- Achieves comparable basis diluted EPS of $0.54 and reported basis
diluted EPS of $0.20 - Reaffirms fiscal 2010 comparable basis
diluted EPS guidance; lowers comparable basis tax rate projection;
updates reported basis diluted EPS guidance - Continues to benefit
from cost reduction efforts - Targets free cash flow to be at the
upper-end of guidance range - Decreases debt by $336 million for
fiscal 2010 year-to-date VICTOR, N.Y., Jan. 7
/PRNewswire-FirstCall/ -- Third Quarter 2010 Financial Highlights*
(in millions, except per share data) Comparable Change Reported
Change ---------- ------ -------- ------ Consolidated net sales
$988 -4% $988 -4% Operating income $190 -13% $135 -32% Operating
margin 19.3% -190 bps 13.6% NM Equity in earnings of equity method
investees** $60 -21% $35 -55% Earnings before interest and taxes
(EBIT) $250 -15% - - Net income $120 -9% $44 -47% Diluted earnings
per share $0.54 -10% $0.20 -47% Constellation Brands, Inc.
(NYSE:STZNYSE:ASX:NYSE:CBR), the world's leading wine company,
reported today its fiscal 2010 third quarter results. "During the
quarter, we continued to execute well against our strategic goals
of generating cash, paying down debt and reducing costs," said Rob
Sands, president and chief executive officer, Constellation Brands.
"U.S. branded wine net sales were impacted by continuing economic
challenges, higher levels of promotional spending in advance of the
holiday selling season, and the expected shift of sales to the
second quarter from the third quarter as part of our U.S.
distributor network consolidation activities. But, we began to see
improving depletion trends later in the quarter." (Logo:
http://www.newscom.com/cgi-bin/prnh/20040119/STZLOGO ) Third
Quarter 2010 Net Sales Highlights* (in millions) Reported Organic
Constant Constant Currency Net Currency Net Change Sales Change
Change Sales Change ------ ----- ------ ------ ----- ------
Consolidated $988 -4% -6% $988 2% - Branded Wine $868 2% - $868 2%
- Spirits $51 -54% -54% $51 -2% -2% Other $68 -4% -5% $68 -4% -5%
----- --- --- --- --- --- --- *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 Net Sales Commentary Reported consolidated net sales
decreased four percent due primarily to the impact of the value
spirits divestiture, partially offset by the favorable impact of
year-over-year currency exchange rate fluctuations. Organic
constant currency net sales were even with the prior year. Branded
wine organic net sales on a constant currency basis were even
versus last year and included a three percent decrease in North
America offset by increases of 12 percent in Europe and two percent
in Australia/New Zealand. The sales increase in Europe was
primarily due to higher volumes of lower priced products. Total
spirits organic net sales decreased two percent for the quarter.
The decrease was primarily due to a difficult comparison versus
third quarter fiscal 2009. Glass shortages for SVEDKA vodka
relating to a new bottle changeover in last year's second quarter
resulted in higher shipment levels in last year's third quarter.
Spirits organic net sales for the first nine months of fiscal 2010
increased 18 percent with SVEDKA vodka net sales increasing more
than 40 percent. The brand continues to experience strong momentum
in the marketplace. Operating Income, Net Income, Diluted EPS
Commentary Wines segment operating income decreased $22 million
versus the prior year third quarter. This is primarily due to the
decrease in U.S. branded wine sales, divestiture of the value
spirits business and a decrease in operating income from the
international business. Constellation's equity earnings from its 50
percent interest in the Crown Imports joint venture totaled $46
million, a decrease of 26 percent from the prior year third
quarter. For third quarter 2010, Crown Imports generated net sales
of $499 million, a decrease of 10 percent, and operating income of
$91 million, a decrease of 26 percent. Net sales for Crown were
impacted primarily by volume declines. However, depletion trends
outpaced shipments resulting in temporary wholesaler inventory
reductions during the quarter. Operating income for Crown decreased
due to lower net sales, expense timing related to national media
programs for Corona Extra and Corona Light and a contractual cost
increase. "While the on-premise and convenience store channels
remain challenging, we are seeing stabilization in the grocery
channel as Crown continues to execute on targeted promotional
spending, media support and the introduction of new packages for
consumers to enjoy at a wide variety of venues, occasions and price
points," said Sands. "These actions have helped to improve
depletion trends as we have also experienced import category market
share gains during the quarter." For third quarter 2010, pre-tax
restructuring charges, acquisition-related integration costs and
unusual items totaled $81 million, including $60 million for
impairment and other charges related to the Ruffino joint venture,
compared to $21 million for the prior year third quarter. Interest
expense totaled $64 million, a decrease of 18 percent. The decrease
was primarily due to lower average borrowings during the quarter.
