- Achieves comparable basis diluted EPS of $0.33 and reported basis
diluted EPS of $0.03 VICTOR, N.Y., July 1 /PRNewswire-FirstCall/ --
First Quarter 2010 Financial Highlights* (in millions, except per
share data) Comparable % Change Reported % Change ----------
-------- -------- -------- Consolidated net sales $792 -15% $792
-15% Operating income $123 -6% $83 -8% Operating margin 15.6% 150
bps 10.5% 80 bps Equity in earnings of equity method investees**
$63 -13% $63 -13% Earnings before interest and taxes (EBIT) $186
-9% - - Net income $73 - $7 NM Diluted earnings per share $0.33 -3%
$0.03 NM Constellation Brands, Inc. (NYSE:STZNYSE:ASX:NYSE:CBR),
the world's leading wine company, reported today its fiscal 2010
first quarter results. "We are generally pleased with our quarterly
results, which were in-line with our expectations," said Rob Sands,
president and chief executive officer of Constellation Brands. "To
strengthen our position as an industry leader, especially in this
challenging economy, we took steps over the past 18 months to shift
the focus of our strategy to building must-have brands that return
the greatest profits and that represent good value for consumers.
We are already seeing the benefits from this strategy as brands
such as Woodbridge by Robert Mondavi, Nobilo, Clos du Bois, Kim
Crawford and SVEDKA continue to perform well. During the quarter,
we also made progress on our global cost reduction initiative which
was implemented to mitigate the negative impacts of the turbulent
global economy and to create efficiencies to drive long-term
sustainable growth." (Logo:
http://www.newscom.com/cgi-bin/prnh/20040119/STZLOGO ) First
Quarter 2010 Net Sales Highlights* (in millions) Reported Organic
------------------------ ------------------------ Constant Constant
Net Currency Net Currency Sales % Change Change Sales % Change
Change ----- -------- ------ ----- -------- ------ Consolidated
$792 -15% -5% $792 -9% 1% Branded Wine $688 -10% - $688 -9% 1%
Spirits $60 -43% -43% $60 13% 13% Other $44 -28% -8% $44 -28% -8% *
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 15 percent due primarily
to the impact of year-over-year currency exchange rate fluctuations
and the divestitures of the value spirits business, spirits
contract production services and certain Pacific Northwest wine
brands. Organic net sales increased one percent on a constant
currency basis. Branded wine organic net sales on a constant
currency basis increased one percent, which includes a one percent
decrease for North America, a six percent increase for Europe, and
a seven percent increase for Australia/New Zealand. Key markets are
being impacted by planned SKU reductions and continuing economic
pressures are driving unfavorable sales mix. However, SG&A
reduction efforts are having the expected benefit of offsetting
reduced gross profit margins. Net sales for Europe benefited from
timing impacts related to the U.K. duty increase. "During the
quarter we integrated the remaining spirits business into our North
American wine organization and began refining the structure of our
U.S. wine business into a single integrated group with the goal of
better serving our trade customers and ultimately consumers," Sands
said. "This structure, combined with an unparalleled premium
portfolio that includes well-known and admired brands such as
Robert Mondavi, Wild Horse, Ravenswood, Estancia and Blackstone,
provides us with outstanding opportunities to capture growth in the
marketplace." Total spirits organic net sales increased 13 percent
for the quarter, led by a 33 percent gain for SVEDKA Vodka. "The
integration of our premium spirits brands into the North American
organization went well," Sands continued. "SVEDKA continues to
enjoy tremendous momentum and now ranks as the third largest import
and fifth largest vodka brand overall in the U.S. The futuristic
marketing campaign featuring the iconic fembot resonates well with
consumers and we are seeing continuing strong growth particularly
in national chains, control states and on-premise." Operating
Income, Net Income, Diluted EPS Commentary Wines segment operating
income decreased $8 million versus the prior quarter. This decrease
is primarily due to the divestiture of the value spirits business
and certain Pacific Northwest wine brands, negative mix and a
decrease in international business performance partially offset by
savings from cost reduction initiatives and gains from foreign
currency transactions. Constellation's equity earnings from its 50
percent interest in the Crown Imports joint venture totaled $63
million, a decrease of 10 percent from the prior year first
quarter. For first quarter 2010, Crown Imports generated net sales
of $636 million, a decrease of five percent, and operating income
of $126 million, a decrease of nine percent. "While the on-premise
and convenience channels remain difficult, Crown is seeing some
improvement at national chains in the grocery channel as it focuses
on optimizing promotional activity through targeted marketing and
programming support," said Sands. "In particular, Corona Extra is
ramping up its marketing efforts for the peak summer sales season
by reprising some of its most iconic television spots and focusing
its overall media investment into and through these key periods."
