-
Achieves reported basis EPS of
$1.98 and comparable basis EPS of $1.96, an increase of 49% and
38%, respectively
-
Results reflect strong
operating performance and include favorable tax rate benefit driven
by reinvestment of certain foreign earnings (APB 23)
-
Generates $1.42 billion of
operating cash flow and $824 million of free cash flow
-
Increases fiscal 2017 outlook;
expects reported basis EPS of $7.55 - $7.65 and comparable basis
EPS of $6.55 - $6.65 primarily reflecting lower tax rate
projection
-
Affirms fiscal 2017 free cash
flow projection of $575 - $675 million
-
Completes acquisitions of High
West and Charles Smith in October 2016 and Obregon brewery in
December 2016
-
Completes sale of Canadian wine
business in December 2016
-
Repurchases 2.4 million shares
of common stock for $367 million during third quarter fiscal 2017;
repurchases 5.4 million shares of common stock for $823 million
during fiscal 2017 through December 31, 2016
-
Declares quarterly cash
dividend
Third Quarter Fiscal 2017 Financial
Highlights* |
|
|
|
|
|
|
|
(in millions, except per share data) |
|
|
|
|
|
|
|
|
Reported |
|
% Change |
|
Comparable |
|
% Change |
Net sales |
$1,811 |
|
10% |
|
$1,811 |
|
10% |
|
|
|
|
|
|
|
|
Operating income |
$534 |
|
19% |
|
$532 |
|
12% |
|
|
|
|
|
|
|
|
Operating margin |
29.5% |
|
+220 bps |
|
29.4% |
|
+40 bps |
|
|
|
|
|
|
|
|
Earnings before interest and taxes (EBIT) |
NA |
|
NA |
|
$559 |
|
11% |
|
|
|
|
|
|
|
|
Net income attributable to CBI |
$406 |
|
50% |
|
$403 |
|
40% |
|
|
|
|
|
|
|
|
Diluted net income per share attributable to CBI
(EPS) |
$1.98 |
|
49% |
|
$1.96 |
|
38% |
*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. 5, 2017 -
Constellation Brands, Inc. (NYSE: STZ and STZ.B), a leading
beverage alcohol company, reported today its third quarter fiscal
2017 results.
"It has been another dynamic quarter for our
business and I am proud of our impressive financial results and
recent accomplishments," said Rob Sands, president and chief
executive officer, Constellation Brands. "We sold our Canadian wine
business as part of our strategy to focus on premium, margin
accretive, growth opportunities. We increased our functioning
brewery capacity and innovation flexibility to support our
fast-growing, high-end Mexican beer portfolio with the purchase of
the Obregon brewery operation in Mexico. We strengthened our
premium wine and spirits portfolio with the acquisitions of Charles
Smith Wines and High West Distillery, and we repurchased a
significant number of our shares. Our business has never been
stronger and the future prospects across our beer, wine and spirits
portfolio are compelling," said Sands.
Net Sales Commentary
For the quarter, the company generated
consolidated net sales growth of 10 percent. This reflects organic
net sales growth on a constant currency basis of seven percent and
acquisition benefits.
Net sales for beer increased 16 percent. This was
due to a 12 percent increase in organic net sales driven primarily
by volume growth and favorable pricing, and the acquisition benefit
from Ballast Point.
"Our beer business delivered double-digit sales
and profit growth for the third quarter, and gained significant
market share of the high-end of the U.S. beer category, as the #1
contributor to growth, with our key brands growing across all
market channels," said Sands.
Wine and spirits net sales increased five percent.
This primarily reflects the acquisition benefit from The Prisoner
wine brands and favorable mix, partially offset by lower volume due
to timing, as U.S. depletion volume outpaced shipment volume during
the quarter.
"During the quarter, our wine business gained IRI
volume and dollar share driven by strong depletion growth for our
Focus Brands, and became the #1 share gainer in the U.S. wine
category. We also successfully integrated Charles Smith and High
West into our portfolio. We're driving strong growth trends for
these brands, which are enabling us to capitalize on U.S. market
trends that favor high-end wine and spirits," said Sands.
