EXHIBIT 99.1
Published on July 12, 2006
EXHIBIT
99.1
[LOGO]
Constellation
NEWS
RELEASE
|
CONTACTS:
|
||
|
Media
Relations
|
Investor
Relations
|
|
|
Mike
Martin -
585-218-3669
|
Lisa
Schnorr
- 585-218-3677
|
|
|
Kevin
Harwood - 585-218-3666
|
Bob
Czudak -
585-218-3668
|
Constellation
Brands Announces
Vincor
Integration Plan
Canada
is Firm’s Fifth Core Market, Businesses in Other
Geographies
Folded into Regional Operating Companies
FAIRPORT,
N.Y., July 11, 2006 -
Constellation Brands, Inc. (NYSE: STZ, ASX: CBR) today announced
its
plan for the integration of acquired Vincor International operations around
the
world. Constellation completed the acquisition of Mississauga, Ontario,
Canada-based Vincor International Inc. on June 5. On June 1, Vincor shareholders
overwhelmingly voted to accept Constellation’s C$36.50 per share cash offer to
buy the company.
Approximately
90 percent of Vincor’s 2,358
worldwide employees will be retained, with positions trimmed coming primarily
from sales, marketing, administrative and production redundancies in the
United
States, United Kingdom and Australia, where Constellation’s operations are
significantly larger in scale than Vincor’s. In Canada, where nearly 79 percent
of Vincor’s total employment exists, 30 people will be impacted. In addition, 16
positions will be filled, with the net decrease of 14 positions in Canada,
representing less than one percent of Vincor’s nationwide employment. Vincor’s
Canadian operations have become “Vincor Canada,” and it is Constellation’s fifth
core market, the others being the United States, United Kingdom, Australia
and
New Zealand.
“While
we are moving quickly to consolidate
activities wherever it makes
-
more
-
-
2 -
sense,
we’re
maintaining an appropriate level of staffing and retaining the expertise
and
experience to maintain and grow the production, marketing and sales of Vincor
brands around the world,” stated Rob Sands, Constellation Brands president and
chief operating officer. “With both companies having very similar structures and
cultures, the transition should be a smooth one. Whenever Constellation adds
companies, brands and people, business continuity is always at the top of
our
priority list, and we want to make certain employees understand our values
and
culture, and feel good about becoming part of our growing organization. We
wish
we could retain everyone, but that is not possible because a small percentage
of
positions are duplicative. We provide appropriate transition support for
anyone
impacted by these changes.”
Sales
and marketing groups will be consolidated
throughout the summer months, with systems integration slated for fall 2006.
Some operations, such as warehousing, will also be consolidated, as will
some
supply chain activities. Each Vincor asset will be evaluated to determine
how
best to maximize its value to the regional operating company it is aligned
with
geographically. The integration is expected to be substantially complete
by the
end of fiscal year 2007. Those people displaced as a result of this integration
plan will receive a severance package.
One-time
Charges
In
connection with the company’s integration of Vincor announced today,
Constellation expects to incur restructuring and related charges and
acquisition-related integration costs totaling approximately $39 million
pre-tax
that will be recorded in the company’s results of operations. These cash charges
are composed primarily of employee redundancy costs and activities relating
to
the consolidation of certain back-office functions and systems.
Approximately
$35
million of these charges is expected to be recorded in the company’s fiscal 2007
results, of which approximately $16 million is expected to be recorded in
the
second quarter of fiscal 2007. The remaining $4 million of
-
more
-
-
3 -
the
charges is
expected to be recorded in fiscal 2008.
The
company will also incur one-time cash costs
of approximately $50 million that will be recorded as liabilities in the
company’s allocation of purchase price in connection with the Vincor
acquisition. The purchase accounting adjustments are composed primarily of
severance charges associated with personnel reductions and contract termination
costs.
The
aggregate of
restructuring and related charges, acquisition-related integration costs
and
purchase accounting adjustments, is approximately $89 million. A Form 8-K
associated with the company’s Vincor Integration Plan will be filed with the
Securities and Exchange Commission within four business days.
The
company
believes the actions announced today will reduce ongoing operating expenses
annually by approximately $40 - $45 million beginning in fiscal 2008, with
approximately half of the savings being realized in fiscal
2007. These savings and the associated costs are
included in the company’s fiscal 2007 outlook.