For first quarter 2010, pre-tax restructuring charges,
acquisition-related integration costs and unusual items totaled $40
million compared to $41 million for the prior year first quarter.
Interest expense totaled $67 million, a decrease of 23 percent. The
decrease was primarily due to a lower average debt balance. "The
improvement in interest expense reflects the significant debt pay
down in fiscal 2009 and additional debt reduction during the first
quarter as proceeds from the sale of the value spirits business in
March 2009 contributed to our on-going deleveraging efforts," said
Bob Ryder, Constellation Brands chief financial officer. Summary
"The macroeconomic environment remains challenging but we continue
to focus on the right strategies to generate cash, reduce
borrowings, increase return on invested capital, and improve the
bottom line. We are striving to better align our businesses in the
U.K. and Australia to provide opportunity for increased
efficiencies and cost savings, which are among our top priorities
during these tumultuous times," Sands concluded. "Through prudent,
targeted actions, coupled with some of the strongest brands in the
industry, we believe we are well-positioned to benefit from the
upturn in the economy when it occurs. Finally, I would like to
thank our Constellation colleagues around the world for their hard
work and dedication as we focus on achieving our goals for fiscal
2010." Outlook The table below sets forth management's current
diluted EPS expectations for fiscal year 2010 compared to fiscal
year 2009 actual results, both on a reported basis and a comparable
basis. Constellation Brands Fiscal Year 2010 Diluted Earnings Per
Share Outlook Reported Basis Comparable Basis ---------------------
-------------------- FY10 FY09 FY10 FY09 Estimate Actual Estimate
Actual -------- ------ -------- ------ Fiscal Year Ending Feb. 28
$0.97 - $1.07 ($1.40) $1.60 - $1.70 $1.60 Full-year fiscal 2010
guidance includes the following current assumptions: -- Interest
expense: approximately $265 - $285 million -- Tax rate:
approximately 53 percent on a reported basis, as compared to 38
percent on a comparable basis, primarily due to a provision of 9
percentage points associated with the March 2009 sale of the value
spirits business and 5 percentage points related to international
restructuring activities with minimal tax benefits -- Weighted
average diluted shares outstanding: approximately 222 million --
Free cash flow: $230 - $270 million Conference Call A conference
call to discuss first quarter fiscal 2010 results and outlook for
fiscal 2010 will be hosted by President and Chief Executive Officer
Rob Sands and Executive Vice President and Chief Financial Officer
Bob Ryder on Wednesday, July 1, 2009 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, with a broad portfolio of widely
admired premium brands across the wine, beer and spirits
categories. Our company achieves success through an unmatched
knowledge of wine consumers paired with storied brands that suit
their varied lives and tastes. Our portfolio of brands include
Robert Mondavi, Hardys, Clos du Bois, Blackstone, Banrock Station,
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(R) company with more than 100
total brands in our portfolio, sales in about 150 countries and
operations in approximately 50 facilities. The company believes
that industry leadership involves a commitment to our brands, to
the trade, to the land, to investors and to the 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 Aug. 24,
2009, 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: -- successful integration of
acquired businesses and realization of expected synergies; --
completion of various portfolio actions; -- 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, and receipt of all consideration from
the divestiture of the value spirits business; -- accuracy of the
bases for forecasts relating to joint ventures and associated costs
and capital investment requirements; -- restructuring charges,
