VICTOR, N.Y., Oct. 1 /PRNewswire-FirstCall/ -- -- Achieves
comparable basis diluted EPS of $0.54 and reported basis diluted
EPS of $0.45 -- Quarter benefits from U.S. distributor transition
and tax timing -- Reaffirms full-year diluted EPS and free cash
flow guidance -- Realigns and consolidates U.S. sales force and
distributor network -- Continues to benefit from cost reduction
efforts -- Decreases debt by more than $155 million during the
quarter and by $270 million year-to-date Second Quarter 2010
Financial Highlights* (in millions, except per share data)
Comparable Change Reported Change ---------- ------ -------- ------
Consolidated net sales $877 -8% $877 -8% Organic constant currency
net sales $877 4% - - Operating income $168 15% $139 NM Operating
margin 19.1% 380 bps 15.8% NM Equity in earnings of equity method
investees** $73 -1% $73 4% Earnings before interest and taxes
(EBIT) $241 9% - - Net income $120 21% $100 NM Diluted earnings per
share $0.54 20% $0.45 NM Constellation Brands, Inc.
(NYSE:STZNYSE:ASX:NYSE:CBR), the world's leading wine company,
reported today its fiscal 2010 second quarter results. "Our
performance in the second quarter demonstrates that we are on track
to achieve our full-year goals," said Rob Sands, president and
chief executive officer of Constellation Brands. "We are focused on
driving organic growth, building must-have brands that return the
greatest profits and creating efficiencies for long-term
sustainable growth. Our initiative to consolidate distribution in
the U.S. is nearly complete and we anticipate that this effort will
be a major catalyst for future organic brand growth." (Logo:
http://www.newscom.com/cgi-bin/prnh/20040119/STZLOGO ) Chief
Financial Officer Bob Ryder added, "We are pleased with the
progress made in our global cost reduction efforts and the
continuing drive to increase sustainable free cash flow and pay
down debt. Our deleveraging efforts are progressing well as debt
decreased by more than $155 million during the second quarter and
more than $1 billion since the beginning of fiscal 2009." Second
Quarter 2010 Net Sales Highlights* (in millions) Reported Organic
-------------------------- ----------------------- Constant
Constant Net Currency Net Currency Sales Change Change Sales Change
Change ----- ------ ------ ----- ------ ------ Consolidated $877
-8% -3% $877 -2% 4% Branded Wine $752 -4% 2% $752 -4% 2% Spirits
$65 -41% -41% $65 49% 49% Other $60 -9% 5% $60 -9% 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 eight
percent due primarily to the impact of the value spirits
divestiture and year-over-year currency exchange rate fluctuations.
Organic net sales increased four percent on a constant currency
basis. Branded wine organic net sales on a constant currency basis
increased two percent overall, three percent in North America, five
percent in Australia/New Zealand and decreased five percent in
Europe. "During the second quarter, we worked closely with our U.S.
distributors to minimize operational disruption during the
transition period. As planned, we shipped additional inventories to
newly appointed distributors to ensure adequate service levels with
retailers. As a result, we experienced a second quarter sales
benefit which we anticipate will reverse in the balance of the
year," said Sands. "As the transition activities are proceeding
well, we believe we are now in a good position to execute for the
key holiday season." Total spirits organic net sales increased 49
percent for the quarter, primarily led by SVEDKA Vodka. "We are
extremely pleased at the continued success of the SVEDKA brand
which is performing well at national chains, control states and
on-premise," Sands said. Operating Income, Net Income, Diluted EPS
Commentary Wines segment operating income increased $16 million
versus the prior year second quarter. This increase is primarily
due to U.S. shipment growth, savings from cost reduction efforts
and the overlap of foreign currency losses from the prior year
second quarter. These benefits were partially offset by the
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 $72 million, a decrease of three percent from
the prior year second quarter. For second quarter 2010, Crown
Imports generated net sales of $693 million, a decrease of five
percent, and operating income of $145 million, a decrease of three
percent. "While sales remain challenging in the on-premise and
convenience store channels, we continue to focus on optimizing
promotional activity through targeted marketing and programming. In
addition, we are introducing new packaging options and increasing
media exposure," said Sands. "This month, Crown will launch 24 oz.
cans of Corona Extra and Corona Light into the convenience channel.
