EXHIBIT 99.1
Published on October 10, 2006
Exhibit
99.1
Unaudited
pro forma combined financial information to
reflect the Company’s
combined
financial information as if the disposition of certain of the
Company’s
beer
assets and liabilities and the related contribution of those assets and
liabilities
to
an equally owned joint venture occurred as of and for all periods
presented.
On
July
17, 2006, Barton Beers, Ltd., a Maryland corporation (“Barton”), an indirect
wholly-owned subsidiary of Constellation Brands, Inc., a Delaware corporation
(the “Company”), entered into an agreement to establish a joint venture (the
“Joint Venture Agreement”) (filed as Exhibit 2.1 to the Company’s Current Report
on Form 8-K filed on July 18, 2006) with Diblo, S.A. de C.V., a sociedad anónima
de capital variable organized under the laws of Mexico (“Diblo”) that is a joint
venture owned 76.75% by Grupo Modelo, S.A. de C.V., a sociedad anónima de
capital variable organized under the laws of Mexico (“Modelo”), and 23.25% by
Anheuser-Busch, Inc., a Delaware corporation, pursuant to which Modelo’s Mexican
beer portfolio will be sold and imported in the 50 states of the United States
of America, the District of Columbia and Guam. Also, the owner of the Tsingtao
brand has agreed to transfer importing and selling rights with respect to that
brand to the joint venture. In addition, subject to the consent of the brand
owner, the joint venture may also sell the St. Pauli Girl brand.
The
Joint
Venture Agreement provides that Barton will establish a wholly-owned subsidiary,
to be formed as a Delaware limited liability company (“LLC”) and to be governed
by a limited liability company agreement. The Joint Venture Agreement provides
also that, on the later of January 2, 2007, or the tenth business day after
all
of the closing conditions have been satisfied or waived, Barton will, pursuant
to a Barton Contribution Agreement, dated July 17, 2006 (the “Barton
Contribution Agreement”) (filed as Exhibit 2.2 to the Company’s Current Report
on Form 8-K filed on July 18, 2006), among Barton, Diblo and LLC, transfer
to
LLC substantially all of its assets relating to importing, marketing and selling
beer under the Corona Extra, Corona Light, Coronita, Modelo Especial, Negra
Modelo, Pacifico, St. Pauli Girl and Tsingtao brands and the liabilities
associated therewith (collectively, the “Barton Contributed Net Assets”).
Additionally, the Joint Venture Agreement provides that following Barton’s
contribution, a subsidiary of Diblo will, in exchange for a 50% membership
interest in the newly formed wholly-owned Barton subsidiary, contribute cash
in
an amount equal to the Barton Contributed Net Assets, subject to specified
adjustments. The joint venture will then enter into an importer agreement with
an affiliate of Modelo which will grant the joint venture the exclusive right
to
sell Modelo's Mexican beer portfolio in the territories mentioned above. As
a result of these transactions, Barton and Diblo will each have, directly or
indirectly, equal interest in the joint venture. The existing importer
agreement which currently gives Barton the right to import and
sell Modelo's Mexican beer portfolio primarily west of the Mississippi
River will be superseded by the transactions contemplated by the Joint Venture
Agreement. The transactions contemplated in the Joint Venture Agreement
are expected to be consummated on or after January 2, 2007.
The
following unaudited pro forma combined financial information of the Company
consists of (i) an unaudited pro forma condensed combined balance sheet as
of
August 31, 2006 (the “Pro Forma Balance Sheet”), (ii) an unaudited pro forma
combined statement of income for the year ended February 28, 2006, (iii) an
unaudited pro forma combined statement of income for the six months ended August
31, 2006 (collectively, the “Pro Forma Statements of Income”), and (iv) notes to
the unaudited pro forma statements (collectively, the “Pro Forma
Statements”).