acquisition-related integration costs, other one-time costs and
purchase accounting adjustments 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) May 31, February 28, 2009
2009 -------- ----------- Assets Current Assets: Cash and cash
investments $16.8 $13.1 Accounts receivable, net 715.9 524.6
Inventories 1,846.0 1,828.7 Prepaid expenses and other 188.0 168.1
----- ----- Total current assets 2,766.7 2,534.5 Property, plant
and equipment, net 1,633.0 1,547.5 Goodwill 2,540.3 2,615.0
Intangible assets, net 1,019.7 1,000.6 Other assets, net 441.8
338.9 ----- ----- Total assets $8,401.5 $8,036.5 ======== ========
Liabilities and Stockholders' Equity Current Liabilities: Notes
payable to banks $353.5 $227.3 Current maturities of long-term debt
256.2 235.2 Accounts payable 276.2 288.7 Accrued excise taxes 69.8
57.6 Other accrued expenses and liabilities 600.0 517.6 ----- -----
Total current liabilities 1,555.7 1,326.4 Long-term debt, less
current maturities 3,712.1 3,971.1 Deferred income taxes 524.0
543.6 Other liabilities 284.5 287.1 ----- ----- Total liabilities
6,076.3 6,128.2 Total stockholders' equity 2,325.2 1,908.3 -------
------- Total liabilities and stockholders' equity $8,401.5
$8,036.5 ======== ======== Constellation Brands, Inc. and
Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS (in millions,
except per share data) Three Months Ended -------------------- May
31, May 31, 2009 2008 --------- -------- Sales $1,003.8 $1,212.0
Excise taxes (212.2) (280.2) ------ ------ Net sales 791.6 931.8
Cost of product sold (522.9) (602.8) ------ ------ Gross profit
268.7 329.0 Selling, general and administrative expenses (166.6)
(233.5) Restructuring charges (18.9) (0.5) Acquisition-related
integration costs (0.1) (4.3) ---- ---- Operating income 83.1 90.7
Equity in earnings of equity method investees 62.8 72.1 Interest
expense, net (66.8) (86.6) ----- ----- Income before income taxes
79.1 76.2 Provision for income taxes (72.6) (31.6) ----- ----- Net
income $6.5 $44.6 ==== ===== Earnings Per Common Share: Basic -
Class A Common Stock $0.03 $0.21 Basic - Class B Common Stock $0.03
$0.19 Diluted - Class A Common Stock $0.03 $0.20 Diluted - Class B
Common Stock $0.03 $0.19 Weighted Average Common Shares
Outstanding: Basic - Class A Common Stock 195.233 192.792 Basic -
Class B Common Stock 23.744 23.769 Diluted - Class A Common Stock
219.820 219.186 Diluted - Class B Common Stock 23.744 23.769
Constellation Brands, Inc. and Subsidiaries CONSOLIDATED STATEMENTS
OF CASH FLOWS (in millions) Three Months Ended --------------------
May 31, May 31, 2009 2008 --------- --------- Cash Flows From
Operating Activities Net income $6.5 $44.6 Adjustments to reconcile
net income to net cash used in operating activities: Depreciation
of property, plant and equipment 34.1 41.2 Stock-based compensation
expense 12.2 10.8 Amortization of intangible and other assets 3.1
3.0 Loss on businesses sold or held for sale 0.8 16.0 Loss on
disposal or impairment of long-lived assets, net 0.4 0.1 Deferred
tax provision (27.1) 3.2 Equity in earnings of equity method
investees, net of distributed earnings (23.6) (23.0) Change in
operating assets and liabilities, net of effects from purchases and
sales of businesses: Accounts receivable, net (132.8) (53.1)
Inventories 34.5 (69.0) Prepaid expenses and other current assets
4.9 6.8 Accounts payable (28.2) 14.4 Accrued excise taxes 6.0 18.3
Other accrued expenses and liabilities 55.2 (58.7) Other, net (0.8)
12.7 ---- ---- Total adjustments (61.3) (77.3) ----- ----- Net cash
used in operating activities (54.8) (32.7) ----- ----- Cash Flows
From Investing Activities Proceeds from sale of business 270.2 -
Proceeds from sales of assets 1.2 0.8 Purchases of property, plant
and equipment (47.1) (22.2) Investment in equity method investee
(0.3) - Purchase of business, net of cash acquired - (2.1) Other
investing activities 0.3 7.8 --- --- Net cash provided by (used in)
investing activities 224.3 (15.7) ----- ----- Cash Flows From