The company has also increased its national media buys for Corona
Extra and Corona Light during National Football League games and
Major League baseball playoffs." For second quarter 2010, pre-tax
restructuring charges, acquisition-related integration costs and
unusual items totaled $29 million compared to $129 million for the
prior year second quarter. Interest expense totaled $67 million, a
decrease of 17 percent. The decrease was primarily due to lower
average borrowings during the quarter. The effective tax rate in
the second quarter was 31 percent which reflects the completion of
various income tax examinations during second quarter 2010. The
company continues to anticipate a full-year comparable tax rate of
38 percent. Summary "The macroeconomic environment remains
challenging but we are beginning to see some signs of
stabilization," said Sands. "Powered by a strong portfolio of
brands which includes Robert Mondavi, Ravenswood, Blackstone, Kim
Crawford and SVEDKA, we believe we have the right strategies in
place to organically grow the business. We intend to continue to
reduce borrowings, improve free cash flow and optimize return on
invested capital. Our expectations for the full year remain
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 $0.97 - $1.07 ($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 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 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 second
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, Oct. 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
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 50 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 Nov. 23, 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: -- 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, 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 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 August 31,
February 28, 2009 2009 ----------- ------------ Assets Current
Assets: Cash and cash investments $19.7 $13.1 Accounts receivable,
net 787.3 524.6 Inventories 1,824.0 1,828.7 Prepaid expenses and
other 187.6 168.1 ----- ----- Total current assets 2,818.6 2,534.5
Property, plant and equipment, net 1,622.5 1,547.5 Goodwill 2,551.3
2,615.0 Intangible assets, net 1,025.3 1,000.6 Other assets, net
416.2 338.9 ----- ----- Total assets $8,433.9 $8,036.5 ========
======== Liabilities and Stockholders' Equity Current Liabilities:
Notes payable to banks $195.9 $227.3 Current maturities of
long-term debt 277.4 235.2 Accounts payable 298.5 288.7 Accrued
excise taxes 81.6 57.6 Other accrued expenses and liabilities 575.4
517.6 ----- ----- Total current liabilities 1,428.8 1,326.4
Long-term debt, less current maturities 3,690.8 3,971.1 Deferred
income taxes 527.7 543.6 Other liabilities 271.3 287.1 ----- -----
Total liabilities 5,918.6 6,128.2 Total stockholders' equity
2,515.3 1,908.3 ------- ------- Total liabilities and stockholders'
equity $8,433.9 $8,036.5 ======== ======== Constellation Brands,
Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS (in
millions, except per share data) Three Months Ended Six Months
Ended -------------------- ------------------ August 31, August 31,
August 31, August 31, 2009 2008 2009 2008 ----------- -----------
----------- ----------- Sales $1,090.7 $1,239.2 $2,094.5 $2,451.2
Excise taxes (213.9) (282.7) (426.1) (562.9) ------ ------ ------
------ Net sales 876.8 956.5 1,668.4 1,888.3 Cost of product sold
(567.2) (650.7) (1,090.1) (1,253.5) ------ ------ -------- --------
Gross profit 309.6 305.8 578.3 634.8 Selling, general and
administrative expenses (167.8) (225.2) (334.4) (458.7) Impairment
of intangible assets - (21.8) - (21.8) Restructuring charges (3.2)