Operating Income and Income Tax
Commentary
For the quarter, consolidated reported and
comparable basis operating income increased 19 percent and 12
percent, respectively.
Third quarter fiscal 2017 comparable adjustments
affecting operating income totaled a net gain of $2 million as
compared to a net loss of $29 million for the same period last
year.
Beer operating income increased 15 percent,
primarily due to organic volume growth and favorable pricing,
partially offset by higher marketing investment. The four percent
increase in wine and spirits operating income primarily reflects
favorable mix, the benefit from The Prisoner acquisition and
favorable COGS, partially offset by higher investment in SG&A
and marketing, as well as lower volumes.
The effective tax rate for third quarter fiscal
2017 was 16 percent versus 32 percent for the prior year third
quarter. During third quarter fiscal 2017, the company determined
that a portion of the earnings of certain foreign subsidiaries
would be indefinitely reinvested (APB 23). This assertion allows
the company to record income taxes on certain foreign earnings
using the applicable foreign jurisdiction tax rates, rather than
the higher U.S. tax rate. The fiscal 2017 year-to-date impact of
this change was recorded in third quarter fiscal 2017. The
effective tax rate for nine months fiscal 2017 was 27 percent. For
fiscal 2017, the company expects the effective tax rate on a
reported basis to approximate 26 percent, which reflects a tax
benefit from the sale of the Canadian wine business, and the
effective tax rate on a comparable basis to approximate 27
percent.
Operating Cash Flow and Free Cash
Flow Commentary
For the first nine months of fiscal 2017,
operating cash flow totaled $1.42 billion, an increase of 30
percent. Free cash flow for the first nine months of fiscal 2017
totaled $824 million, as compared to $578 million for the same
period last year. This reflects higher operating cash flow,
partially offset by higher capital expenditures.
"We are pleased with our strong operating cash
flow results and we continue to target fiscal 2017 free cash flow
in the range of $575 to $675 million," said David Klein, executive
vice president and chief financial officer, Constellation Brands.
"We recently achieved "Investment Grade" status, successfully
completed a new senior notes offering at an attractive interest
rate, and opportunistically repurchased a significant number of our
shares. These activities continue to build shareholder value,"
added Klein.
Recent Business
Activities
In October 2016, the company completed the
acquisitions of High West for $137 million, net of cash acquired
and subject to post-closing adjustments, and Charles Smith for $121
million.
In December 2016, the company completed the
purchase of the Obregon, Mexico brewery operation from Grupo
Modelo, a subsidiary of Anheuser-Busch InBev SA/NV for $583
million, net of cash acquired and subject to post-closing
adjustments.
The company also completed the sale of its
Canadian wine business to Ontario Teachers' Pension Plan in
December 2016. The transaction was valued at C$1.04 billion ($776
million) and the company received cash proceeds, net of outstanding
debt, of approximately C$775 million ($581 million), subject to
post-closing adjustments. The company received the proceeds
from the outstanding debt prior to the sale. The company expects to
record a net gain in connection with this transaction during fourth
quarter fiscal 2017 and after-tax proceeds are expected to
approximate $511 million.
For nine months fiscal 2017, net sales and
operating income that will no longer be part of the wine and
spirits segment results after the sale of the Canadian wine
business totaled $289 million and $45 million, respectively. This
compares to $284 million of net sales and $48 million of operating
income for nine months fiscal 2016. For fiscal 2016, net sales and
operating income for the divested business totaled $365 million and
$63 million, respectively.
During the third quarter, Constellation Brands
also made minority investments in Catoctin Creek Distilling
Company, a producer of premium rye whisky and gin from organic
sources, as well as Bardstown Bourbon Company, the largest new
whiskey distillery in the U.S.
Share Repurchases
In November 2016, Constellation's board of
directors authorized a new share repurchase program of up to $1
billion of the company's common stock. This new program was in
addition to the company's then-existing $1 billion share repurchase
program. During third quarter fiscal 2017, the company repurchased
2.4 million shares of common stock for $367 million. Through
December 31, 2016, the company repurchased 5.4 million shares of
common stock for $823 million. As of December 31, 2016, the company
has fully utilized its prior $1 billion share repurchase
authorization and has $847 million remaining under its new share
repurchase authorization.