“The
Vincor
integration plan we announced today should enable us to realize significant
synergies and deliver returns consistent with those developed in our Vincor
acquisition model,” stated Sands. “With our vast experience at managing a global
wine business that has grown both organically and through acquisitions, we
believe there remain unharvested opportunities to further refine our geographic
footprint. We are evaluating our production capabilities to identify initiatives
which will create incremental value and returns for the long term, while
maintaining the quality, style and rich heritage of our wine portfolio.”
Outlook
The
table below sets forth management’s current
diluted earnings per share expectations compared to actual results both on
a
reported basis and a comparable basis for the periods presented. Effective
March
1, 2006, the company adopted Statement of Financial Accounting Standards
No.
123(R), “Share-Based Payment” (“SFAS 123(R)”). For comparison purposes, the
table
-
more
-
-
4 -
also
provides
actual comparable basis diluted earnings per share, including pro forma stock
compensation expense, as though the company had adopted SFAS 123(R) for the
periods presented.
With
respect to the table, reconciliations of
reported information to comparable information and to comparable information,
including pro forma stock compensation expense, are included in this news
release.
Constellation
Brands Second Quarter and Fiscal Year 2007
Diluted
Earnings Per Share Outlook
|
Reported
Basis
|
Comparable
Basis
|
Comparable
Basis,
Including
Pro
Forma Stock Compensation
Expense
|
|||
|
FY07
Estimate
|
FY06
Actual
|
FY07
Estimate
|
FY06
Actual
|
FY06
Actual
|
|
|
Second
Quarter
Ending
Aug.
31
|
$0.35
-
$0.37
|
$0.34
|
$0.42
-
$0.44
|
$0.41
|
$0.41
|
|
Fiscal
Year
Ending
Feb. 28
|
$1.58
-
$1.66
|
$1.36
|
$1.72
-
$1.80
|
$1.59
|
$1.44
|
Full-year
fiscal 2007 guidance includes the following assumptions and
excludes
Vincor purchase accounting adjustments related to assets subject
to
an
independent appraisal:
| · |
Net
sales
growth: mid teens
|
| · |
Interest
expense: $255 - $265 million
|
| · |
Stock
compensation expense: approximately $15
million
|
| · |
Tax
rate:
approximately 38.3 percent on a reported basis, which includes
a
provision
of
1.5 percent primarily related to the sale of Strathmore water,
or
36.8
percent
on a comparable basis
|
| · |
Weighted
average diluted shares outstanding: approximately 241
million
|
| · |
Free
cash
flow: $180 - $200 million
|
Explanations
Reported
basis
(“reported”) diluted earnings per share is reported under generally accepted
accounting principles (“GAAP”). Diluted earnings per share on
-
more
-
-
5 -
a
comparable basis (“comparable”) excludes acquisition-related integration costs,
restructuring and related charges and unusual items.
The
company
discusses additional non-GAAP measures in this news release, including free
cash
flow and comparable basis diluted earnings per share, including pro forma
stock
compensation expense. 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, Inc. is a leading international producer and marketer of
beverage alcohol
brands with a broad portfolio across the wine, spirits and imported beer
categories. Well-known brands in Constellation’s portfolio include: Almaden,
Arbor Mist, Vendange, Woodbridge by Robert Mondavi, Hardys, Nobilo, Kim
Crawford, Alice White, Ruffino, Kumala, Robert Mondavi Private Selection,
Rex
Goliath, Toasted Head, Blackstone, Ravenswood, Estancia, Franciscan Oakville
Estate, Inniskillin, Jackson-Triggs, Simi, Robert Mondavi Winery, Stowells,
Blackthorn, Black Velvet, Mr. Boston, Fleischmann’s, Paul Masson Grande Amber
Brandy, Chi-Chi’s, 99 Schnapps, Ridgemont Reserve 1792, Effen Vodka, Corona
Extra, Corona Light, Pacifico, Modelo Especial, Negra Modelo, St. Pauli Girl,
Tsingtao. For additional information about Constellation Brands, as well
as its
product portfolio, visit the company’s Web site at www.cbrands.com.
