-
Achieves fiscal 2017 reported
basis EPS of $7.52 and record comparable basis EPS of
$6.76
-
Generates record $1.7 billion
of operating cash flow and $789 million of free cash flow for
fiscal 2017
-
Provides fiscal 2018 outlook;
expects reported basis EPS of $7.65 - $7.95 and comparable basis
EPS of $7.70 - $8.00
-
Projects operating cash flow
target of approximately $2.0 billion, total capital expenditure
estimate of $1.175 - $1.275 billion and free cash flow of $725 -
$825 million for fiscal 2018
-
Completes expansion to 25
million hectoliters ahead of schedule at Nava Brewery
-
Declares quarterly dividend of
$0.52 per share Class A and $0.47 per share Class B common stock,
an increase of approximately 30%
-
Repurchases approximately 7.4
million shares of common stock for $1.1 billion during fiscal 2017
at an average price of $151.57 per share
Fiscal 2017 Financial
Highlights* |
|
|
|
|
|
|
|
(in millions, except per share data) |
|
|
|
|
|
|
|
|
Reported |
|
% Change |
|
Comparable |
|
% Change |
Net sales |
$7,332 |
|
12% |
|
$7,332 |
|
12% |
|
|
|
|
|
|
|
|
Operating income |
$2,399 |
|
36% |
|
$2,195 |
|
18% |
|
|
|
|
|
|
|
|
Operating margin |
32.7% |
|
+570 bps |
|
29.9% |
|
+140 bps |
|
|
|
|
|
|
|
|
Earnings before interest and taxes (EBIT) |
NA |
|
NA |
|
$2,224 |
|
18% |
|
|
|
|
|
|
|
|
Net income attributable to CBI |
$1,535 |
|
46% |
|
$1,381 |
|
25% |
|
|
|
|
|
|
|
|
Diluted net income per share attributable to CBI
(EPS) |
$7.52 |
|
45% |
|
$6.76 |
|
24% |
*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., April 6, 2017 -
Constellation Brands, Inc. (NYSE: STZ and STZ.B), a leading
beverage alcohol company, reported today its fiscal 2017
results.
"Fiscal 2017 has been a year marked by operational
excellence and record financial performance," said Rob Sands,
president and chief executive officer, Constellation Brands. "We
look forward to building on these results to achieve comparable EPS
growth that exceeds our target of at least 10% for fiscal 2018, as
we continue to build shareholder value," said Sands.
Fiscal 2017 Net Sales
Commentary
For the year, the company generated consolidated
net sales growth of 12 percent. This reflects organic net sales
growth on a constant currency basis of nine percent.
Net sales for the beer business increased 17
percent. This was due to a 13 percent increase in organic net sales
driven primarily by volume growth and favorable pricing, and the
acquisition benefit from Ballast Point.
"Our beer business continues to be a powerhouse
for growth. We exceeded our profit and margin goals for the year,"
said Sands. "These excellent results were driven by solid
performance for every brand in our portfolio, which resulted in
Constellation being the #1 growth contributor to the U.S. beer
industry for the year. In addition, our portfolio posted
industry-leading depletion growth in the 9 to 10 percent range for
the first calendar quarter of 2017 after a challenging December for
the U.S. beer industry," said Sands.
Wine and spirits net sales increased six percent.
This reflects a four percent increase in organic net sales on a
constant currency basis driven primarily by volume growth and
favorable mix, and the acquisition benefit primarily from Meiomi
and Prisoner. These benefits were partially offset by the
divestiture of the Canadian wine business.
"Our wine and spirits business achieved strong
earnings growth and margin expansion driven by our fast-growing,
high-margin Focus Brands, which collectively delivered depletion
growth of nine percent for the year. We continue to gain
distribution for our newly acquired High West whiskey brands, as
well as the Prisoner and Charles Smith wine brands, all of which
posted strong, double-digit depletion growth for the year," said
Sands.
Fiscal 2017 Operating Income and
Net Income Commentary
For the year, consolidated reported and comparable
basis operating income increased 36 percent and 18 percent,
respectively.
For the year, comparable adjustments affecting
operating income totaled a net gain of $204 million as compared to
a net loss of $101 million for the same period last year.
