sales
Commentary
For the quarter, the company generated consolidated net sales
growth of six percent. This reflects organic net sales growth on a
constant currency basis of six percent and Meiomi acquisition
benefit, partially offset by unfavorable currency impact.
Beer net sales increased eight percent, primarily
due to volume growth. Beer depletions grew more than 16 percent,
reflecting strong consumer demand for the beer portfolio. Net sales
growth for third quarter 2016 was impacted by the overlap of a $37
million shift in net sales from second quarter 2015 to third
quarter 2015 related to beer product recall activities.
"The beer business posted outstanding depletion
growth during the third quarter driven primarily by the
accelerating momentum of Corona Extra and Modelo Especial, although
nearly every brand in the portfolio experienced double digit
depletion gains," said Sands. "Strong consumer demand continues to
propel the portfolio and reflects the benefits of marketing and
brand building efforts, as well as distribution gains for key
products. Excellent marketplace execution helped Constellation win
the Labor Day holiday and the fall sports season. These stellar
results are driving the upward revision to our EPS target for the
year."
Wine and spirits net sales on an organic constant
currency basis increased three percent. This primarily reflects
favorable mix.
"This is the first full quarter that we are seeing
the benefits of the Meiomi wine acquisition, which has been fully
integrated into our portfolio of premium wine brands. During the
quarter, Meiomi grew more than 80% in IRI channels and its strong
margin profile helped drive the quarterly margin improvement for
our wine and spirits business. In addition, some of our other focus
brands posted strong depletion growth including Kim Crawford, The
Dreaming Tree, Mark West, Ruffino and Clos du Bois, as focus brand
investments during the key holiday selling season are driving
excellent results," said Sands.
Operating Income and Net Income
Commentary
For the quarter, consolidated comparable basis operating income
increased 15 percent.
Beer operating income increased 20 percent,
primarily due to volume growth, favorable pricing and lower cost of
product sold for the beer portfolio, partially offset by increased
marketing spend. The 12 percent increase in wine and spirits
operating income primarily reflects the benefit from the Meiomi
acquisition, favorable mix and lower cost of product sold,
partially offset by higher marketing spend.
For third quarter 2016, pre-tax comparable
adjustments totaled $29 million as compared to $40 million for the
same period last year.
Interest expense for third quarter 2016 totaled
$76 million, a decrease of 12 percent. The decrease was primarily
due to lower average interest rates.
The comparable basis effective tax rate for third
quarter 2016 was 32.3 percent as compared to a 29.2 percent tax
rate for the prior year third quarter, which reflected the benefit
of certain tax credits. The company now expects the comparable
basis effective tax rate to approximate 30 percent for fiscal year
2016.
Free Cash Flow
Commentary
Free cash flow for the first nine months of fiscal 2016 totaled
$578 million as compared to $209 million for the same period last
year. The increase is primarily driven by higher operating cash
flow.
"We are increasing free cash flow guidance for
fiscal 2016 to a range of $475 to $525 million. The anticipated
increase is being primarily driven by higher earnings for the beer
business, timing of capital expenditures and lower income tax
payments," said David Klein, executive vice president and chief
financial officer, Constellation Brands. "Earlier today, we
announced plans to build a new brewery in Mexicali and further
expand our Nava brewery as part of our efforts to support the
significant growth opportunity we see for our beer business over
the long term. Even with the incremental capital expenditures
projected for this initiative, we are decreasing our total capital
expenditure estimate to a range of $875 to $925 million for fiscal
2016. While the initial 10 million hectoliter expansion at
Nava continues to progress as planned, payment timing for some of
the capital expenditures associated with this activity has shifted
into fiscal 2017."
Quarterly Dividend
On January 6, 2016, Constellation's board of directors
declared a quarterly cash dividend of $0.31 per share of Class A
Common Stock and $0.28 per share of Class B Common Stock, payable
on February 24, 2016, to stockholders of record as of the
close of business on February 9, 2016.
Outlook
The table below sets forth management's current EPS expectations
for fiscal 2016 compared to fiscal 2015 actual results, both on a
comparable basis and a reported basis, including the acquisitions
of Meiomi and Ballast Point.
|
Comparable Basis |
Reported Basis |
|
FY16
Estimate |
FY15
Actual |
FY16
Estimate |
FY15
Actual |
Fiscal Year Ending Feb. 28/29 |
$5.30 -
$5.40 |
$4.44 |
|
$5.05 - $5.15 |
$4.17 |
|
For fiscal 2016, the beer business now expects net
sales growth of approximately 12 - 14 percent and operating income
growth in the 22 - 24 percent range before any benefit from the
Ballast Point acquisition. For the wine and spirits business, the
company continues to expect net sales and operating income growth
to be in the low to mid single-digit range before any benefit from
the Meiomi acquisition.