"Our debt level has decreased $336 million since the beginning of
fiscal 2010 and we are estimating full-year free cash flow to be at
the upper-end of our guidance range," said Bob Ryder, chief
financial officer, Constellation Brands. "We anticipate that
proceeds from the pending sale of the U.K. cider business combined
with targeted free cash flow generation during the fourth quarter
will further advance our deleveraging efforts." The comparable
basis effective tax rate in the third quarter was 35.4 percent
which reflects the favorable outcome of various tax items. The
company anticipates a full year comparable tax rate of
approximately 35 percent which represents a reduction to previous
guidance. Summary "The industry and our results continue to be
impacted by the difficult economic climate. However, we believe we
have the right strategies in place to organically grow the business
as we continue to experience improving market trends in our U.S.
wine and beer businesses," said Sands. "Overall, we remain
optimistic for the future and intend to continue to work toward
reducing borrowings, improving free cash flow and optimizing return
on invested capital. Our comparable basis diluted EPS expectation
for the full year remains unchanged." Outlook The table below sets
forth management's current diluted EPS expectations for fiscal 2010
compared to fiscal 2009 actual results, both on a reported basis
and a comparable basis. Constellation Brands Fiscal 2010 Diluted
Earnings Per Share Outlook Reported Basis Comparable Basis
-------------- ---------------- FY10 FY09 FY10 FY09 Estimate Actual
Estimate Actual -------- ------ -------- ------ Fiscal Year Ending
Feb. 28 $0.79 - $0.89 ($1.40) $1.60 - $1.70 $1.60 Full-year fiscal
2010 guidance includes the following current assumptions: --
Interest expense: approximately $260 - $270 million -- Tax rate:
approximately 51 percent on a reported basis, as compared to 35
percent on a comparable basis, primarily due to a provision of nine
percentage points associated with the March 2009 sale of the value
spirits business; five percentage points related to the
nondeductible charges associated with the company's Ruffino joint
venture; with the remainder primarily related to international
restructuring activities which have minimal tax benefits --
Weighted average diluted shares outstanding: approximately 222
million -- Free cash flow: $230 - $270 million Conference Call A
conference call to discuss third quarter 2010 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, Jan. 7, 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: http://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, acquisition-related
integration costs and unusual items. The company's measure of
segment profitability excludes restructuring charges,
acquisition-related integration costs 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. About Constellation Brands Constellation Brands is
the world's leading wine company that achieves success through an
unmatched knowledge of wine consumers paired with storied brands
that suit varied lives and tastes. 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:STZNYSE:andNYSE:STZ.B)(ASX:CBR) is an S&P 500 Index and
Fortune 1000® company with more than 100 total brands in our
portfolio, sales in about 150 countries and operations in
approximately 45 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
Brands and its product portfolio visit the company's web site at
http://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 Feb. 19, 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, or financing 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: -- realization of expected synergies from acquired
businesses; -- completion of various portfolio actions;
implementation of consolidation activities and actual U.S.
distributor transition experience; -- achievement of all expected
cost savings from the company's various restructuring plans,
realization of expected asset sale proceeds from the sale of
inventory and other assets, including the sale of the company's
U.K. cider business, and receipt of all consideration from the
divestiture of the value spirits business; -- completion of any
transactions regarding the company's Australian or United Kingdom
businesses; -- accuracy of the bases for forecasts relating to
joint ventures and associated costs and capital investment
requirements; -- 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; -- raw material supply, production
or shipment difficulties could adversely affect the company's
ability to supply its customers; -- increased competitive
activities in the form of pricing, advertising and promotions could