(35.5) (22.1) (36.0) Acquisition-related integration costs - (1.8)
(0.1) (6.1) - ---- ---- ---- Operating income 138.6 21.5 221.7
112.2 Equity in earnings of equity method investees 73.2 70.1 136.0
142.2 Interest expense, net (66.6) (80.7) (133.4) (167.3) -----
----- ------ ------ Income before income taxes 145.2 10.9 224.3
87.1 Provision for income taxes (45.5) (33.6) (118.1) (65.2) -----
----- ------ ----- Net income $99.7 $(22.7) $106.2 $21.9 =====
====== ====== ===== Earnings Per Common Share: Basic - Class A
Common Stock $0.46 $(0.11) $0.49 $0.10 Basic - Class B Common Stock
$0.42 $(0.10) $0.44 $0.09 Diluted - Class A Common Stock $0.45
$(0.11) $0.48 $0.10 Diluted - Class B Common Stock $0.41 $(0.10)
$0.44 $0.09 Weighted Average Common Shares Outstanding: Basic -
Class A Common Stock 195.910 193.733 195.571 193.262 Basic - Class
B Common Stock 23.736 23.754 23.740 23.762 Diluted - Class A Common
Stock 220.714 193.733 220.274 219.828 Diluted - Class B Common
Stock 23.736 23.754 23.740 23.762 Constellation Brands, Inc. and
Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions)
Six Months Ended ------------------ August 31, August 31, 2009 2008
----------- ----------- Cash Flows From Operating Activities Net
income $106.2 $21.9 Adjustments to reconcile net income to net cash
provided by operating activities: Depreciation of property, plant
and equipment 77.1 79.3 Stock-based compensation expense 25.4 22.3
Amortization of intangible and other assets 6.0 5.9 Loss on
business sold 0.8 15.8 Deferred tax provision (28.7) 11.8 Equity in
earnings of equity method investees, net of distributed earnings
(12.3) 3.1 (Gain) loss on disposal or impairment of long-lived
assets, net (1.4) 28.6 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 (204.5)
(76.0) Inventories 91.3 (28.3) Prepaid expenses and other current
assets 1.0 9.7 Accounts payable (11.5) 10.2 Accrued excise taxes
17.6 9.5 Other accrued expenses and liabilities 8.8 (65.5) Other,
net 21.6 59.1 ---- ---- Total adjustments (8.8) 154.9 ---- -----
Net cash provided by operating activities 97.4 176.8 ---- -----
Cash Flows From Investing Activities Proceeds from sale of business
276.4 204.2 Proceeds from sales of assets 14.5 16.0 Purchases of
property, plant and equipment (65.1) (52.0) Investment in equity
method investee (0.5) (0.6) Purchase of business, net of cash
acquired - 0.6 Other investing activities 1.2 11.3 --- ---- Net
cash provided by investing activities 226.5 179.5 ----- ----- Cash
Flows From Financing Activities Principal payments of long-term
debt (271.4) (99.5) Net repayment of notes payable (60.2) (281.0)
Exercise of employee stock options 9.0 19.2 Proceeds from employee
stock purchases 2.3 2.9 Excess tax benefits from stock-based
payment awards 2.2 6.4 --- --- Net cash used in financing
activities (318.1) (352.0) ------ ------ Effect of exchange rate
changes on cash and cash investments 0.8 0.1 --- --- Net increase
in cash and cash equivalents 6.6 4.4 Cash and cash investments,
beginning of period 13.1 20.5 ---- ---- Cash and cash investments,
end of period $19.7 $24.9 ===== ===== Constellation Brands, Inc.
and Subsidiaries SEGMENT INFORMATION (in millions) Three Months
Ended ---------------------- August 31, August 31, Percent 2009
2008 Change ------------ ------------ Segment Net Sales and
Operating Income Constellation Wines (1) Branded wine net sales
$752.4 $782.1 (4%) Spirits net sales 64.9 109.1 (41%) Other net
sales 59.5 65.3 (9%) ---- ---- Segment net sales $876.8 $956.5 (8%)
Operating income $187.9 $172.3 9% % Net sales 21.4% 18.0% Equity in
earnings of equity method investees $1.0 $(0.2) NM Crown Imports
Segment net sales $693.0 $732.1 (5%) Operating income $144.7 $148.8