Fiscal 2016 guidance also includes the following current
assumptions, including the acquisitions of Meiomi and Ballast
Point:
-
Interest expense: approximately $310 - $320
million
-
Tax rate: approximately 30 percent
-
Weighted average diluted shares outstanding:
approximately 204 million
-
Free cash flow: approximately $475 - $525
million
-
Operating cash flow: approximately $1.35 - $1.45
billion
-
Capital expenditures: approximately $875 - $925
million
Conference Call
A conference call to discuss third quarter 2016 results and outlook
will be hosted by President and Chief Executive Officer Rob Sands
and Executive Vice President and Chief Financial Officer David
Klein on Thursday, Jan. 7, 2016 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 during the call will be available
on the Internet at the company's website: www.cbrands.com under
"Investors," prior to the call.
Explanations
Reported basis ("reported") operating income, net income and EPS
are as reported under generally accepted accounting principles.
Operating income, net income and EPS on a comparable basis
("comparable"), exclude items that affect comparability
("comparable adjustments"), as they are not reflective of core
operations of the segments. The company's measure of segment
profitability excludes comparable adjustments, which is consistent
with the measure used by management to evaluate results.
The company discusses additional non-GAAP measures
in this news release, including constant currency net sales,
organic net sales, comparable basis EBIT, comparable basis
effective tax rate and free cash flow.
Supplemental Financial
Information
Tables reconciling non-GAAP measures, together with definitions of
these measures and the reasons management uses these measures, are
attached to and are part of this news release.
About Constellation
Brands
Constellation Brands (NYSE: STZ and STZ.B) is a leading
international producer and marketer of beer, wine and spirits with
operations in the U.S., Canada, Mexico, New Zealand and Italy. In
2015, Constellation was one of the top performing stocks in the
S&P 500 Consumer Staples Index. Constellation is the number
three beer company in the U.S. with high-end, iconic imported
brands including Corona Extra, Corona Light, Modelo Especial, Negra
Modelo and Pacifico. Constellation is also the world's leader in
premium wine selling great brands that people love including Robert
Mondavi, Clos du Bois, Kim Crawford, Meiomi, Mark West, Franciscan
Estate, Ruffino and Jackson-Triggs. The company's premium spirits
brands include SVEDKA Vodka and Black Velvet Canadian Whisky.
Based in Victor, N.Y., the company believes that
industry leadership involves a commitment to brand-building, our
trade partners, the environment, our investors and to consumers
around the world who choose our products when celebrating big
moments or enjoying quiet ones. Founded in 1945, Constellation has
grown to become a significant player in the beverage alcohol
industry with more than 100 brands in its portfolio, sales in
approximately 100 countries, about 40 facilities and over 8,300
talented employees. We express our company vision: to elevate life with every glass raised. To learn more,
visit www.cbrands.com.
Forward-Looking
Statements
The statements made under the heading Outlook, and all statements
other than statements of historical fact set forth in this news
release regarding Constellation Brands' business strategy, future
operations, financial position, estimated revenues, projected
costs, estimated diluted EPS, expected cash flow, prospects, future
payments of dividends, 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 Brands
may reiterate the Projections. Prior to the start of the company's
quiet period, which will begin at the close of business Feb. 29,
2016, the public can continue to rely on the Projections as still
being Constellation Brands' current expectations on the matters
covered, unless the company publishes a notice stating otherwise.
During Constellation Brands' "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:
-
Mexicali brewery construction and Nava brewery
expansion activities and joint venture glass plant expansion
activities take place with expected scope, on expected terms and
timetable, and with receipt of any necessary permits and regulatory
approvals;
-
accuracy of supply projections, including those
relating to Mexicali brewery construction and Nava brewery
expansion and glass sourcing;
-
timeframe and actual costs associated with beer
supply, Mexicali brewery construction and Nava brewery expansion
and glass sourcing, including joint venture glass plant expansion,
may vary from management's current expectations due to market
conditions, the company's cash and debt position, and other factors
as determined by management;
-
free cash flow, operating cash flow and capital
expenditures to support long-term growth may vary from management's
current estimates;
-
timing and volume amount of beer shipments to
wholesalers may vary from current expectations due to actual
consumer demand;
-
accuracy of projections associated with the
Meiomi wine brand and the Ballast Point acquisitions;
-
the impact of and the ability to realize the
anticipated benefits of acquisitions, including as a result of
difficulty in integrating the businesses of the companies
involved;
-
the exact duration of the share repurchase
implementation and the amount and timing of any additional share
repurchases;
-
amount and timing of future dividends are
subject to the determination and discretion of the Board of
Directors;
-
ability to use cash flow to fund dividends could
be affected by unanticipated increases in net total debt, inability
to generate cash flow at the levels anticipated, and failure to
generate expected earnings;
-
raw material and water 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, 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, results of operations or effective tax rate;
-
changes in interest rates and the inherent
unpredictability of currency fluctuations, commodity prices and raw
material costs;
-
accuracy of the bases for forecasts relating to
joint ventures and associated costs, losses, purchase obligations
and capital investment requirements; 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, 2015, which could cause actual future performance to
differ from current expectations.
CONTACTS
Media
Cheryl Gossin: 585-678-7191
Amy Martin: 585-678-7141
Investor Relations
Patty Yahn-Urlaub: 585-678-7483
Bob Czudak: 585-678-7170
2_Color_Horiz_1_Line(R)
Q3 FY16 Financial Statements
This
announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Constellation Brands Inc via Globenewswire
HUG#1977194
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