adversely impact consumer demand for the company's products and/or
result in lower than expected sales or higher than expected
expenses; -- general economic, geo-political and regulatory
conditions, 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; -- changes to accounting rules
and tax laws, and other factors which could impact the company's
reported financial position or effective tax rate; -- changes in
interest rates and the inherent unpredictability of currency
fluctuations, commodity prices and raw material costs; 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, 2009, which could
cause actual future performance to differ from current
expectations. Constellation Brands, Inc. and Subsidiaries CONDENSED
CONSOLIDATED BALANCE SHEETS (in millions) November 30, February 28,
2009 2009 ---- ---- Assets Current Assets: Cash and cash
investments $50.3 $13.1 Accounts receivable, net 901.7 524.6
Inventories 1,992.5 1,828.7 Prepaid expenses and other 149.1 168.1
----- ----- Total current assets 3,093.6 2,534.5 Property, plant
and equipment, net 1,649.5 1,547.5 Goodwill 2,571.5 2,615.0
Intangible assets, net 1,042.7 1,000.6 Other assets, net 371.3
338.9 ----- ----- Total assets $8,728.6 $8,036.5 ======== ========
Liabilities and Stockholders' Equity Current Liabilities: Notes
payable to banks $381.7 $227.3 Current maturities of long-term debt
99.5 235.2 Accounts payable 376.7 288.7 Accrued excise taxes 76.2
57.6 Other accrued expenses and liabilities 642.3 517.6 ----- -----
Total current liabilities 1,576.4 1,326.4 Long-term debt, less
current maturities 3,616.0 3,971.1 Deferred income taxes 550.1
543.6 Other liabilities 288.9 287.1 ----- ----- Total liabilities
6,031.4 6,128.2 Total stockholders' equity 2,697.2 1,908.3 -------
------- Total liabilities and stockholders' equity $8,728.6
$8,036.5 ======== ======== Constellation Brands, Inc. and
Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS (in millions,
except per share data) Three Months Ended Nine Months Ended
------------------ ----------------- November November November
November 30, 30, 30, 30, 2009 2008 2009 2008 ---- ---- ---- ----
Sales $1,225.5 $1,306.9 $3,320.0 $3,758.1 Excise taxes (237.8)
(275.7) (663.9) (838.6) ------ ------ ------ ------ Net sales 987.7
1,031.2 2,656.1 2,919.5 Cost of product sold (643.6) (627.2)
(1,733.7) (1,880.7) ------ ------ -------- -------- Gross profit
344.1 404.0 922.4 1,038.8 Selling, general and administrative
expenses (204.3) (200.5) (538.7) (659.2) Impairment of intangible
assets - - - (21.8) Restructuring charges (5.1) (4.3) (27.2) (40.3)
Acquisition-related integration costs (0.1) (1.5) (0.2) (7.6) ----
---- ---- ---- Operating income 134.6 197.7 356.3 309.9 Equity in
earnings of equity method investees 34.6 76.3 170.6 218.5 Interest
expense, net (64.0) (78.4) (197.4) (245.7) ----- ----- ------
------ Income before income taxes 105.2 195.6 329.5 282.7 Provision
for income taxes (61.1) (112.1) (179.2) (177.3) ----- ------ ------
------ Net income $44.1 $83.5 $150.3 $105.4 ===== ===== ======
====== Earnings Per Common Share: Basic -Class A Common Stock $0.20
$0.39 $0.69 $0.49 Basic -Class B Common Stock $0.18 $0.35 $0.63
$0.45 Diluted -Class A Common Stock $0.20 $0.38 $0.68 $0.48 Diluted
-Class B Common Stock $0.18 $0.35 $0.62 $0.44 Weighted Average
Common Shares Outstanding: Basic -Class A Common Stock 196.505
194.451 195.880 193.656 Basic -Class B Common Stock 23.734 23.744
23.738 23.756 Diluted -Class A Common Stock 222.205 220.006 220.849
219.970 Diluted -Class B Common Stock 23.734 23.744 23.738 23.756
Constellation Brands, Inc. and Subsidiaries CONSOLIDATED STATEMENTS
OF CASH FLOWS (in millions) Nine Months Ended -----------------
November 30, November 30, 2009 2008 ---- ---- Cash Flows From
Operating Activities Net income $150.3 $105.4 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation of property, plant and equipment 111.5 109.2
Stock-based compensation expense 39.2 34.1 Loss on contractual
obligation from put option of Ruffino shareholder 34.3 - Equity in
earnings of equity method investees, net of distributed earnings
27.0 8.6 Amortization of intangible and other assets 8.9 10.0 Loss
on business sold 0.8 15.8 Loss on disposal or impairment of
long-lived assets, net 0.7 29.3 Deferred tax (benefit) provision
(22.8) 9.6 Write-down of inventory associated with the Australian
Initiative - 47.6 Impairment of intangible assets - 21.8 Change in
operating assets and liabilities, net of effects from purchases and
sales of businesses: Accounts receivable, net (307.3) (187.4)
Inventories (32.3) (176.6) Prepaid expenses and other current
assets 7.3 16.4 Accounts payable 63.2 38.3 Accrued excise taxes
11.5 75.9 Other accrued expenses and liabilities 57.1 39.5 Other,