(3%) % Net sales 20.9% 20.3% Consolidation and Eliminations Segment
net sales $(693.0) $(732.1) (5%) Operating income $(144.7) $(148.8)
(3%) Equity in earnings of Crown Imports $72.2 $74.4 (3%) Corporate
Operations and Other Consolidated net sales $876.8 $956.5 (8%)
Operating income $(20.4) $(26.2) (22%) % Net sales 2.3% 2.7% Six
Months Ended -------------------- August 31, August 31, Percent
2009 2008 Change ------------ ------------ Segment Net Sales and
Operating Income Constellation Wines (1) Branded wine net sales
$1,440.3 $1,547.8 (7%) Spirits net sales 125.0 214.7 (42%) Other
net sales 103.1 125.8 (18%) ----- ----- Segment net sales $1,668.4
$1,888.3 (12%) Operating income $335.5 $327.6 2% % Net sales 20.1%
17.3% Equity in earnings of equity method investees $0.9 $2.2 (59%)
Crown Imports Segment net sales $1,328.8 $1,404.6 (5%) Operating
income $270.7 $287.4 (6%) % Net sales 20.4% 20.5% Consolidation and
Eliminations Segment net sales $(1,328.8) $(1,404.6) (5%) Operating
income $(270.7) $(287.4) (6%) Equity in earnings of Crown Imports
$135.1 $144.1 (6%) Corporate Operations and Other Consolidated net
sales $1,668.4 $1,888.3 (12%) Operating income $(44.7) $(50.2)
(11%) % Net sales 2.7% 2.7% 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 August 31, August 31, Percent
Currency Percent 2009 2008 Change Impact Change(3) ---- ----
Geographic Net Sales (1)(2) North America $622.7 $666.1 (7%) (1%)
(5%) Branded wine $543.2 $534.7 2% (1%) 3% Spirits $64.9 $109.1
(41%) - (41%) Other $14.6 $22.3 (35%) (3%) (32%) Europe $164.0
$191.1 (14%) (16%) 2% Branded wine $122.5 $153.1 (20%) (15%) (5%)
Other $41.5 $38.0 9% (20%) 29% Australia/New Zealand $90.1 $99.3
(9%) (13%) 4% Branded wine $86.7 $94.3 (8%) (13%) 5% Other $3.4
$5.0 (32%) (10%) (22%) Organic Three Months Ended Constant
-------------------- Currency August 31, August 31, Percent
Currency Percent 2009 2008 Change Impact Change(3) ---- ----
Branded Wine Geographic Net Sales (1)(2) North America $543.2
$534.7 2% (1%) 3% Europe 122.5 153.1 (20%) (15%) (5%) Australia/New
Zealand 86.7 94.3 (8%) (13%) 5% ---- ---- Consolidated branded wine
net sales $752.4 $782.1 (4%) (5%) 2% ====== ====== Six Months Ended
Constant ------------------ Currency August 31, August 31, Percent
Currency Percent 2009 2008 Change Impact Change(3) ---- ----
Geographic Net Sales (1)(2) North America $1,194.9 $1,318.6 (9%)
(2%) (7%) Branded wine $1,043.6 $1,065.4 (2%) (2%) - Spirits $125.0
$214.7 (42%) - (42%) Wholesale and other $26.3 $38.5 (32%) (5%)
(26%) Europe $308.5 $373.2 (17%) (21%) 4% Branded wine $235.6
$296.1 (20%) (21%) - Wholesale and other $72.9 $77.1 (5%) (24%) 18%
Australia/New Zealand $165.0 $196.5 (16%) (19%) 3% Branded wine
$161.1 $186.3 (14%) (19%) 6% Wholesale and other $3.9 $10.2 (62%)
(6%) (56%) Organic Six Months Ended Constant ------------------
Divest- Currency August 31, August 31, Percent iture Currency
Percent 2009 2008 Change Impact(4) Impact Change(3) ---- ----
Branded Wine Geographic Net Sales (1)(2) North America $1,043.6
$1,065.4 (2%) (1%) (2%) 1% Europe 235.6 296.1 (20%) - (21%) -
Australia/New Zealand 161.1 186.3 (14%) - (19%) 6% ----- -----
Consolidated branded wine net sales $1,440.3 $1,547.8 (7%) (1%)
(8%) 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 six months ended August 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 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 August 31, August 31, Percent
Currency Percent 2009 2008 Change Impact Change(1) ---- ----
Consolidated Net Sales Branded wine $752.4 $782.1 (4%) (5%) 2%
Spirits 64.9 109.1 (41%) - (41%) Other 59.5 65.3 (9%) (13%) 5% ----
---- Consolidated reported net sales 876.8 956.5 (8%) (5%) (3%)
Less: Pacific Northwest branded wine net sales (2) - - Less:
