FAIRPORT,
N.Y., April 17, 2007 - Constellation
Brands, Inc. (NYSE: STZ, ASX: CBR), a leading international producer
and
marketer of beverage alcohol, today announced the formation of a joint
venture
with Staffordshire, England-based Punch Taverns plc that will reinforce
Matthew
Clark’s position as the U.K.’s largest independent premier drinks wholesaler and
distributor serving the on-trade drinks industry.
Under
the terms of
the arrangement, Constellation Europe and Punch Taverns have each become
50
percent owners of Matthew Clark and provide representation on a new holding
company board. On a day-to-day basis the business will continue to be
run by
Steve Thomson, currently managing director of Matthew Clark Wholesale
Limited,
and his management team.
The
joint venture
will benefit customers, suppliers and employees. Capital investment will
further
enhance Matthew Clark’s reputation for providing outstanding customer value,
additional branded products and a faster, more efficient route-to-market
to the
U.K. on-trade industry consisting of hotels, pubs, clubs and
restaurants.
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For
supply
partners, Matthew Clark intends to become a more effective, efficient
and
complete route-to-market for their brands, including Constellation Europe’s
existing branded wine offerings.
From
the outset,
Matthew Clark will supply a number of Punch Taverns pubs with a portfolio
of
wines and spirits, and will progressively become the preferred supplier
of
choice to the remaining tenanted Punch Taverns pubs. The pubs will benefit
from
the scale and variety offered by Matthew Clark’s wine and spirits expertise,
extensive drinks portfolio and supply chain capabilities.
The
joint venture
will invest in Matthew Clark’s distribution infrastructure for such items as
updated warehouse management and route scheduling software, which will
enable
more rapid response rates for customers, faster and more efficiently
processed
orders and a wider reach across the British Isles through its highly
skilled and
knowledgeable sales team.
“Our
joint venture
with Punch Taverns is an innovative drinks distribution initiative that
will
transform the business to one with a focus on providing improved service
and an
unequalled portfolio of drinks options to on-premise customers,” stated Rob
Sands, Constellation Brands president and chief operating officer. “Given the
importance of the U.K. on-premise drinks business, this joint venture
helps
assure that Matthew Clark, its customers and, most important, consumers
can
benefit from distribution efficiency gains and expanded beverage offerings.
We
believe this collaboration will establish a new benchmark for wholesale
drinks
distribution in the U.K. and it should result in additional long-term
growth for
Matthew Clark.”
The
transaction
closed today. Although terms of the agreement were not disclosed, Constellation
Brands expects to receive approximately £85 million (approximately $168 million
U.S.) of cash proceeds from formation of the joint venture, subject to
post-closing adjustments. This includes £35 million from Punch Taverns with the
remainder coming primarily from the issuance of debt by the joint venture.
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On
April 5, 2007,
Constellation Brands issued a news release containing, among
other items,
diluted earnings per share guidance for fiscal 2008 and certain related
assumptions. The transaction announced today affects certain estimates
and
assumptions set forth in that news release.
The
transaction is
not expected to result in a gain or loss. The company expects to incur
a charge
for the provision for income taxes associated with the repatriation of
the
proceeds from the transaction. This is expected to result in a $0.05
reduction
to the company’s fiscal 2008 diluted earnings per share (“EPS”) as reported
under generally accepted accounting principles (“reported”), and will be
excluded from the company’s comparable basis diluted earnings per share.
The
impact of this
transaction, including joint venture formation costs, is expected to
be neutral
to slightly dilutive to ongoing reported basis and comparable basis diluted
earnings per share in fiscal 2008.
As
a result of this
transaction the company now expects its fiscal 2008 reported interest
expense to
be in the range of $300 - $310 million. The company expects its reported
tax
rate for fiscal 2008 to be approximately 40 percent, which includes a
provision
of approximately two percent related to the repatriation of the proceeds
from
the transaction, or approximately 38 percent on a comparable basis.
Constellation
will
report its investment in the joint venture under the equity method of
accounting
in its consolidated financial statements. For net sales in fiscal 2008,
the
company expects low single-digit growth in organic net sales and low
single-digit incremental benefit from the acquisitions of Vincor and
SVEDKA. As
a result of these increases, and the impact of reporting the Crown Imports
joint
venture and the joint venture for the Matthew Clark wholesale business
under the
equity method, reported net sales are expected to decrease 30-32
percent.
Due
to the
anticipated impact on reported earnings, the company is adjusting its
reported
diluted EPS outlook for fiscal 2008 from that set forth in its
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April
5, 2007, news
release, to $1.16 - $1.26. The company’s comparable diluted
EPS outlook
for fiscal 2008, as set forth in the company’s April 5, 2007, news release, is
unchanged.
About
Matthew Clark
Matthew
Clark is
the largest independent premier drinks supplier serving
the
U.K.’s on-trade
drinks industry. It offers customers a choice of wines, spirits, FABs,
beers,
ciders and soft drinks that is unrivalled in the U.K. for breadth and
value.