net 39.3 133.4 ---- ----- Total adjustments 38.4 225.5 ---- -----
Net cash provided by operating activities 188.7 330.9 ----- -----
Cash Flows From Investing Activities Proceeds from sale of business
276.4 204.2 Proceeds from sales of assets 16.5 18.9 Purchases of
property, plant and equipment (89.2) (95.6) Investment in equity
method investee (0.6) (1.0) Purchase of business, net of cash
acquired - 0.2 Capital distributions from equity method investees
0.2 20.7 Other investing activities 0.6 9.9 --- --- Net cash
provided by investing activities 203.9 157.3 ----- ----- Cash Flows
From Financing Activities Principal payments of long-term debt
(529.8) (225.2) Net proceeds from (repayment of) notes payable
124.2 (137.4) Proceeds from maturity of derivative instrument 33.2
- Exercise of employee stock options 10.7 25.5 Proceeds from
employee stock purchases 2.3 2.9 Excess tax benefits from
stock-based payment awards 2.5 7.0 --- --- Net cash used in
financing activities (356.9) (327.2) ------ ------ Effect of
exchange rate changes on cash and cash investments 1.5 (0.2) ---
---- Net increase in cash and cash equivalents 37.2 160.8 Cash and
cash investments, beginning of period 13.1 20.5 ---- ---- Cash and
cash investments, end of period $50.3 $181.3 ===== ======
Constellation Brands, Inc. and Subsidiaries SEGMENT INFORMATION (in
millions) Three Months Ended ------------------ Percent November
30, November 30, Change 2009 2008 ---- ---- Segment Net Sales and
Operating Income Constellation Wines (1) Branded wine net sales
$868.1 $848.7 2% Spirits net sales 51.3 111.4 (54%) Other net sales
68.3 71.1 (4%) ---- ---- Segment net sales $987.7 $1,031.2 (4%)
Operating income $218.3 $240.5 (9%) % Net sales 22.1% 23.3% Equity
in earnings of equity method $14.4 $14.6 NM investees Crown Imports
Segment net sales $498.8 $554.7 (10%) Operating income $91.4 $123.5
(26%) % Net sales 18.3% 22.3% Consolidation and Eliminations
Segment net sales $(498.8) $(554.7) (10%) Operating income $(91.4)
$(123.5) (26%) Equity in earnings of Crown Imports $45.6 $61.7
(26%) Corporate Operations and Other Consolidated net sales $987.7
$1,031.2 (4%) Operating income $(28.0) $(21.9) 28% % Net sales 2.8%
2.1% Nine Months Ended ----------------- Percent November 30,
November 30, Change 2009 2008 ---- ---- Segment Net Sales and
Operating Income Constellation Wines (1) Branded wine net sales
$2,308.4 $2,396.5 (4%) Spirits net sales 176.3 326.1 (46%) Other
net sales 171.4 196.9 (13%) ----- ----- Segment net sales $2,656.1
$2,919.5 (9%) Operating income $553.8 $568.1 (3%) % Net sales 20.9%
19.5% Equity in earnings of equity method $15.3 $16.8 (9%)
investees Crown Imports Segment net sales $1,827.6 $1,959.3 (7%)
Operating income $362.1 $410.9 (12%) % Net sales 19.8% 21.0%
Consolidation and Eliminations Segment net sales $(1,827.6)
$(1,959.3) (7%) Operating income $(362.1) $(410.9) (12%) Equity in
earnings of Crown Imports $180.7 $205.8 (12%) Corporate Operations
and Other Consolidated net sales $2,656.1 $2,919.5 (9%) Operating
income $(72.7) $(72.1) 1% % Net sales 2.7% 2.5% NM = Not Meaningful
(1) In connection with the Company's divestiture of its value
spirits business and the integration of the retained spirits brands
into the Constellation Wines business, the Company changed its
internal management financial reporting on May 1, 2009. The Company
now reports its operating results in three segments: Constellation
Wines, Crown Imports and Corporate Operations and Other. Prior
results have been restated to conform with the new segment
presentation. Constellation Brands, Inc. and Subsidiaries
GEOGRAPHIC INFORMATION (in millions) Three Months Ended Constant
------------------ Currency November 30, November 30, Percent
Currency Percent 2009 2008 Change Impact Change(3) ---- ----
Geographic Net Sales (1)(2) North America $707.9 $780.0 (9%) 1%
(10%) Branded wine $621.5 $630.3 (1%) 1% (3%) Spirits $51.3 $111.4
(54%) - (54%) Other $35.1 $38.3 (8%) 2% (10%) Europe $177.1 $163.3
8% (2%) 11% Branded wine $146.1 $133.8 9% (2%) 12% Other $31.0
$29.5 5% (2%) 7% Australia/ New Zealand $102.7 $87.9 17% 17% -
Branded wine $100.5 $84.6 19% 17% 2% Other $2.2 $3.3 (33%) 12%
(45%) Organic Three Months Ended Constant ------------------
Currency November 30, November 30, Percent Currency Percent 2009
2008 Change Impact Change(3) ---- ---- Branded Wine Geographic Net
Sales (1)(2) North America $621.5 $630.3 (1%) 1% (3%) Europe 146.1
133.8 9% (2%) 12% Australia/ New Zealand 100.5 84.6 19% 17% 2%
----- ---- Consolidated branded wine net sales $868.1 $848.7 2% 2%
- ====== ====== Nine Months Ended Constant -----------------
Currency November 30, November 30, Percent Currency Percent 2009