Beer operating income increased 21 percent
primarily due to organic volume growth and favorable pricing,
partially offset by higher marketing investment. The 10 percent
increase in wine and spirits operating income primarily reflects
the acquisition benefit from Meiomi and Prisoner, and organic
volume growth and favorable mix, partially offset by higher
investment in SG&A and marketing.
Interest expense for the year totaled $333
million, an increase of six percent. The increase was due to higher
average borrowings, partially offset by lower average interest
rates.
The reported basis effective tax rate for fiscal
2017 was 26.5 percent compared to 29.3 percent for fiscal 2016. The
comparable basis effective tax rate for fiscal 2017 was 26.8
percent compared to 29.6 percent for fiscal 2016. 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. For fiscal 2017, the effective tax rate on a reported basis
also reflects a tax benefit from the sale of the Canadian wine
business.
Operating Cash Flow and Free Cash
Flow Commentary
Operating cash flow for fiscal 2017 totaled $1.7
billion, an increase of 20 percent. Free cash flow for fiscal 2017
totaled $789 million compared to $522 million for the prior year.
This primarily reflects higher operating cash flow driven by growth
in both the beer business and the wine and spirits business.
"Our strong financial results and record operating
cash flow in fiscal 2017 created flexibility that enabled a
dividend increase, significant share repurchases, value-creating
acquisitions and continued investments to support the ongoing
growth of our business throughout the year. Given this momentum, we
are significantly increasing our dividend for the coming year and
we are expecting to generate approximately $2.0 billion in
operating cash flow for fiscal 2018," said David Klein, executive
vice president and chief financial officer, Constellation Brands.
"I am also pleased that we have completed the next phase of our
expansion project to 25 million hectoliters ahead of schedule at
our Nava brewery in Mexico," said Klein.
Canadian Wine Business
Divestiture
The company completed the sale of its Canadian
wine business to Ontario Teachers' Pension Plan on December 17,
2016. The transaction was valued at C$1.03 billion ($775 million)
and the company received cash proceeds, net of outstanding debt and
direct costs to sell, of $575 million, subject to post-closing
adjustments. The company received the proceeds from the outstanding
debt prior to the sale. The company recorded a net gain on the sale
of the business of $262 million during fourth quarter fiscal 2017
and after-tax proceeds are expected to approximate $495
million.
For fiscal 2017, through the date of divestiture,
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 $311 million and $50 million, respectively.
For fiscal 2016, net sales and operating income for the divested
business totaled $365 million and $63 million, respectively.
Fourth Quarter Fiscal 2017 Financial
Highlights* |
|
|
|
|
|
|
|
(in millions, except per share data) |
|
|
|
|
|
|
|
|
Reported |
|
% Change |
|
Comparable |
|
% Change |
Net sales |
$1,628 |
|
5% |
|
$1,628 |
|
5% |
|
|
|
|
|
|
|
|
Operating income |
$702 |
|
71% |
|
$495 |
|
14% |
|
|
|
|
|
|
|
|
Operating margin |
43.1% |
|
NM |
|
30.4% |
|
+220 bps |
|
|
|
|
|
|
|
|
EBIT |
NA |
|
NA |
|
$496 |
|
15% |
|
|
|
|
|
|
|
|
Net income attributable to CBI |
$452 |
|
86% |
|
$296 |
|
22% |
|
|
|
|
|
|
|
|
EPS |
$2.26 |
|
90% |
|
$1.48 |
|
24% |
NM=Not Meaningful
Fourth Quarter Fiscal 2017 Net
Sales Commentary
For the quarter, the company generated
consolidated net sales growth of five percent. This reflects
organic net sales growth on a constant currency basis of seven
percent.
Net sales for beer increased 11 percent. This was
due to a 10 percent increase in organic net sales driven primarily
by volume growth and favorable pricing.
Wine and spirits net sales were flat. This
reflects a four percent increase in organic net sales and the
acquisition benefit from Prisoner, Charles Smith and High West,
offset by the divestiture of the Canadian wine business.
Fourth Quarter Fiscal 2017
Operating Income and Net Income Commentary
For the quarter, consolidated reported and
comparable basis operating income increased 71 percent and 14
percent, respectively.
For the quarter, comparable adjustments affecting
operating income totaled a net gain of $207.0 million as compared
to a net loss of $24 million for the same period last year.
