-
Achieves reported basis EPS of
$2.00 and comparable basis EPS of $2.34, an increase of 29% and
52%, respectively
-
Generates $382 million of
operating cash flow and $165 million of free cash flow
-
Updates fiscal 2018 reported
basis EPS outlook to $7.55 - $7.75
-
Increases fiscal 2018
comparable basis EPS outlook to $7.90 - $8.10 driven primarily by
strong beer business results
-
Affirms fiscal 2018 operating
cash flow target of approximately $2.0 billion and free cash flow
projection of $725 - $825 million
-
Declares quarterly cash
dividend
-
Acquires Schrader Cellars fine
wine portfolio
First Quarter Fiscal 2018 Financial
Highlights* |
|
|
|
|
|
|
|
(in millions, except per share data) |
|
|
|
|
|
|
|
|
Reported |
|
% Change |
|
Comparable |
|
% Change |
Net sales |
$1,936 |
|
3% |
|
$1,936 |
|
3% |
|
|
|
|
|
|
|
|
Operating income |
$568 |
|
3% |
|
$669 |
|
22% |
|
|
|
|
|
|
|
|
Operating margin |
29.4% |
|
-10 bps |
|
34.6% |
|
+530 bps |
|
|
|
|
|
|
|
|
Earnings before interest and taxes (EBIT) |
NA |
|
NA |
|
$669 |
|
22% |
|
|
|
|
|
|
|
|
Net income attributable to CBI |
$403 |
|
27% |
|
$471 |
|
48% |
|
|
|
|
|
|
|
|
Diluted net income per share attributable to CBI
(EPS) |
$2.00 |
|
29% |
|
$2.34 |
|
52% |
*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., June 29, 2017 -
Constellation Brands, Inc. (NYSE: STZ and STZ.B), a leading
beverage alcohol company, reported today its first quarter fiscal
2018 results.
"We're off to a great start for our new fiscal
year as we continue to deliver excellent results that demonstrate
our commitment to sustain profitable growth and build shareholder
value," said Rob Sands, president and chief executive officer,
Constellation Brands. "Across the business, we're driving consumer
demand for our exceptional portfolio of premium products while
executing strong financial and operational performance."
Net Sales Commentary
The company generated consolidated net sales
growth of three percent. This reflects organic net sales growth of
seven percent, partially offset by the net impact of the Canadian
wine business divestiture less acquisition benefits.
Net sales for beer increased eight percent. This
was driven primarily by volume growth and favorable pricing.
"The first quarter results for our beer business
are a testament to the ongoing growth opportunities we have for our
iconic portfolio of brands, which posted depletions of almost 12%
for the quarter. Excellent execution during the Cinco de Mayo and
Memorial Day holidays led to significant share gains, as
Constellation remains the #1 growth driver in the high-end of the
U.S. beer market. In addition, our new Corona Premier and Familiar
products are delivering strong performance in test markets and they
are well ahead of our expectations," said Sands.
Wine and spirits net sales decreased four percent.
This reflects a six percent increase in organic net sales driven
primarily by benefits from mix, price and volume growth, which was
more than offset by the net impact of the Canadian wine business
divestiture less acquisition benefits. U.S. shipment volume
outpaced depletion volume for the quarter due primarily to
timing.
"Our Wine and Spirits business delivered
significant margin improvement in the first quarter, while
depletion trends were impacted by the timing of promotional
activities. However, we have solid programming in place to drive
growth for our key brands throughout the remainder of the year. In
addition, our spirits business posted double-digit sales growth
driven by the success of our High West Whiskey portfolio, as well
as SVEDKA Vodka and Paul Masson Brandy," said Sands.
Operating Income and Income Tax
Commentary
Consolidated reported and comparable basis
operating income increased three percent and 22 percent,
respectively.
Comparable adjustments affecting operating income
totaled a net loss of $101 million as compared to a net gain
of $4 million for the same period last year. For the first quarter,
the company recorded an $87 million non-cash impairment charge to
the trademarks associated with the Ballast Point business driven by
the performance of the portfolio. The company remains focused on
achieving its targeted return on investment for this
acquisition.