2008 Change Impact Change(3) ---- ---- Geographic Net Sales (1)(2)
North America $1,902.8 $2,098.6 (9%) (1%) (9%) Branded wine
$1,665.1 $1,695.7 (2%) (1%) (1%) Spirits $176.3 $326.1 (46%) -
(46%) Other $61.4 $76.8 (20%) (2%) (18%) Europe $485.6 $536.5 (9%)
(16%) 6% Branded wine $381.7 $429.9 (11%) (15%) 4% Other $103.9
$106.6 (3%) (18%) 15% Australia/ New Zealand $267.7 $284.4 (6%)
(8%) 2% Branded wine $261.6 $270.9 (3%) (8%) 5% Other $6.1 $13.5
(55%) (1%) (53%) Nine Months Ended Organic -----------------
Constant November November Divestiture Currency 30, 30, Percent
Impact Currency Percent 2009 2008 Change (4) Impact Change(3) ----
---- Branded Wine Geographic Net Sales (1)(2) North America
$1,665.1 $1,695.7 (2%) - (1%) - Europe 381.7 429.9 (11%) - (15%) 4%
Australia/ New Zealand 261.6 270.9 (3%) - (8%) 5% ----- -----
Consolidated branded wine net sales $2,308.4 $2,396.5 (4%) - (5%)
1% ======== ======== (1) Refer to discussion under "Reconciliation
of Reported, Organic and Constant Currency Net Sales" on following
page for definition of constant currency net sales and organic
constant currency net sales and reasons for use. (2) Net sales are
attributed to countries based on the location of the selling
company. (3) May not sum due to rounding as each item is computed
independently. (4) Divestiture impact includes the removal of
branded wine net sales associated with the Pacific Northwest brands
for the period March 1, 2008, through May 31, 2008, included in the
nine months ended November 30, 2008. Constellation Brands, Inc. and
Subsidiaries RECONCILIATION OF REPORTED, ORGANIC AND CONSTANT
CURRENCY NET SALES (in millions) As the company sold certain
Pacific Northwest wine brands on June 5, 2008; exited certain
spirits production contracts in connection with the sale of a
Canadian distilling facility on August 31, 2008; and sold certain
value spirits brands on March 24, 2009, organic net sales for the
respective periods are defined by the company as reported net sales
less net sales of Pacific Northwest wine brands and/or net sales of
certain spirits contract production services and/or value brands,
as appropriate. 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. Three Months Ended Constant
------------------ Currency November 30, November 30, Percent
Currency Percent 2009 2008 Change Impact Change(1) ---- ----
Consolidated Net Sales Branded wine $868.1 $848.7 2% 2% - Spirits
51.3 111.4 (54%) - (54%) Other 68.3 71.1 (4%) 1% (5%) ---- ----
Consolidated reported net sales 987.7 1,031.2 (4%) 2% (6%) Less:
Pacific Northwest branded wine net sales (2) - - Less: Spirits net
sales (3) - (59.3) --- ----- Consolidated organic net sales $987.7
$971.9 2% 2% - ====== ====== Branded Wine Net Sales Branded wine
reported net sales $868.1 $848.7 2% 2% - Less: Pacific Northwest
branded wine net sales (2) - - --- --- Branded wine organic net
sales $868.1 $848.7 2% 2% - ====== ====== Spirits Net Sales Spirits
reported net sales $51.3 $111.4 (54%) - (54%) Less: Spirits net
sales (3) - (59.3) --- ----- Spirits organic net sales $51.3 $52.1
(2%) - (2%) ===== ===== Nine Months Ended Constant
----------------- Currency November 30, November 30, Percent
Currency Percent 2009 2008 Change Impact Change(1) ---- ----
Consolidated Net Sales Branded wine $2,308.4 $2,396.5 (4%) (4%) 1%
Spirits 176.3 326.1 (46%) - (46%) Other 171.4 196.9 (13%) (10%)
(2%) ----- ----- Consolidated reported net sales 2,656.1 2,919.5
(9%) (4%) (5%) Less: Pacific Northwest branded wine net sales (2) -
(7.9) Less: Spirits net sales (3) - (177.3) --- ------ Consolidated
organic net sales $2,656.1 $2,734.3 (3%) (4%) 2% ======== ========
Branded Wine Net Sales Branded wine reported net sales $2,308.4
$2,396.5 (4%) (4%) 1% Less: Pacific Northwest branded wine net
sales (2) - (7.9) --- ---- Branded wine organic net sales $2,308.4
$2,388.6 (3%) (4%) 1% ======== ======== Spirits Net Sales Spirits
reported net sales $176.3 $326.1 (46%) - (46%) Less: Spirits net
sales (3) - (177.3) --- ------ Spirits organic net sales $176.3
$148.8 18% - 18% ====== ====== (1) May not sum due to rounding as
each item is computed independently. (2) For the period March 1,
2008, through May 31, 2008, included in the nine months ended
November 30, 2008. (3) Includes certain spirits contract production
services net sales and certain value spirits brands net sales for
the period September 1, 2008, through November 30, 2008, included
in the three months ended November 30, 2008. Includes certain
spirits contract production services net sales for the period March
1, 2008, through November 30, 2008, and certain value spirits
brands net sales for the period March 25, 2008, through November
30, 2008, included in the nine months ended November 30, 2008.