Forward-Looking
Statements
The
statements made
under the heading Outlook, as well as all other statements set forth in this
press release which are not historical facts are forward-looking statements
that
involve risks and uncertainties that could cause actual results to differ
materially from those set forth in or implied by the forward-looking
statements.
During
the current
quarter Constellation may reiterate the estimates set forth above under the
heading Outlook and elsewhere in this news release (collectively, the “Updated
Projections”), which replace in their entirety the “Projections” as defined and
set forth in the company’s news release dated June 29, 2006. Prior to the
start of the company’s quiet period, which will begin at the close of business
on August 18, 2006, the public can continue to rely on the Updated Projections
as still being Constellation’s current expectations on the matters covered,
unless Constellation publishes a notice stating otherwise.
-
more
-
-
6 -
At
the close of business on August 18, 2006, Constellation will observe a “quiet
period” during which the Updated Projections should not be considered to
constitute the company’s expectations. During the quiet period, the
Updated Projections should be considered to be historical, speaking as of
prior
to the quiet period only and not subject to update by the company.
The
company’s forward-looking statements 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. Any projections of future
results of operations, and in particular, (i) the company’s estimated diluted
earnings per share on a reported basis for fiscal 2007 and second quarter
2007,
and (ii) the company’s estimated diluted earnings per share on a comparable
basis for fiscal 2007 and second quarter 2007, 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 forward-looking
statements of the company contained in this press release are also subject
to
the following risks and uncertainties: Constellation’s ability to integrate
Vincor’s business successfully and realize expected synergies, the continued
strength of Vincor’s relationships with its employees, suppliers and customers;
the accuracy of the bases for forecasts relating to Vincor’s business;
the
company's restructuring and related charges, acquisition-related integration
costs and purchase accounting adjustments associated with the Vincor integration
plan vary materially from management's current estimates of these charges,
costs
and adjustments due to variations in anticipated headcount reductions, contract
terminations, and costs of the implementation of the integration
plan;
the company achieving all of the expected cost savings from its Vincor
integration plan described in this news release and from its global wine
restructuring plan announced in February 2006 due to, with respect to either
or
both these plans, lower than anticipated reductions in headcount or other
expenses, or a delay or greater than anticipated costs in their implementation;
the company achieving certain sales projections and meeting certain cost
targets; wholesalers and retailers may give higher priority to products of
the
company’s competitors; 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
higher than expected selling, general and administrative expenses; a general
decline in alcohol consumption; increases in excise and other taxes on beverage
alcohol products; governmental bodies may increase tax rates; proportionately,
the company’s taxable income may be higher than expected in jurisdictions with
higher tax rates; and changes in interest rates and foreign currency exchange
rates.
For
additional information about risks and uncertainties that could adversely
affect
the company’s forward-looking statements, please refer to 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, 2006, which contain a discussion
of
additional factors that may affect Constellation’s business. The factors
discussed in these reports could cause actual future performance to differ
from
current expectations.
-
more
-
-
7 -
|
Constellation
Brands, Inc. and
Subsidiaries
|
|||||||||||||
|
GUIDANCE
- DILUTED EARNINGS PER SHARE AND FREE CASH
FLOW
|
|||||||||||||
|
RECONCILIATIONS
OF GAAP TO NON-GAAP FINANCIAL
MEASURES
|
|||||||||||||
|
(in
millions, except per share data)
|
|||||||||||||
|
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 reconciliations
below, 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. 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.
See the
table below for reconciliations of these non-GAAP financial measures
to
GAAP financial measures for the three months ending August 31,
2006, and
year ending February 28, 2007, and three months ended August
31, 2005, and
year ended February 28, 2006. 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.