Quarterly Dividend
On January 4, 2017, Constellation's board of
directors declared a quarterly cash dividend of $0.40 per share of
Class A Common Stock and $0.36 per share of Class B Common Stock,
payable on February 23, 2017, to stockholders of record as of
the close of business on February 9, 2017.
Outlook
The table below sets forth management's current
EPS expectations for fiscal 2017 compared to fiscal 2016 actual
results, both on a reported basis and a comparable basis.
|
Reported Basis |
Comparable Basis |
|
FY17
Estimate |
FY16
Actual |
FY17
Estimate |
FY16
Actual |
Fiscal Year Ending Feb. 28/29 |
$7.55 -
$7.65 |
$5.18 |
|
$6.55 - $6.65 |
$5.43 |
|
For fiscal 2017, the beer business continues to
expect net sales growth of 16 - 17 percent and operating income
growth at the high teens level. These growth rates include an
estimated incremental benefit from the Ballast Point acquisition.
For the wine and spirits business, the company continues to expect
net sales growth in the mid single-digit range and operating income
growth in the mid to high single-digit range. These growth rates
include an estimated incremental benefit from the Meiomi, Prisoner,
High West and Charles Smith acquisitions, net of the Canadian wine
business divestiture.
Fiscal 2017 guidance also includes the following
current assumptions:
-
Interest expense: approximately $335 - $345
million
-
Tax rate: reported basis approximately 26%,
which reflects a tax benefit from the sale of the Canadian wine
business; comparable basis approximately 27%
-
Weighted average diluted shares outstanding:
204.5 million
-
Operating cash flow: approximately $1.4 - $1.6
billion
-
Capital expenditures: approximately $825 - $925
million
-
Free cash flow: approximately $575 - $675
million
Conference Call
A conference call to discuss third quarter fiscal
2017 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. 5, 2017 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,
effective tax rate, net income and EPS are as reported under
generally accepted accounting principles. Operating income,
effective tax rate, 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 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), a Fortune 500® company,
is a leading international producer and marketer of beer, wine and
spirits with operations in the U.S., Canada, Mexico, New Zealand
and Italy. Constellation is the No. 3 beer company in the U.S. with
high-end, iconic imported brands such as Corona Extra, Corona
Light, Modelo Especial, Modelo Negra and Pacifico. The company's
beer portfolio also includes Ballast Point, one of the most awarded
craft brewers in the U.S. In addition, Constellation is the world
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 The Prisoner. The company's
premium spirits brands include SVEDKA Vodka, Casa Noble Tequila and
High West Whiskey.
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, about 40
facilities and approximately 8,000 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, expected effective tax rate, estimated diluted EPS, expected
cash flow, future payments of dividends, prospects, plans and
objectives of management, including the duration of reinvestment of
earnings of certain foreign subsidiaries, manner and timing of
share repurchases, 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. 28,
2017, 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, Nava brewery
expansion and Obregon brewery optimization activities and joint
venture glass plant expansion activities take place with expected
scope, on expected terms and timetables, and with receipt of any
necessary permits and regulatory approvals;
-
accuracy of supply projections, including those
relating Mexicali brewery construction, Nava brewery expansions,
Obregon brewery optimization, and glass sourcing;
-
timeframe and actual costs associated with beer
supply, Mexicali brewery construction, Nava brewery expansions,
Obregon brewery optimization and glass sourcing, including joint
venture glass plant expansions, 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;
-
operating cash flow, free cash flow, effective
tax rate 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
acquisitions of the Meiomi wine brand, Ballast Point, The Prisoner
Wine Company brand portfolio, High West, the Charles Smith Wine
Collection, and the Obregon brewery and the projections associated
with the sale of the Canadian wine business;
-
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, timing and source of funds 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 and
acquisitions 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, domestic,
international and regulatory conditions, instability in world
financial markets, or unanticipated environmental liabilities and
costs;
-
changes to international trade agreements and
tariffs, 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. 29, 2016, 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
Constellation Brands Third Quarter
Fiscal 2017 Results Financials
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq 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
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