Spirits net sales (3) - (65.4) - ----- Consolidated organic net
sales $876.8 $891.1 (2%) (6%) 4% ====== ====== Branded Wine Net
Sales Branded wine reported net sales $752.4 $782.1 (4%) (5%) 2%
Less: Pacific Northwest branded wine net sales (2) - - - - Branded
wine organic net sales $752.4 $782.1 (4%) (5%) 2% ====== ======
Spirits Net Sales Spirits reported net sales $64.9 $109.1 (41%) -
(41%) Less: Spirits net sales (3) - (65.4) - ----- Spirits organic
net sales $64.9 $43.7 49% - 49% ===== ===== Six Months Ended
Constant -------------------- Currency August 31, August 31,
Percent Currency Percent 2009 2008 Change Impact Change(1) ----
---- Consolidated Net Sales Branded wine $1,440.3 $1,547.8 (7%)
(8%) 1% Spirits 125.0 214.7 (42%) - (42%) Other 103.1 125.8 (18%)
(17%) (1%) ----- ----- Consolidated reported net sales 1,668.4
1,888.3 (12%) (7%) (4%) Less: Pacific Northwest branded wine net
sales (2) - (7.9) Less: Spirits net sales (3) - (118.0) - ------
Consolidated organic net sales $1,668.4 $1,762.4 (5%) (8%) 3%
======== ======== Branded Wine Net Sales Branded wine reported net
sales $1,440.3 $1,547.8 (7%) (8%) 1% Less: Pacific Northwest
branded wine net sales (2) - (7.9) - ---- Branded wine organic net
sales $1,440.3 $1,539.9 (6%) (8%) 1% ======== ======== Spirits Net
Sales Spirits reported net sales $125.0 $214.7 (42%) - (42%) Less:
Spirits net sales (3) - (118.0) - ------ Spirits organic net sales
$125.0 $96.7 29% - 29% ====== ===== (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 six months ended August
31, 2008. (3) Includes certain spirits contract production services
net sales and certain spirits value brands net sales for the period
June 1, 2008, through August 31, 2008, included in the three months
ended August 31, 2008. Includes certain spirits contract production
services net sales for the period March 1, 2008, through August 31,
2008, and certain spirits value brands net sales for the period
March 25, 2008, through August 31, 2008, included in the six months
ended August 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 August 31, 2009
Strategic Reported Business Comparable Basis Inventory Realignment
Basis (GAAP) Step-up (2) Other (Non-GAAP) --------- ---------
------------ ----- ---------- Net Sales $876.8 $876.8 Cost of
product sold (567.2) 2.5 13.0 (551.7) ------ --- ---- - ------
Gross Profit 309.6 2.5 13.0 - 325.1 Selling, general and
administrative expenses ("SG&A") (167.8) 10.2 (157.6)
Impairment of intangible assets - - - Restructuring charges (3.2)
3.2 - Acquisition- related integration costs - - - - --- - - -
Operating Income 138.6 2.5 26.4 - 167.5 Equity in earnings of
equity method investees 73.2 73.2 ---- EBIT 240.7 Interest expense,
net (66.6) (66.6) ----- --- ---- - ----- Income Before Income Taxes
145.2 2.5 26.4 - 174.1 (Provision for) benefit from income taxes
(45.5) (0.9) (7.7) - (54.1) ----- ---- ---- - ----- Net Income
$99.7 $1.6 $18.7 $- $120.0 ===== ==== ===== == ====== Diluted
Earnings Per Common Share $0.45 $0.54 ===== ===== Weighted Average
Common Shares Outstanding - Diluted(4) 220.714 220.714 =======
======= Gross Margin 35.3% 37.1% SG&A as a percent of net sales
19.1% 18.0% Operating Margin 15.8% 19.1% Effective Tax Rate 31.3%
31.1% ---- ---- Three Months Ended August 31, 2008 Strategic
Reported Business Comparable Basis Inventory Realignment Basis
(GAAP) Step-up (2) Other(3) (Non-GAAP) -------- ---------
----------- -------- ---------- Net Sales $956.5 $956.5 Cost of
product sold (650.7) 4.3 49.9 - (596.5) ------ --- ---- - ------
Gross Profit 305.8 4.3 49.9 - 360.0 Selling, general and
administrative expenses ("SG&A") (225.2) 11.3 (213.9)
Impairment of intangible assets (21.8) 21.8 - Restructuring charges