Constellation Brands, Inc. and Subsidiaries RECONCILIATIONS OF GAAP
TO NON-GAAP FINANCIAL MEASURES (1) (in millions, except per share
data) Three Months Ended November 30, 2009
------------------------------------ Strategic Comparable Reported
Business Basis Basis Inventory Realign- (Non- (GAAP) Step-up
ment(2) Other(3) GAAP) ------ ------- ------- -------- ----- Net
Sales $987.7 $987.7 Cost of product sold (643.6) 2.0 3.2 (638.4)
------ --- --- ------ Gross Profit 344.1 2.0 3.2 - 349.3 Selling,
general and administrative expenses ("SG&A") (204.3) 11.0 34.3
(159.0) Impairment of intangible assets - - - Restructuring charges
(5.1) 5.1 - Acquisition-related integration costs (0.1) 0.1 - ----
--- --- Operating Income 134.6 2.0 19.4 34.3 190.3 Equity in
earnings of equity method investees 34.6 25.4 60.0 ---- EBIT 250.3
Interest expense, net (64.0) (64.0) ----- ----- Income Before
Income Taxes 105.2 2.0 19.4 59.7 186.3 (Provision for) benefit from
income taxes (61.1) (0.8) (4.0) - (65.9) ----- ---- ---- --- -----
Net Income $44.1 $1.2 $15.4 $59.7 $120.4 ===== ==== ===== =====
====== Diluted Earnings Per Common Share $0.20 $0.01 $0.07 $0.27
$0.54 ===== ===== ===== ===== ===== Weighted Average Common Shares
Outstanding - Diluted 222.205 222.205 222.205 222.205 222.205
======= ======= ======= ======= ======= Gross Margin 34.8% 35.4%
SG&A as a percent of net sales 20.7% 16.1% Operating Margin
13.6% 19.3% Effective Tax Rate 58.1% 35.4% Three Months Ended
November 30, 2008 ------------------------------------ Strategic
Comparable Reported Business Basis Basis Inventory Realign- (Non-
(GAAP) Step-up ment(2) Other(3) GAAP) ------ ------- -------
-------- ----- Net Sales $1,031.2 $1,031.2 Cost of product sold
(627.2) 6.1 2.3 - (618.8) ------ --- --- --- ------ Gross Profit
404.0 6.1 2.3 - 412.4 Selling, general and administrative expenses
("SG&A") (200.5) 6.7 (193.8) Impairment of intangible assets -
- - Restructuring charges (4.3) 4.3 - Acquisition- related
integration costs (1.5) 1.5 - ---- --- --- Operating Income 197.7
6.1 14.8 - 218.6 Equity in earnings of equity method investees 76.3
- 76.3 ---- EBIT 294.9 Interest expense, net (78.4) (78.4) -----
----- Income Before Income Taxes 195.6 6.1 14.8 - 216.5 (Provision
for) benefit from income taxes (112.1) (2.3) (2.5) 32.4 (84.5)
------ ---- ---- ---- ----- Net Income $83.5 $3.8 $12.3 $32.4
$132.0 ===== ==== ===== ===== ====== Diluted Earnings Per Common
Share $0.38 $0.02 $0.06 $0.15 $0.60 ===== ===== ===== ===== =====
Weighted Average Common Shares Outstanding - Diluted 220.006
220.006 220.006 220.006 220.006 ======= ======= ======= =======
======= Gross Margin 39.2% 40.0% SG&A as a percent of net sales
19.4% 18.8% Operating Margin 19.2% 21.2% Effective Tax Rate 57.3%
39.0% Percent Percent Change - Change - Reported Comparable Basis
Basis (GAAP) (Non-GAAP) Net Sales (4%) (4%) Cost of product sold 3%
3% Gross Profit (15%) (15%) Selling, general and administrative
expenses ("SG&A") 2% (18%) Impairment of intangible assets N/A
N/A Restructuring charges 19% N/A Acquisition-related integration
costs (93%) N/A Operating Income (32%) (13%) Equity in earnings of
equity method investees (55%) (21%) EBIT N/A (15%) Interest
expense, net (18%) (18%) Income Before Income Taxes (46%) (14%)
(Provision for) benefit from income taxes (45%) (22%) Net Income
(47%) (9%) Diluted Earnings Per Common Share (47%) (10%) Weighted
Average Common Shares Outstanding - Diluted Gross Margin SG&A
as a percent of net sales Operating Margin Effective Tax Rate
Constellation Brands, Inc. and Subsidiaries RECONCILIATIONS OF GAAP
TO NON-GAAP FINANCIAL MEASURES (1) (in millions, except per share
data) Nine Months Ended November 30, 2009
----------------------------------- Strategic Comparable Reported
Business Basis Basis Inventory Realign- Other (Non- (GAAP) Step-up
ment(4) (5) GAAP) ------ ------- ------- --- ----- Net Sales
$2,656.1 $2,656.1 Cost of product sold (1,733.7) 7.2 21.0 (1,705.5)