Matthew Clark has a customer base of around 20,000 accounts and provides
a full
range of drinks to its pub, club, hotel, and restaurant customers throughout
the
U.K. Matthew Clark was acquired by Constellation Brands, Inc. in 1998.
Since
that time, the business has rapidly expanded into a dynamic service-orientated
business with annual net sales of approximately £500 million (approximately $925
million U.S.). The
business, with
over 1,200 employees is headquartered in Bristol and operates
a national
network of regional distribution depots and a fleet of more than 200
vehicles
with extensive reach across the British Isles. It also operates two
purpose-designed contact centers located in Bristol and Glasgow. For
further
information, visit the Web site: www.matthewclark.co.uk
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, Goundrey,
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 and the Effen and SVEDKA
vodka lines. Constellation Brands,
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through
Crown
Imports LLC, imports and markets Corona Extra, Corona Light, Pacifico,
Modelo
Especial, Negra Modelo, St. Pauli Girl and Tsingtao beers. 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 set
forth in this news 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 and referenced
in
this news release (collectively, the "Projections"). Prior to the start
of the
company’s quiet period, which will begin at the close of business on May 17,
2007, 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.
Commencing
at the
close of business on May 17, 2007, Constellation will observe a "quiet
period"
during which the Projections should not be considered to constitute the
company's expectations. During the quiet period, the 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 2008, and (ii) the
company’s
estimated diluted earnings per share on a comparable basis for fiscal
2008,
should not be construed in any manner as a guarantee that such results
will in
fact occur. The company acquired Vincor International Inc. on June 5,
2006 and
the SVEDKA Vodka business on March 19, 2007. In addition to the risks and
uncertainties of ordinary business operations, the forward-looking statements
of
the company contained in this news release are also subject to the following
risks and uncertainties: factors relating to higher than expected formation
and/or start-up costs for the joint venture; the joint venture’s ability to
operate the business successfully; the joint venture's ability to develop
appropriate standards, controls, procedures and policies for the growth
and
management of the joint venture; the continued strength of the joint
venture's
relationships with, including without limitation, its employees, suppliers
and
customers; and the accuracy of the basis for the forecasts relating to
the joint
venture’s business, including any capital investment in distribution
infrastructure or the realization of any distribution efficiencies.
The
company’s
forward-looking statements are further subject to the following additional
risks
and uncertainties: factors relating to Constellation’s ability to integrate
Vincor’s business, and the SVEDKA Vodka business, successfully and realize
expected synergies associated with the Vincor acquisition; the continued
strength of Vincor’s relationships, and relationships of the SVEDKA Vodka
business, with their respective employees, suppliers and customers; the
accuracy
of the bases for forecasts relating to Vincor’s business and the SVEDKA Vodka
business; final management determinations and independent appraisals
may vary
materially from current management estimates of the fair value of assets
acquired and liabilities assumed in the Vincor acquisition and in the
SVEDKA
Vodka business acquisition; the
company's
restructuring and related charges, acquisition-related integration costs
and
purchase accounting adjustments associated with the Vincor integration
plan
(announced in July 2006) and the company’s
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restructuring
and
related charges associated with the Fiscal 2007 Wine Plan (announced
in
August
2006) and its global wine restructuring plan announced in February 2006
may vary
materially
from
management's current estimates of these charges, costs and adjustments
due to
variations in one or more of anticipated headcount reductions, contract
terminations, or costs of implementation of these plans;
the company
achieving all of the expected cost savings from its Fiscal 2007 Wine
Plan, from
its Vincor integration plan and from its global wine restructuring plan
due to,
with respect to any or all of these plans, lower than anticipated reductions
in
headcount or
other expenses,
or a delay or greater than anticipated costs in their implementation;
the
company may realize lower than expected proceeds from sale of assets
identified
for sale under the Fiscal 2007 Wine Plan and consequently incurs a greater
than
expected loss on the sale of such assets; 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. In addition, on Jan. 2, 2007,
the
company formed the Crown Imports joint venture with Grupo Modelo for
the purpose
of importing and marketing Modelo’s Mexican beer portfolio into the United
States and Guam. Risks and uncertainties associated with this joint venture
include, among others, the joint venture’s ability to operate the business
successfully, the joint venture’s ability to develop appropriate standards,
controls, procedures and policies for the growth and management of the
joint
venture and the strength of the joint venture’s relationships with its
employees, suppliers and customers.
For
additional
information about risks and uncertainties that could adversely affect
Constellation’s forward-looking statements, please refer to Constellation’s
filings with the Securities and Exchange Commission, including its Annual
Report
on Form 10-K for the fiscal year ended Feb. 28, 2006, and Constellation’s
Quarterly Report on Form 10-Q for the fiscal quarter ended Nov. 30, 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.
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