The
Pro
Forma Balance Sheet as of August 31, 2006, reflects (i) the probable
contribution of the Barton Contributed Net Assets to the joint venture at
historical cost and (ii) the recording of Barton’s 50% interest in the probable
joint venture as if the transactions had occurred on August 31, 2006. The Pro
Forma Statements of Income for the year ended February 28, 2006, and the six
months ended August 31, 2006, reflect (i) the probable disposition of the Barton
beer business, which is being contributed by Barton to the joint venture, (ii)
Barton’s probable equity in earnings (loss) of the joint venture, and (iii) the
present ongoing operations of the Company as if the transactions had occurred
on
March 1, 2005.
The
probable equity in earnings (loss) of the joint venture reflects Barton’s 50%
share of the joint venture’s earnings for the periods presented based on (i) the
understanding that both Diblo and Barton are contributing assets of equal value
and (ii) certain provisions in the Joint Venture Agreement are structured with
the intent and expectation that Barton would maintain its historical market
position and historical profit levels related to the selling of imported beer
products in the United States.
The
Company’s February 28, 2006, information was derived from its audited
consolidated financial statements filed in its Annual Report on Form 10-K for
the fiscal year ended February 28, 2006. The Company’s August 31, 2006,
information was derived from its unaudited consolidated financial statements
filed in this quarterly report on Form 10-Q for the quarter ended August 31,
2006. The historical consolidated financial information has been adjusted to
give effect to pro forma events that are (i) directly attributable to the
transactions described above, (ii) factually supportable and (iii) with respect
to the income statement information, expected to have a continuing impact on
the
Company’s consolidated results.
The
Pro
Forma Statements are for illustrative purposes only and should be read in
conjunction with the Company’s separate historical consolidated financial
statements and the notes thereto and with the accompanying notes to the Pro
Forma Statements. The Pro Forma Statements are based upon currently available
information and upon certain assumptions that the Company believes are
reasonable under the circumstances. The Pro Forma Statements do not purport
to
represent what the Company’s financial position or results of operations would
actually have been if the aforementioned transactions had in fact occurred
on
such dates or at the beginning of the periods indicated, nor do they project
the
Company’s financial position or results of operations at any future date or for
any future period.
|
CONSTELLATION
BRANDS, INC. AND SUBSIDIARIES
|
|||||||||||||
|
UNAUDITED
PRO FORMA CONDENSED COMBINED BALANCE SHEET
|
|||||||||||||
|
AS
OF AUGUST 31, 2006
|
|||||||||||||
|
(in
millions)
|
|||||||||||||
|
Historical
Constellation
|
Pro
Forma
Adjustments
|
Pro
Forma
Combined
|
|||||||||||
|
ASSETS
|
|||||||||||||
|
CURRENT
ASSETS:
|
|||||||||||||
|
Cash
and cash investments
|
$
|
42.2
|
$
|
(0.1
|
)
|
(a
|
)
|
$
|
42.1
|
||||
|
Accounts
receivable, net
|
1,022.4
|
(109.5
|
)
|
(a
|
)
|
912.9
|
|||||||
|
Inventories
|
1,926.2
|
(42.7
|
)
|
(a
|
)
|
1,883.5
|
|||||||
|
Prepaid
expenses and other
|
281.8
|
(70.8
|
)
|
(a
|
)
|
211.0
|
|||||||
|
Total
current assets
|
3,272.6
|
(223.1
|
)
|
3,049.5
|
|||||||||
|
PROPERTY,
PLANT AND EQUIPMENT, net
|
1,698.1
|
(1.0
|
)
|
(a
|
)
|
1,697.1
|
|||||||
|
GOODWILL
|
3,085.3
|
(13.0
|
)
|
(a
|
)
|
3,072.3
|
|||||||
|
INTANGIBLE
ASSETS, net
|
1,151.4
|
(14.2
|
)
|
(a
|
)
|
1,137.2
|
|||||||
|
OTHER
ASSETS, net
|
241.3
|
(0.1
|
)
|
(a
|
)
|
410.3
|
|||||||
|
|
|
169.1
|
(b
|
)
|
|
||||||||
|
Total
assets
|
$
|
9,448.7
|
$
|
(82.3
|
)
|
$
|
9,366.4
|
||||||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||||||||
|
CURRENT
LIABILITIES:
|
|||||||||||||
|
Notes
payable to banks
|
$
|
313.3
|
$
|
-
|
$
|
313.3
|
|||||||
|
Current
maturities of long-term debt
|
15.4
|
-
|
15.4
|
||||||||||
|
Accounts
payable
|
420.3
|
(21.7
|
)
|
(a
|
)
|
398.6
|
|||||||
|
Accrued
excise taxes
|
80.8
|
(10.8
|
)
|
(a
|
)
|
70.0
|
|||||||
|
Other
accrued expenses and liabilities
|
738.0
|
(49.8
|
)
|
(a
|
)
|
688.2
|
|||||||
|
Total
current liabilities
|
1,567.8
|
(82.3
|
)
|
1,485.5
|
|||||||||
|
LONG-TERM
DEBT, less current maturities
|
3,987.7
|
-
|
3,987.7
|
||||||||||
|
DEFERRED
INCOME TAXES
|
453.6
|
-
|
453.6
|
||||||||||
|
OTHER
LIABILITIES
|
272.6
|
-
|
272.6
|
||||||||||
|
STOCKHOLDERS'
EQUITY
|
3,167.0
|
-
|
3,167.0
|
||||||||||
|
Total
liabilities and stockholders' equity
|
$
|
9,448.7
|
$
|
(82.3
|
)
|
$
|
9,366.4
|
||||||
|
See
Notes to the Unaudited Pro Forma Statements
|
|||||||||||||
|
CONSTELLATION
BRANDS, INC. AND SUBSIDIARIES
|
|||||||||||||
|
UNAUDITED
PRO FORMA COMBINED STATEMENT OF INCOME
|
|||||||||||||
|
FOR
THE YEAR ENDED FEBRUARY 28, 2006
|
|||||||||||||
|
(in
millions, except per share data)
|
|||||||||||||
|
Historical
Constellation
|
Pro
Forma
Adjustments
|
Pro
Forma
Combined
|
|||||||||||
|
|
|||||||||||||
|
SALES
|
$
|
5,706.9
|
$
|
(1,135.4
|
)
|
(c
|
)
|
$
|
4,571.5
|
||||
|
Less
- Excise taxes
|
(1,103.5
|
)
|
91.9
|
(c
|
)
|
(1,011.6
|
)
|
||||||
|
Net
sales
|
4,603.4
|
(1,043.5
|
)
|
3,559.9
|
|||||||||
|
COST
OF PRODUCT SOLD
|
(3,278.8
|
)
|
753.7
|
(c
|
)
|
(2,525.1
|
)
|
||||||
|
Gross
profit
|
1,324.6
|
(289.8
|
)
|
1,034.8
|
|||||||||
|
SELLING,
GENERAL AND ADMINISTRATIVE
EXPENSES
|
(612.4
|
)
|
70.6
|
(c)
(d
|
)
|
(541.8
|
)
|
||||||
|
RESTRUCTURING
AND RELATED CHARGES
|
(29.3
|
)
|
-
|
(29.3
|
)
|
||||||||
|
ACQUISITION-RELATED
INTEGRATION COSTS
|
(16.8
|
)
|
-
|
(16.8
|
)
|
||||||||
|
Operating
income
|
666.1
|
(219.2
|
)
|
446.9
|
|||||||||
|
EQUITY
IN EARNINGS (LOSS) OF EQUITY
METHOD
INVESTEES
|
0.8
|
220.8
|
(e
|
)
|
221.6
|
||||||||
|
GAIN
ON CHANGE IN FAIR VALUE OF
DERIVATIVE
INSTRUMENT
|
-
|
-
|
-
|
||||||||||
|
INTEREST
EXPENSE, net
|
(189.6
|
)
|
(1.6
|
)
|
(c
|
)
|
(191.2
|
)
|
|||||
|
Income
before income taxes
|
477.3
|
0.0
|
477.3
|
||||||||||
|
PROVISION
FOR INCOME TAXES
|
(152.0