Financing Activities Principal payments of long-term debt (269.5)
(49.5) Net proceeds from notes payable 98.6 85.8 Exercise of
employee stock options 3.4 12.1 Excess tax benefits from
stock-based payment awards 1.2 4.7 --- --- Net cash (used in)
provided by financing activities (166.3) 53.1 ------ ---- Effect of
exchange rate changes on cash and cash investments 0.5 - --- ---
Net increase in cash and cash equivalents 3.7 4.7 Cash and cash
investments, beginning of period 13.1 20.5 ---- ---- Cash and cash
investments, end of period $16.8 $25.2 ===== ===== Constellation
Brands, Inc. and Subsidiaries SEGMENT INFORMATION (in millions)
Three Months Ended -------------------- May 31, May 31, Percent
2009 2008 Change --------- --------- Segment Net Sales and
Operating Income Constellation Wines (1) Branded wine net sales
$687.9 $765.7 (10%) Spirits net sales 60.1 105.6 (43%) Other net
sales 43.6 60.5 (28%) ---- ---- Segment net sales $791.6 $931.8
(15%) Operating income $147.6 $155.3 (5%) % Net sales 18.6% 16.7%
Equity in earnings of equity method investees $(0.1) $2.4 NM Crown
Imports Segment net sales $635.8 $672.5 (5%) Operating income
$126.0 $138.6 (9%) % Net sales 19.8% 20.6% Consolidation and
Eliminations Segment net sales $(635.8) $(672.5) (5%) Operating
income $(126.0) $(138.6) (9%) Equity in earnings of Crown Imports
$62.9 $69.7 (10%) Corporate Operations and Other Consolidated net
sales $791.6 $931.8 (15%) Operating income $(24.3) $(24.0) 1% % Net
sales 3.1% 2.6% 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 May 31, May 31, Percent Currency Percent 2009 2008 Change
Impact Change(3) -------- -------- Geographic Net Sales (1)(2)
North America $572.2 $652.5 (12%) (3%) (10%) Branded wine $500.4
$530.7 (6%) (3%) (3%) Spirits $60.1 $105.6 (43%) - (43%) Other
$11.7 $16.2 (28%) (9%) (19%) Europe $144.5 $182.1 (21%) (27%) 6%
Branded wine $113.1 $143.0 (21%) (27%) 6% Other $31.4 $39.1 (20%)
(27%) 8% Australia/New Zealand $74.9 $97.2 (23%) (25%) 2% Branded
wine $74.4 $92.0 (19%) (26%) 7% Other $0.5 $5.2 (90%) 2% (92%)
Organic Constant Three Months Ended Divest- Currency
------------------ iture Percent May 31, May 31, Percent Impact
Currency Change 2009 2008 Change (4) Impact (3) ------- -------
Branded Wine Geographic Net Sales (1)(2) North America $500.4
$530.7 (6%) (1%) (3%) (1%) Europe 113.1 143.0 (21%) - (27%) 6%
Australia/New Zealand 74.4 92.0 (19%) - (26%) 7% ---- ----
Consolidated branded wine net sales $687.9 $765.7 (10%) (1%) (10%)
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
three months ended May 31, 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
three months ended May 31, 2008, 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. Constant Three Months Ended
Currency ------------------ Percent May 31, May 31, Percent
Currency Change 2009 2008 Change Impact (1) ------- -------
Consolidated Net Sales Branded wine $687.9 $765.7 (10%) (10%) -
Spirits 60.1 105.6 (43%) - (43%) Other 43.6 60.5 (28%) (20%) (8%)
---- ---- Consolidated reported net sales 791.6 931.8 (15%) (10%)
(5%) Less: Pacific Northwest branded wine net sales (2) - (7.9)
Less: Spirits net sales (3) - (52.6) --- ----- Consolidated organic
net sales $791.6 $871.3 (9%) (10%) 1% ====== ====== Branded Wine
Net Sales Branded wine reported net sales $687.9 $765.7 (10%) (10%)
- Less: Pacific Northwest branded wine net sales (2) - (7.9) ---
---- Branded wine organic net sales $687.9 $757.8 (9%) (10%) 1%
====== ====== Spirits Net Sales Spirits reported net sales $60.1
$105.6 (43%) - (43%) Less: Spirits net sales (3) - (52.6) --- -----
Spirits organic net sales $60.1 $53.0 13% - 13% ===== ===== (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
three months ended May 31, 2008. (3) Includes certain spirits
contract production services net sales for the period March 1,
2008, through May 31, 2008, and certain spirits value brands net
sales for the period March 25, 2008, through May 31, 2008, included
in the three months ended May 31, 2008. Constellation Brands, Inc.