(35.5) 35.5 - Acquisition- related integration costs (1.8) 1.8 -
---- --- --- - - Operating Income 21.5 4.3 120.3 - 146.1 Equity in
earnings of equity method investees 70.1 4.1 74.2 ---- EBIT 220.3
Interest expense, net (80.7) (80.7) ----- --- ----- --- -----
Income Before Income Taxes 10.9 4.3 120.3 4.1 139.6 (Provision for)
benefit from income taxes (33.6) (1.6) (5.4) - (40.6) ----- ----
---- - ----- Net Income $(22.7) $2.7 $114.9 $4.1 $99.0 ====== ====
====== ==== ===== Diluted Earnings Per Common Share $(0.11) $0.45
====== ===== Weighted Average Common Shares Outstanding -
Diluted(4) 193.733 220.353 ======= ======= Gross Margin 32.0% 37.6%
SG&A as a percent of net sales 23.5% 22.4% Operating Margin
2.2% 15.3% Effective Tax Rate 308.3% 29.1% ----- ---- Percent
Percent Change - Change - Reported Comparable Basis Basis (GAAP)
(Non-GAAP) ------ ---------- Net Sales (8%) (8%) Cost of product
sold (13%) (8%) Gross Profit 1% (10%) Selling, general and
administrative expenses ("SG&A") (25%) (26%) Impairment of
intangible assets NM N/A Restructuring charges NM N/A Acquisition-
related integration costs NM N/A Operating Income NM 15% Equity in
earnings of equity method investees 4% (1%) EBIT N/A 9% Interest
expense, net (17%) (17%) Income Before Income Taxes NM 25%
(Provision for) benefit from income taxes 35% 33% Net Income NM 21%
Diluted Earnings Per Common Share NM 20% Weighted Average Common
Shares Outstanding - Diluted(4) 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) Six
Months Ended August 31, 2009 Strategic Reported Business Comparable
Basis Inventory Realignment Basis (GAAP) Step-up (5) Other
(Non-GAAP) -------- --------- ----------- ----- ---------- Net
Sales $1,668.4 $1,668.4 Cost of product sold (1,090.1) 5.2 17.8
(1,067.1) -------- --- ---- - -------- Gross Profit 578.3 5.2 17.8
- 601.3 Selling, general and administrative expenses ("SG&A")
(334.4) 23.9 (310.5) Impairment of intangible assets - -
Restructuring charges (22.1) 22.1 - Acquisition- related
integration costs (0.1) 0.1 - ---- --- --- - - Operating Income
221.7 5.2 63.9 - 290.8 Equity in earnings of equity method
investees 136.0 136.0 ----- EBIT 426.8 Interest expense, net
(133.4) (133.4) ------ --- ---- - ------ Income Before Income Taxes
224.3 5.2 63.9 - 293.4 (Provision for) benefit from income taxes
(118.1) (2.0) 19.4 - (100.7) ------ ---- ---- - ------ Net Income
$106.2 $3.2 $83.3 $- $192.7 ====== ==== ===== == ====== Diluted
Earnings Per Common Share $0.48 $0.01 $0.38 $- $0.87 ===== =====
===== == ===== Weighted Average Common Shares Outstanding - Diluted
220.274 220.274 220.274 220.274 220.274 ======= ======= =======
======= ======= Gross Margin 34.7% 36.0% SG&A as a percent of
net sales 20.0% 18.6% Operating Margin 13.3% 17.4% Effective Tax
Rate 52.7% 34.3% ---- ---- Six Months Ended August 31, 2008
Strategic Reported Business Comparable Basis Inventory Realignment
Basis (GAAP) Step-up (5) Other(6) (Non-GAAP) -------- ---------
----------- -------- ---------- Net Sales $1,888.3 $1,888.3 Cost of
product sold (1,253.5) 10.6 53.9 0.1 (1,188.9) -------- ---- ----
--- -------- Gross Profit 634.8 10.6 53.9 0.1 699.4 Selling,
general and administrative expenses ("SG&A") (458.7) 36.7
(422.0) Impairment of intangible assets (21.8) 21.8 - Restructuring
charges (36.0) 36.0 - Acquisition- related integration costs (6.1)
6.1 - ---- ---- --- --- - Operating Income 112.2 10.6 154.5 0.1
277.4 Equity in earnings of equity method investees 142.2 4.1 146.3
----- EBIT 423.7 Interest expense, net (167.3) (167.3) ------ ----
----- --- ------ Income Before Income Taxes 87.1 10.6 154.5 4.2
256.4 (Provision for) benefit from income taxes (65.2) (4.0) (14.6)
- (83.8) ----- ---- ----- - ----- Net Income $21.9 $6.6 $139.9 $4.2