Beer operating income increased 21 percent
primarily due to organic volume growth, favorable pricing and lower
cost of product sold, partially offset by higher marketing spend.
The six percent increase in wine and spirits operating income
primarily reflects organic volume growth and the acquisition
benefit from Prisoner, Charles Smith and High West, partially
offset by higher investment in SG&A and marketing.
Interest expense for fourth quarter fiscal 2017
totaled $77 million, a decrease of eight percent. The decrease was
due to lower average interest rates, partially offset by higher
average borrowings.
The reported basis effective tax rate for fourth
quarter fiscal 2017 was 26.0 percent versus 30.0 percent for the
prior year fourth quarter. The comparable basis effective tax rate
for fourth quarter fiscal 2017 was 26.9 percent. This compares to a
29.8 percent tax rate for the prior year. The fourth quarter fiscal
2017 effective tax rates reflect the benefit of APB 23. In
addition, the reported basis effective tax rate includes a tax
benefit from the sale of the Canadian wine business.
Quarterly Dividend and Share
Repurchases
On April 5, 2017, Constellation's board of
directors declared a quarterly cash dividend of $0.52 per share of
Class A Common Stock and $0.47 per share of Class B Common Stock,
payable on May 24, 2017, to stockholders of record as of the
close of business on May 10, 2017. This represents an increase
of approximately 30 percent in the dividend rate per share for both
the Class A and Class B Common Stock.
During fiscal 2017, the company repurchased
approximately 7.4 million shares of common stock for $1.1 billion,
including approximately 5 million shares of common stock for $750
million during fourth quarter fiscal 2017.
Outlook
The table below sets forth management's current
EPS expectations for fiscal 2018 compared to fiscal 2017 actual
results, both on a reported basis and a comparable basis.
|
Reported Basis |
Comparable Basis |
|
FY18
Estimate |
FY17
Actual |
FY18
Estimate |
FY17
Actual |
Fiscal Year Ending Feb. 28 |
$7.65 - $7.95 |
$7.52 |
|
$7.70 - $8.00 |
$6.76 |
|
For fiscal 2018, the beer business is targeting
net sales growth in the range of 9 - 11 percent and operating
income growth in the range of 11 - 13 percent.
For the wine and spirits business, the company
expects net sales to decrease in the range of 4 - 6 percent and
operating income to be flat. These projections include the
estimated impact of the December 2016 divestiture of the Canadian
wine business and the estimated incremental benefits from High
West, Charles Smith and Prisoner acquisitions. Excluding the $311
million of net sales and $50 million of operating income from the
fiscal 2017 wine and spirits segment results related to the
Canadian wine business divestiture, the company expects net sales
growth of 4 - 6 percent and operating income growth of 5 - 7
percent for fiscal 2018.
Full-year fiscal 2018 guidance also includes the
following current assumptions:
-
Interest expense: approximately $340 - $350
million
-
Tax rate: approximately 22 percent
-
Weighted average diluted shares outstanding:
approximately 201 million
-
Operating cash flow: approximately $1.9 - $2.1
billion
-
Capital expenditures: approximately $1.175 -
$1.275 billion, including approximately $1.0 billion targeted for
Mexico beer operations expansion activities
-
Free cash flow: approximately $725 - $825
million
Conference Call
A conference call to discuss fourth quarter and
full year 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,
April 6, 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 Information
Financial statements, as well as supplemental
schedules and 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.
In addition to our strong financial performance,
the past year was marked by an impressive list of awards and
recognitions. A listing of those achievements is attached to and is
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.,
Mexico, New Zealand, Italy and Canada. 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 9,000 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 May 31,
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:
-
beer operations expansion activities, including
construction, expansion and optimization activities at our Mexican
breweries and joint venture glass plant, 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 to construction, expansion and optimization of our Mexican
breweries and joint venture glass plant, and glass sourcing;
-
timeframe and actual costs associated with beer
supply; construction, expansion and optimization activities at our
Mexican breweries and joint venture glass plant; and glass sourcing
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;
-
net sales, operating income, 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 product 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 standards 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
Mike McGrew:
773-251-4934
Amy Martin:
585-678-7141
Investor Relations
Patty Yahn-Urlaub: 585-678-7483
Bob Czudak: 585-678-7170
Constellation Brands 2016 Awards
and Accolades
Earnings Release Financial Statements
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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