and Subsidiaries RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL
MEASURES (1) (in millions, except per share data) Three Months
Ended May 31, 2009
--------------------------------------------------- Strategic
Comparable Reported Business Basis Basis Inventory Realign- (Non-
(GAAP) Step-up ment(2) Other GAAP)
--------------------------------------------------- Net Sales
$791.6 $791.6 Cost of product sold (522.9) 2.7 4.8 (515.4) ------
--- --- --- ------ Gross Profit 268.7 2.7 4.8 - 276.2 Selling,
general and administrative expenses ("SG&A") (166.6) 13.7
(152.9) Restructuring charges (18.9) 18.9 - Acquisition-related
integration costs (0.1) 0.1 - ---- --- --- --- --- Operating Income
83.1 2.7 37.5 - 123.3 Equity in earnings of equity method investees
62.8 62.8 ---- EBIT 186.1 Interest expense, net (66.8) (66.8) -----
--- ---- --- ----- Income Before Income Taxes 79.1 2.7 37.5 - 119.3
(Provision for) benefit from income taxes (72.6) (1.1) 27.1 -
(46.6) ----- ---- ---- --- ----- Net Income $6.5 $1.6 $64.6 $-
$72.7 ==== ==== ===== === ===== Diluted Earnings Per Common Share
$0.03 $0.01 $0.29 $- $0.33 ===== ===== ===== === ===== Weighted
Average Common Shares Outstanding - Diluted 219.820 219.820 219.820
219.820 219.820 ======= ======= ======= ======= ======= Gross
Margin 33.9% 34.9% SG&A as a percent of net sales 21.0% 19.3%
Operating Margin 10.5% 15.6% Effective Tax Rate NM 39.1% --- ----
Three Months Ended May 31, 2008
--------------------------------------------------- Strategic
Comparable Reported Business Basis Basis Inventory Realign- (Non-
(GAAP) Step-up ment(2) Other GAAP)
--------------------------------------------------- Net Sales
$931.8 $931.8 Cost of product sold (602.8) 6.3 4.0 0.1 (592.4)
------ --- --- --- ------ Gross Profit 329.0 6.3 4.0 0.1 339.4
Selling, general and administrative expenses ("SG&A") (233.5)
25.4 (208.1) Restructuring charges (0.5) 0.5 - Acquisition-related
integration costs (4.3) 4.3 - ---- --- --- --- --- Operating Income
90.7 6.3 34.2 0.1 131.3 Equity in earnings of equity method
investees 72.1 72.1 ---- EBIT 203.4 Interest expense, net (86.6)
(86.6) ----- --- ---- --- ----- Income Before Income Taxes 76.2 6.3
34.2 0.1 116.8 (Provision for) benefit from income taxes (31.6)
(2.4) (9.2) - (43.2) ----- ---- ---- --- ----- Net Income $44.6
$3.9 $25.0 $0.1 $73.6 ===== ==== ===== ==== ===== Diluted Earnings
Per Common Share $0.20 $0.02 $0.11 $- $0.34 ===== ===== ===== ===
===== Weighted Average Common Shares Outstanding - Diluted 219.186
219.186 219.186 219.186 219.186 ======= ======= ======= =======
======= Gross Margin 35.3% 36.4% SG&A as a percent of net sales
25.1% 22.3% Operating Margin 9.7% 14.1% Effective Tax Rate 41.5%
37.0% ---- ---- Percent Percent Change - Change - Reported
Comparable Basis Basis (GAAP) (Non-GAAP) -------- ---------- Net
Sales (15%) (15%) Cost of product sold (13%) (13%) Gross Profit
(18%) (19%) Selling, general and administrative expenses
("SG&A") (29%) (27%) Restructuring charges NM N/A
Acquisition-related integration costs NM N/A Operating Income (8%)
(6%) Equity in earnings of equity method investees (13%) (13%) EBIT
N/A (9%) Interest expense, net (23%) (23%) Income Before Income
Taxes 4% 2% (Provision for) benefit from income taxes NM 8% Net
Income NM (1%) Diluted Earnings Per Common Share NM (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
ended May 31, 2009, and May 31, 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 May 31, 2009, strategic