|
)
|
-
|
(f
|
)
|
(152.0
|
)
|
||||||
|
NET
INCOME
|
325.3
|
0.0
|
325.3
|
||||||||||
|
Dividends
on preferred stock
|
(9.8
|
)
|
-
|
(9.8
|
)
|
||||||||
|
INCOME
AVAILABLE TO COMMON
STOCKHOLDERS
|
$
|
315.5
|
$
|
0.0
|
$
|
315.5
|
|||||||
|
SHARE
DATA:
|
|||||||||||||
|
Earnings
per common share:
|
|||||||||||||
|
Basic
- Class A Common Stock
|
$
|
1.44
|
$
|
1.44
|
|||||||||
|
Basic
- Class B Common Stock
|
$
|
1.31
|
$
|
1.31
|
|||||||||
|
Diluted
|
$
|
1.36
|
$
|
1.36
|
|||||||||
|
Weighted
average common shares outstanding:
|
|||||||||||||
|
Basic
- Class A Common Stock
|
196.907
|
196.907
|
|||||||||||
|
Basic
- Class B Common Stock
|
23.904
|
23.904
|
|||||||||||
|
Diluted
|
238.707
|
238.707
|
|||||||||||
|
See
Notes to the Unaudited Pro Forma Statements
|
|||||||||||||
|
CONSTELLATION
BRANDS, INC. AND SUBSIDIARIES
|
|||||||||||||
|
UNAUDITED
PRO FORMA COMBINED STATEMENT OF INCOME
|
|||||||||||||
|
FOR
THE SIX MONTHS ENDED AUGUST 31, 2006
|
|||||||||||||
|
(in
millions, except per share data)
|
|||||||||||||
|
Historical
Constellation
|
Pro
Forma
Adjustments
|
Pro
Forma
Combined
|
|||||||||||
|
|
|||||||||||||
|
SALES
|
$
|
3,145.1
|
$
|
(706.0
|
)
|
(c
|
)
|
$
|
2,439.1
|
||||
|
Less
- Excise taxes
|
(571.7
|
)
|
56.3
|
(c
|
)
|
(515.4
|
)
|
||||||
|
Net
sales
|
2,573.4
|
(649.7
|
)
|
1,923.7
|
|||||||||
|
COST
OF PRODUCT SOLD
|
(1,840.0
|
)
|
470.3
|
(c
|
)
|
(1,369.7
|
)
|
||||||
|
Gross
profit
|
733.4
|
(179.4
|
)
|
554.0
|
|||||||||
|
SELLING,
GENERAL AND ADMINISTRATIVE
EXPENSES
|
(377.0
|
)
|
40.6
|
(c)
(d
|
)
|
(336.4
|
)
|
||||||
|
RESTRUCTURING
AND RELATED CHARGES
|
(24.0
|
)
|
-
|
(24.0
|
)
|
||||||||
|
ACQUISITION-RELATED
INTEGRATION COSTS
|
(8.1
|
)
|
-
|
(8.1
|
)
|
||||||||
|
Operating
income
|
324.3
|
(138.8
|
)
|
185.5
|
|||||||||
|
EQUITY
IN EARNINGS (LOSS) OF EQUITY
METHOD
INVESTEES
|
0.3
|
140.0
|
(e
|
)
|
140.3
|
||||||||
|
GAIN
ON CHANGE IN FAIR VALUE OF
DERIVATIVE
INSTRUMENT
|
55.1
|
-
|
55.1
|
||||||||||
|
INTEREST
EXPENSE, net
|
(121.2
|
)
|
(1.2
|
)
|
(c
|
)
|
(122.4
|
)
|
|||||
|
Income
before income taxes
|
258.5
|
-
|
258.5
|
||||||||||
|
PROVISION
FOR INCOME TAXES
|
(104.6
|
)
|
-
|
(f
|
)
|
(104.6
|
)
|
||||||
|
NET
INCOME
|
153.9
|
-
|
153.9
|
||||||||||
|
Dividends
on preferred stock
|
(4.9
|
)
|
-
|
(4.9
|
)
|
||||||||
|
INCOME
AVAILABLE TO COMMON
STOCKHOLDERS
|
$
|
149.0
|
$
|
-
|
$
|
149.0
|
|||||||
|
SHARE
DATA:
|
|||||||||||||
|
Earnings
per common share:
|
|||||||||||||
|
Basic
- Class A Common Stock
|
$
|
0.67
|
$
|
0.67
|
|||||||||
|
Basic
- Class B Common Stock
|
$
|
0.61
|
$
|
0.61
|
|||||||||
|
Diluted
|
$
|
0.64
|
$
|
0.64
|
|||||||||
|
Weighted
average common shares outstanding:
|
|||||||||||||
|
Basic
- Class A Common Stock
|
199.943
|
199.943
|
|||||||||||
|
Basic
- Class B Common Stock
|
23.849
|
23.849
|
|||||||||||
|
Diluted
|
240.052
|
240.052
|
|||||||||||
|
See
Notes to the Unaudited Pro Forma Statements
|
|||||||||||||
CONSTELLATION
BRANDS, INC. AND SUBSIDIARIES
NOTES
TO
THE UNAUDITED PRO FORMA STATEMENTS
AS
OF
FEBRUARY 28, 2006, AND AUGUST 31, 2006
(in
millions)