Beer operating income increased 22 percent,
primarily due to lower cost of product sold, volume growth and
favorable pricing. The 22 percent increase in wine and spirits
operating income primarily reflects favorable mix and pricing,
acquisition benefits, and volume growth, partially offset by the
Canadian wine business divestiture.
The reported basis effective tax rate for first
quarter fiscal 2018 was 15.5 percent versus 31.9 percent for the
prior year first quarter. The comparable basis effective tax rate
for first quarter fiscal 2018 was 19.4 percent. This compares to a
31.6 percent tax rate for the prior year. The first quarter fiscal
2018 effective tax rates reflect the benefit of reinvesting foreign
earnings under APB 23 and the adoption of ASU 2016-09, which
requires excess tax benefits from stock-based payment award
activity to be recognized in the income statement. In addition, the
reported basis effective tax rate includes a tax benefit related to
the intangible asset impairment charge.
For fiscal 2018, the company expects the effective
tax rate on a reported basis and comparable basis to approximate 22
percent.
Operating Cash Flow and Free Cash
Flow Commentary
For first quarter fiscal 2018, operating cash flow
totaled $382 million, an increase of 10 percent. Free cash flow for
first quarter fiscal 2018 totaled $165 million, as compared to $177
million for the same period last year. This reflects higher
operating cash flow, more than offset by higher capital
expenditures.
"We continue to deliver impressive financial
results, especially for our beer business, which is driving the
upward revision to our EPS guidance for the year. During the
quarter, we also successfully refinanced debt at attractive,
investment grade interest rates, which provides us with greater
long-term capital allocation flexibility," said David Klein,
executive vice president and chief financial officer, Constellation
Brands.
Recent Business
Activities
In June 2017, the company announced that it had
enhanced its fine wine portfolio with the purchase of Schrader
Cellars. The iconic Schrader Cabernet Sauvignon portfolio is
sourced from premier Napa Valley vineyards and has become part of
the company's admired fine wine portfolio under its newly
established fine wine organization, which specializes in servicing
luxury wine consumers and customers. Terms of the transaction were
not disclosed.
Canadian Wine Business
Divestiture
The company completed the sale of its Canadian
wine business to Ontario Teachers' Pension Plan in December 2016.
For first quarter fiscal 2017, net sales and operating income that
are no longer part of the wine and spirits segment results after
the sale of the Canadian wine business totaled $90 million and $10
million, respectively. For fiscal 2017, through the date of
divestiture, net sales and operating income for the divested
business totaled $311 million and $50 million, respectively.
Quarterly Dividend
On June 28, 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 August 23, 2017, to stockholders of record as of
the close of business on August 9, 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 |
$7.55 -
$7.75 |
$7.52 |
|
$7.90 - $8.10 |
$6.76 |
|
For fiscal 2018, the beer business continues to
target net sales growth in the range of 9 - 11 percent and
operating income growth is now targeted in the range of 13 - 15
percent.
For the wine and spirits business, the company
continues to expect 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
the 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 first quarter fiscal
2018 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, June 29, 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 organic net sales, comparable basis
EBIT and free cash flow.
Supplemental Financial
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.
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, future financial position, expected
effective tax rates and anticipated tax liabilities, estimated
revenues, projected costs, 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, and 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 Aug. 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
but not limited to Mexicali brewery construction, Obregon brewery
optimization activities, and Nava brewery and 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 to beer operations expansion activities and glass
sourcing;
- timeframe and actual costs associated with beer
supply, beer operations expansion activities 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;
- 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 Prisoner Wine Company brand portfolio, High
West, the Charles Smith Wine Collection, the Obregon brewery, and
Schrader Cellars, 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 those associated
with 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, elections or assertions, tax laws or
other governmental rules and regulations, 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, 2017, 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
STZ Logo
First Quarter Fiscal 2018 Financial Tables
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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