$172.6 ===== ==== ====== ==== ====== Diluted Earnings Per Common
Share $0.10 $0.03 $0.64 $0.02 $0.79 ===== ===== ===== ===== =====
Weighted Average Common Shares Outstanding - Diluted 219.828
219.828 219.828 219.828 219.828 ======= ======= ======= =======
======= Gross Margin 33.6% 37.0% SG&A as a percent of net sales
24.3% 22.3% Operating Margin 5.9% 14.7% Effective Tax Rate 74.9%
32.7% ---- ---- Percent Percent Change - Change - Reported
Comparable Basis Basis (GAAP) (Non-GAAP) ------ ---------- Net
Sales (12%) (12%) Cost of product sold (13%) (10%) Gross Profit
(9%) (14%) Selling, general and administrative expenses
("SG&A") (27%) (26%) Impairment of intangible assets NM N/A
Restructuring charges (39%) N/A Acquisition- related integration
costs NM N/A Operating Income NM 5% Equity in earnings of equity
method investees (4%) (7%) EBIT N/A 1% Interest expense, net (20%)
(20%) Income Before Income Taxes NM 14% (Provision for) benefit
from income taxes NM 20% Net Income NM 12% Diluted Earnings Per
Common Share NM 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
(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 six months ended August
31, 2009, and August 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 August 31, 2009, strategic
business realignment items primarily include costs recognized by
the company in connection with the Global Initiative of $12.5
million, net of a tax benefit of $6.3 million, and the Fiscal 2007
Wine Plan of $4.7 million, net of a tax benefit of $1.1 million.
For the three months ended August 31, 2008, strategic business
realignment items consist primarily of costs recognized by the
company in connection with its Australian Initiative of $104.0
million, net of a tax benefit of $0.6 million, and the loss in
connection with the sale of a nonstrategic Canadian distilling
facility of $5.1 million, net of a tax benefit of $2.7 million. (3)
For the three months ended August 31, 2008, other consists of $4.1
million, net of a tax benefit of $0 million, associated with the
impairment of an Australian equity method investment. (4) In
accordance with the antidilution provisions of Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS
No. 128"), the dilutive impact of potential common shares is
excluded from the company's reported diluted weighted average
common shares outstanding for the three months ended August 31,
2008. As a result of the company having net income on a comparable
basis, the dilutive impact of potential common shares is included
in the company's comparable diluted weighted average common shares
outstanding. (5) For the six months ended August 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 $33.6 million, net of a
tax benefit of $16.4 million. For the six months ended August 31,
2008, strategic business realignment items consist primarily of
costs recognized by the company in connection with the Australian
Initiative, of $104.0 million, net of a tax benefit of $0.6
million, and 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. (6) For the six months ended August 31,
2008, other consists primarily of $4.1 million, net of a tax
benefit of $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 Range for the Year 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 Actual for the Six the Six Months
Ended Months Ended August 31, August 31, 2009 2008 --------------
-------------- Net cash provided by operating activities (GAAP)
$97.4 $176.8 Purchases of property, plant and equipment (65.1)
(52.0) ----- ----- Free cash flow (Non-GAAP) $32.3 $124.8 =====
======
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, all of Constellation Brands Web Site:
http://www.cbrands.com/
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