| (a) |
Reflects
the elimination of the net assets being contributed by the Barton
beer
business to the joint venture for a 50% interest in the joint venture
as
of August 31, 2006.
|
| (b) |
Reflects
the recording of the Company’s 50% interest in the joint venture as an
equity method investment equal to the net assets being contributed
in (a)
above. The equity method investment is classified in “Other assets, net”
in the condensed combined balance sheet as of August 31,
2006.
|
| (c) |
Reflects
the elimination of sales, cost of product sold, operating expenses,
and
interest income attributable to the historical Barton beer business
to be
disposed of in exchange for a 50% interest in the formation of the
joint
venture with Diblo for the periods
presented.
|
| (d) |
Reflects
adjustments to selling, general and administrative expenses calculated
as
direct Barton selling and marketing expenses, plus designating certain
general and administrative expenses from the Constellation Beers
and
Spirits segment that relate to the Barton beer business
for the periods presented. The administrative and support services
designated to the Barton beer business include financial reporting
and
accounting, payroll processing, billing and collection, legal, human
resource support, information technology, facilities costs, and executive
management. The designation of these expenses to the Barton beer
business
were calculated based on the following: (i) specific identification
of
certain costs; (ii) employee headcount in relation to beers and spirits
functions; (iii) facility square footage occupied by beers and spirits
personnel; and (iv) information technology user costs by beer related
personnel. The designation of these general and administrative expenses
reflect costs expected to impact the pending joint venture operations
and
those costs expected to have a continuing impact on the Company’s ongoing
operations.
|
| (e) |
Reflects
the Company’s earnings in the joint venture related to its 50% equity
interest for the periods presented. As the historical results of
operations of the assets contributed by Diblo are not readily available,
the joint venture earnings are based upon the historical results
of
operations of the contributed Barton beer business. In addition,
the joint
venture earnings are based upon (i) the understanding that both Diblo
and
Barton are contributing assets of equal value and (ii) certain provisions
in the Joint Venture Agreement are structured with the intent and
expectation that Barton would maintain its historical market position
and
historical profit levels related to the selling of imported beer
products
in the United States.
|
| (f) |
Reflects
no income tax expense related directly to the joint venture for the
periods presented as this entity is expected to be operated as a
limited
liability company. The joint venture will be treated as a partnership
for
both federal and state income tax purposes and income tax expense
(benefit) will be recorded by the Company based on the equity in
earnings
(loss) of the joint
venture.
|