business realignment items primarily include tax expense associated
with the March 2009 divestiture of the value spirits business of
$37.5 million and costs recognized by the company in connection
with the Global Initiative of $21.2 million, net of a tax benefit
of $9.5 million. For the three months ended May 31, 2008, strategic
business realignment items primarily include (i) the loss,
primarily on assets held for sale, in connection with the
divestiture of the Pacific Northwest wine brands (announced on June
10, 2008), of $17.3 million, net of a tax benefit of $6.1 million,
and (ii) costs recognized by the company primarily in connection
with the Fiscal 2008 Plan of $5.6 million, net of a tax benefit of
$2.3 million. DEFINITIONS Global Initiative The company's plan
announced in April 2009 to simplify its business, increase
efficiencies and reduce its cost structure on a global basis (the
"Global Initiative"). Australian Initiative The company's plan
announced in August 2008 to sell certain assets and implement
operational changes designed to improve the efficiencies and
returns associated with its Australian business (the "Australian
Initiative"). Fiscal 2008 Plan The company's plan announced in
November 2007 to streamline certain of its international
operations, primarily in Australia; certain other restructuring
charges incurred during the third quarter of fiscal 2008 in
connection with the consolidation of certain spirits production
processes in the U.S.; and its plan announced in January 2008 to
streamline certain of its operations in the U.S., primarily in
connection with the restructuring and integration of the operations
of Beam Wine Estates, Inc. ("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) Range for the Year
Diluted Earnings Per Share Guidance Ending February 28, 2010
------------------------ Forecasted diluted earnings per share -
reported basis (GAAP) $0.97 $1.07 Inventory step-up 0.03 0.03
Strategic business realignment (1) 0.60 0.60 ---- ---- Forecasted
diluted earnings per share - comparable basis (Non-GAAP) (2) $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 (3) 1.94 Impact of anti-dilutive potential common shares
(4) 0.03 ---- Diluted earnings per share - comparable basis
(Non-GAAP) (2) $1.60 ===== (1) Includes $0.34, $0.17, $0.06 and
$0.03 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; 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.(2) (2) May not sum due to rounding as each item is
computed independently. (3) 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. (2) (4) In accordance with
the antidilution provisions of SFAS No. 128, 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 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) $380.0 $440.0 Purchases of property, plant and equipment
(150.0) (170.0) ------ ------ Free cash flow (Non-GAAP) $230.0
$270.0 ====== ====== Actual for the Three Months Ended May 31, 2009
------------ Net cash used in operating activities (GAAP) $(54.8)
Purchases of property, plant and equipment (47.1) ----- Free cash
flow (Non-GAAP) $(101.9) =======
http://www.newscom.com/cgi-bin/prnh/20040119/STZLOGODATASOURCE:
Constellation Brands, Inc. CONTACT: Media, Angie Blackwell,
+1-585-678-7141, Cheryl Gossin, +1-585-678-7191, or Investor
Relations, Patty Yahn-Urlaub, +1-585-678-7483, Bob Czudak,
+1-585-678-7170 Web Site: http://www.cbrands.com/
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