Attached files
| file | filename |
|---|---|
| 8-K - CONSTELLATION BRANDS, INC. | v189495_8k.htm |
NEWS
RELEASE
07
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CONTACTS
|
|
|
Media
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Investor
Relations
|
|
Angie
Blackwell – 585-678-7141
Cheryl
Gossin – 585-678-7191
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Patty
Yahn-Urlaub – 585-678-7483
Bob
Czudak – 585-678-7170
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Constellation
Brands Reports
Q1
Fiscal 2011 Results
|
·
|
Achieves comparable basis
diluted EPS of $0.38 and reported basis diluted EPS of $0.22; comparable
basis results reflect favorable tax
rate
|
|
·
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U.S. distributor program gains
traction
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·
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Initiates $300 million
accelerated stock buyback and updates full-year diluted EPS guidance to reflect transaction
benefits
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|
·
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On target to achieve free cash
flow of $350 - $400 million
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|
First
Quarter 2011 Financial Highlights*
(in
millions, except per share data)
|
||||||||||||||||
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Comparable
|
% Change
|
Reported
|
% Change
|
|||||||||||||
|
Consolidated
net sales
|
$788 | -1 | % | $788 | -1 | % | ||||||||||
|
Operating
income
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$103 | -17 | % | $96 | 14 | % | ||||||||||
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Operating
margin
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13.1% |
-270
bps
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12.2% |
150
bps
|
||||||||||||
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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
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$0.38 | 15 | % | $0.22 |
NM
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|||||||||||
VICTOR, N.Y., July 1, 2010 – Constellation Brands,
Inc. (NYSE: STZ, ASX: CBR), the world’s leading wine company, reported today its
first quarter fiscal 2011 results.
"I am pleased with our first
quarter results that are in line with our expectations,” said Rob Sands,
president and chief executive officer,
-more-
-2-
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 blüfeld German riesling, Black Box malbec, Woodbridge by
Robert Mondavi brut sparkling wine and the Arbor Mist White Pear pinot
grigio.”
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First Quarter 2011 Net Sales Highlights*
(in millions)
|
|||||||||||||||||||||||||
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Reported
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Organic
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||||||||||||||||||||||||
|
Net
Sales
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% Change
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Constant
Currency
Change
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Net
Sales
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% Change
|
Constant
Currency
Change
|
||||||||||||||||||||
|
Consolidated
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$788 | -1 | % | -5 | % | $788 | 5 | % | - | ||||||||||||||||
|
Wine
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$729 | - | -5 | % | $729 | 4 | % | -1 | % | ||||||||||||||||
|
North
America Wine
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$532 | 1 | % | -2 | % | $532 | 1 | % | -2 | % | |||||||||||||||
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Australia
and Europe Wine
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$198 | -5 | % | -13 | % | $198 | 10 | % | 1 | % | |||||||||||||||
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Spirits
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$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
-more-
-3-
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.
-more-
-4-
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
|
|||
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FY11
Estimate
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FY10
Actual
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FY11
Estimate
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FY10
Actual
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Fiscal
Year Ending Feb. 28
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$1.33-$1.48
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$0.45
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$1.63
- $1.78
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$1.69
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-more-
-5-
Full-year
fiscal 2011 guidance includes the following current assumptions:
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·
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Interest
expense: approximately $210 - $220
million
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·
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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.
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·
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Weighted
average diluted shares outstanding: approximately 212
million
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·
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Free
cash flow: $350 - $400 million
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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.
-more-
-6-
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:
|
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·
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completion
of various portfolio actions; implementation of consolidation activities
and actual U.S. distributor transition
experience;
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·
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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;
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·
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actual
date of the termination of the calculation period under the ASB
transaction;
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·
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final
number of shares of Class A Common Stock received as a result of the ASB
transaction;
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·
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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;
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·
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accuracy
of the bases for forecasts relating to joint ventures and associated costs
and capital investment
requirements;
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·
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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;
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-more-
-7-
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·
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raw
material supply, production or shipment difficulties could adversely
affect the company's ability to supply its
customers;
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·
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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;
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·
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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;
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·
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changes
to accounting rules and tax laws, and other factors which could impact the
company's reported financial position or effective tax
rate;
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·
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changes
in interest rates and the inherent unpredictability of currency
fluctuations, commodity prices and raw material costs;
and
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·
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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.
|
# # #
8
Constellation
Brands, Inc. and Subsidiaries
CONDENSED
CONSOLIDATED BALANCE SHEETS
(in
millions)
|
May 31,
2010
|
February 28,
2010
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|||||||
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Assets
|
||||||||
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Current
Assets:
|
||||||||
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Cash
and cash investments
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$ | 20.9 | $ | 43.5 | ||||
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Accounts
receivable, net
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636.5 | 514.7 | ||||||
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Inventories
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1,795.6 | 1,879.9 | ||||||
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Prepaid
expenses and other
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109.0 | 151.0 | ||||||
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Total
current assets
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2,562.0 | 2,589.1 | ||||||
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Property,
plant and equipment, net
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1,522.9 | 1,567.2 | ||||||
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Goodwill
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2,570.9 | 2,570.6 | ||||||
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Intangible
assets, net
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922.7 | 925.0 | ||||||
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Other
assets, net
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317.6 | 442.4 | ||||||
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Total
assets
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$ | 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 | ||||||
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Accounts
payable
|
224.8 | 268.8 | ||||||
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Accrued
excise taxes
|
50.8 | 43.8 | ||||||
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Other
accrued expenses and liabilities
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441.8 | 501.6 | ||||||
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Total
current liabilities
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1,534.2 | 1,372.6 | ||||||
|
Long-term
debt, less current maturities
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3,201.0 | 3,277.1 | ||||||
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Deferred
income taxes
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547.5 | 536.2 | ||||||
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Other
liabilities
|
316.0 | 332.1 | ||||||
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Total
liabilities
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5,598.7 | 5,518.0 | ||||||
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Total
stockholders' equity
|
2,297.4 | 2,576.3 | ||||||
|
Total
liabilities and stockholders' equity
|
$ | 7,896.1 | $ | 8,094.3 | ||||
-more-
9
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 | ||||||
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10
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 | ||||
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11
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 | % |
-more-
12
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.
-more-
13
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 | % | |||||||||||||||||||||||||||||||||||||||||
-more-
14
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").
-more-
15
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 | ) | |||