-------- --- ---- -------- Gross Profit 922.4 7.2 21.0 - 950.6
Selling, general and administrative expenses ("SG&A") (538.7)
34.9 34.3 (469.5) Impairment of intangible assets - - Restructuring
charges (27.2) 27.2 - Acquisition-related integration costs (0.2)
0.2 - ---- --- --- Operating Income 356.3 7.2 83.3 34.3 481.1
Equity in earnings of equity method investees 170.6 25.4 196.0
----- EBIT 677.1 Interest expense, net (197.4) (197.4) ------
------ Income Before Income Taxes 329.5 7.2 83.3 59.7 479.7
(Provision for) benefit from income taxes (179.2) (2.8) 15.4 -
(166.6) ------ ---- ---- --- ------ Net Income $150.3 $4.4 $98.7
$59.7 $313.1 ====== ==== ===== ===== ====== Diluted Earnings Per
Common Share $0.68 $0.02 $0.45 $0.27 $1.42 ===== ===== ===== =====
===== Weighted Average Common Shares Outstanding - Diluted 220.849
220.849 220.849 220.849 220.849 ======= ======= ======= =======
======= Gross Margin 34.7% 35.8% SG&A as a percent of net sales
20.3% 17.7% Operating Margin 13.4% 18.1% Effective Tax Rate 54.4%
34.7% Nine Months Ended November 30, 2008
----------------------------------- Strategic Comparable Reported
Business Basis Basis Inventory Realign- Other (Non- (GAAP) Step-up
ment(4) (5) GAAP) ------ ------- ------- --- ----- Net Sales
$2,919.5 $2,919.5 Cost of product sold (1,880.7) 16.7 56.2 0.1
(1,807.7) -------- ---- ---- --- -------- Gross Profit 1,038.8 16.7
56.2 0.1 1,111.8 Selling, general and administrative expenses
("SG&A") (659.2) 43.4 (615.8) Impairment of intangible assets
(21.8) 21.8 - Restructuring charges (40.3) 40.3 - Acquisition-
related integration costs (7.6) 7.6 - ---- --- --- Operating Income
309.9 16.7 169.3 0.1 496.0 Equity in earnings of equity method
investees 218.5 4.1 222.6 ----- EBIT 718.6 Interest expense, net
(245.7) (245.7) ------ ------ Income Before Income Taxes 282.7 16.7
169.3 4.2 472.9 (Provision for) benefit from income taxes (177.3)
(6.3) (17.1) 32.4 (168.3) ------ ---- ----- ---- ------ Net Income
$105.4 $10.4 $152.2 $36.6 $304.6 ====== ===== ====== ===== ======
Diluted Earnings Per Common Share $0.48 $0.05 $0.69 $0.17 $1.38
===== ===== ===== ===== ===== Weighted Average Common Shares
Outstanding - Diluted 219.970 219.970 219.970 219.970 219.970
======= ======= ======= ======= ======= Gross Margin 35.6% 38.1%
SG&A as a percent of net sales 22.6% 21.1% Operating Margin
10.6% 17.0% Effective Tax Rate 62.7% 35.6% Percent Percent Change -
Change - Reported Comparable Basis Basis (GAAP) (Non-GAAP) Net
Sales (9%) (9%) Cost of product sold (8%) (6%) Gross Profit (11%)
(14%) Selling, general and administrative expenses ("SG&A")
(18%) (24%) Impairment of intangible assets (100%) N/A
Restructuring charges (33%) N/A Acquisition-related integration
costs (97%) N/A Operating Income 15% (3%) Equity in earnings of
equity method investees (22%) (12%) EBIT N/A (6%) Interest expense,
net (20%) (20%) Income Before Income Taxes 17% 1% (Provision for)
benefit from income taxes 1% (1%) Net Income 43% 3% Diluted
Earnings Per Common Share 42% 3% Weighted Average Common Shares
Outstanding - Diluted Gross Margin SG&A as a percent of net
sales Operating Margin Effective Tax Rate 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 and nine months ended
November 30, 2009, and November 30, 2008. 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 November 30, 2009,
strategic business realignment items primarily include costs
recognized by the company in connection with the Global Initiative
of $9.1 million, net of a tax benefit of $4.1 million, and the
Australian Initiative of $3.3 million, net of a tax benefit of $0.0
million. For the three months ended November 30, 2008, strategic
business realignment items consist primarily of costs recognized by
the company in connection with its Australian Initiative of $6.1
million, net of a tax benefit of $0.0 million, and its Fiscal 2007
Wine Plan of $5.0 million, net of a tax benefit of $1.8 million.