|
|||||||||||||
|
Diluted
Earnings Per Share
Guidance
|
Range
for the Three Months
Ending
August 31, 2006
|
Range
for the Year
Ending
February 28, 2007
|
|||||||||||
|
Forecasted
diluted earnings per share - reported basis
(GAAP)(1),
(2)
|
$
|
0.35
|
$
|
0.37
|
$
|
1.58
|
$
|
1.66
|
|||||
|
Mondavi
Adverse Grape Cost
|
-
|
-
|
0.01
|
0.01
|
|||||||||
|
Inventory
step-up(2)
|
-
|
-
|
0.01
|
0.01
|
|||||||||
|
Strategic
business realignment(2),
(3)
|
0.08
|
0.08
|
0.27
|
0.27
|
|||||||||
|
Other(4)
|
(0.01
|
)
|
(0.01
|
)
|
(0.15
|
)
|
(0.15
|
)
|
|||||
|
Forecasted
diluted earnings per share - comparable
basis
(Non-GAAP)(5)
|
$
|
0.42
|
$
|
0.44
|
$
|
1.72
|
$
|
1.80
|
|||||
|
Actual
for the
Three
Months Ended
August
31, 2005
|
Actual
for the Year Ended
February
28, 2006
|
||||||||||||
|
Diluted
earnings per share - reported basis
(GAAP)(1)
|
$
|
0.34
|
$
|
1.36
|
|||||||||
|
Mondavi
Adverse Grape Cost
|
0.02
|
0.06
|
|||||||||||
|
Inventory
step-up
|
0.01
|
0.06
|
|||||||||||
|
Strategic
business realignment
|
0.03
|
0.17
|
|||||||||||
|
Other
|
0.01
|
0.01
|
|||||||||||
|
Income
tax adjustments
|
-
|
(0.07
|
)
|
||||||||||
|
Diluted
earnings per share - comparable basis
(Non-GAAP)(5)
|
0.41
|
1.59
|
|||||||||||
|
Pro
forma stock-based compensation expense, net of
related
tax effects(6)
|
-
|
(0.15
|
)
|
||||||||||
|
Diluted
earnings per share - comparable basis,
including
pro
forma stock-based compensation
expense
(Non-GAAP)(5)
|
$
|
0.41
|
$
|
1.44
|
|||||||||
|
(1)
|
Includes
$0.01 and $0.04 diluted earnings per share impact of expensing
stock-based
compensation for the three months ending August 31, 2006, and
the year
ending February 28, 2007, respectively, in accordance with the
adoption of
SFAS 123(R) beginning March 1, 2006. Includes $0.02 diluted earnings
per
share impact of expensing stock-based compensation for the year
ended
February 28, 2006, in accordance with APB No. 25 and its related
interpretations, which was recorded within the line item restructuring
and
related charges in the company's consolidated statements of income.
There
was no diluted earnings per share impact of expensing stock-based
compensation for the three months ended August 31,
2005.
|
||||||
|
(2)
|
Amounts
exclude Vincor purchase accounting adjustments related to assets
subject
to an independent appraisal.
|
||||||
|
(3)
|
Includes
$0.04 and $0.11 diluted earnings per share associated with the
company's
Fiscal 2006 Plan for the three months ending August 31, 2006
and the year
ending February 28, 2007, respectively; $0.07 diluted earnings
per share
associated with the loss on the sale of the company's branded
bottled
water business for the year ending February 28, 2007; and $0.04
and $0.09
diluted earnings per share associated with the company's Vincor
Integration Plan for the three months ending August 31, 2006
and the year
ending February 28, 2007, respectively.
|
||||||
|
(4)
|
Amount
represents the mark-to-market adjustment of a foreign currency
forward
contract entered into in connection with the acquisition of Vincor
to fix
the U.S. dollar cost of the acquisition and payment of certain
outstanding
indebtedness.
|
||||||
|
(5)
|
May
not
sum due to rounding as each item is computed
independently.
|
||||||
|
(6)
|
Amount
included herein is net of the impact of actual stock-based compensation
expense recorded in the company's consolidated statements of
income in
accordance with APB No. 25 and its related interpretations (see
(1)
above).
|
||||||
|
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 after capital expenditures and excess
tax
benefits, 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.
|
||||||||||
|
Actual
for
the Year
Ended
February
28,
2006
|
Range
for the
Year
Ending
February 28, 2007
|
|||||||||
|
Net
cash provided by operating activities (GAAP)
|
$
|
436.0
|
$
|
345.0
|
$
|
365.0
|
||||
|
Purchases
of
property, plant and equipment
|
(132.5
|
)
|
(180.0
|
)
|
(180.0
|
)
|
||||
|
Excess
tax
benefits from share-based payment awards
|
-
|
15.0
|
15.0
|
|||||||
|
Free
cash flow (Non-GAAP)
|
$
|
303.5
|
$
|
180.0
|
$
|
200.0
|
||||
#
#
#