(3) For the three months ended November 30, 2009, other consists of
a loss of $34.3 million, net of a tax benefit of $0.0 million, on
the contractual obligation created by the notification by the 9.9%
shareholder of Ruffino S.r.l. ("Ruffino") to exercise the option to
put its entire equity interest in Ruffino to the Company for a
specified minimum value, and $25.4 million, net of a tax benefit of
$0.0 million, associated with the impairment of the Company's
investment in Ruffino. For the three months ended November 30,
2008, other consists of $32.4 million associated with the
recognition of income tax expense in connection with the gain on
settlement of certain foreign currency economic hedges. (4) For the
nine months ended November 30, 2009, strategic business realignment
items primarily include (i) costs recognized by the company in
connection with the Global Initiative of $42.7 million, net of a
tax benefit of $20.5 million; (ii) tax expense associated with the
March 2009 divestiture of the value spirits business of $37.5
million; and (iii) costs recognized by the company in connection
with the Fiscal 2007 Wine Plan and Australian Initiative of $8.6
million, net of a tax benefit of $1.9 million, and $8.1 million,
net of a tax benefit of $0.0 million, respectively. For the nine
months ended November 30, 2008, strategic business realignment
items consist primarily of (i) costs recognized by the company in
connection with the Australian Initiative of $110.1 million, net of
a tax benefit of $0.6 million, the Fiscal 2007 Wine Plan of $9.2
million, net of a tax benefit of $3.6 million, and the Fiscal 2008
Plan of $8.9 million, net of a tax benefit of $3.2 million; and
(ii) the loss in connection with the disposal of the Pacific
Northwest wine brands of $17.1 million, net of a tax benefit of
$6.1 million. (5) For the nine months ended November 30, 2009,
other consists of a loss of $34.3 million, net of a tax benefit of
$0.0 million, on the contractual obligation created by the
notification by the 9.9% shareholder of Ruffino S.r.l. ("Ruffino")
to exercise the option to put its entire equity interest in Ruffino
to the Company for a specified minimum value, and $25.4 million,
net of a tax benefit of $0.0 million, associated with the
impairment of the Company's investment in Ruffino. For the nine
months ended November 30, 2008, other consists primarily of $32.4
million associated with the recognition of income tax expense in
connection with the gain on settlement of certain foreign currency
economic hedges, and $4.1 million, net of a tax benefit of $0.0
million, associated with the impairment of an Australian equity
method investment. 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. ("BWE") (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"). 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, 2010
------------------------ Forecasted diluted earnings per share -
reported basis (GAAP) $0.79 $0.89 Inventory step-up 0.03 0.03
Strategic business realignment (1) 0.51 0.51 Other (2) 0.27 0.27
---- ---- Forecasted diluted earnings per share - comparable basis
(Non-GAAP) (3) $1.60 $1.70 ===== ===== Actual for the Year Ended
February 28, 2009 ---- Diluted earnings per share -reported basis
(GAAP) $(1.40) Inventory step-up 0.06 Strategic business
realignment (1) 0.97 Other (2) 1.94 Impact of anti-dilutive
potential common shares (4) 0.03 ---- Diluted earnings per share -
comparable basis (Non-GAAP) (3) $1.60 ===== (1) Includes $0.24,
$0.17, $0.04, $0.04 and $0.01 diluted earnings per share for the
year ending 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; and other previously announced restructuring
plans, respectively. Includes $0.63, $0.09, $0.08, $0.08, $0.05,
$0.02 and $0.02 diluted earnings per share for the year ended
February 28, 2009, associated with the Australian Initiative; a
loss, primarily on assets held for sale, in connection with the
March 2009 divestiture of the value spirits business; a loss in
connection with the June 2008 divestiture of the Pacific Northwest
wine brands; the Fiscal 2007 Wine Plan; the Fiscal 2008 Plan; a
loss in connection with the sale of a Canadian distilling facility;
and other previously announced restructuring plans,
respectively.(3) (2) Includes $0.15 and $0.11 diluted earnings per
share for the year ending February 28, 2010, associated with the
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. Includes $1.23, $0.38, $0.18 and $0.15
diluted earnings per share for the year ended February 28, 2009,
associated with impairments of certain goodwill and intangible
assets; impairments of certain equity method investments; the
recognition of income tax expense in connection with the gain on
settlement of certain foreign currency economic hedges; and a loss
on the adjustment of certain inventory, primarily Australian,
related to prior years; respectively. (3) (3) May not sum due to
rounding as each item is computed independently. (4) In accordance
with the FASB guidance for earnings per share, the dilutive impact
of potential common shares is excluded from the company's reported
diluted loss per share calculation for the year ended February 28,
2009, as the inclusion of these potential common shares would be
antidilutive. As a result of the company having net income on a
comparable basis for the year ended February 28, 2009, the dilutive
impact of potential common shares is included in the company's
comparable diluted earnings per share calculation. 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, 2010
------------------------ Net cash provided by operating activities
(GAAP) $360.0 $420.0 Purchases of property, plant and equipment
(130.0) (150.0) ------ ------ Free cash flow (Non-GAAP) $230.0
$270.0 ====== ====== Actual for the Actual for the Nine Months Nine
Months Ended November Ended November 30, 2009 30, 2008
-------------- -------------- Net cash provided by operating
activities (GAAP) $188.7 $330.9 Purchases of property, plant and
equipment (89.2) (95.6) ----- ----- Free cash flow (Non-GAAP) $99.5
$235.3 ===== ======
http://www.newscom.com/cgi-bin/prnh/20040119/STZLOGODATASOURCE:
Constellation Brands, Inc. CONTACT: Media, Angie Blackwell,
+1-585-678-7141, or Cheryl Gossin, +1-585-678-7191; or Investor
Relations, Patty Yahn-Urlaub, +1-585-678-7483, or Bob Czudak,
+1-585-678-7170 Web Site: http://www.cbrands.com/
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