Published on June 10, 2008
NEWS RELEASE
08
|
CONTACTS
|
|
|
Media
|
Investor
Relations
|
|
Mike
Martin - 585-218-3669
Angie
Blackwell - 585-218-3842
|
Patty
Yahn-Urlaub - 585-218-3838
Bob
Czudak - 585-218-3668
|
Constellation
Brands Sells Certain California and
Pacific
Northwest Wine Assets for up to $234 Million
| · |
Increases
focus on key growth brands
|
| · |
Proceeds
will reduce borrowings
|
| · |
Company
updates fiscal 2009 outlook
|
FAIRPORT,
N.Y., June 10, 2008
-
Constellation Brands, Inc. (NYSE: STZ, ASX: CBR), a leading international
producer and marketer of beverage alcohol, today announced it has sold certain
U.S. wine assets to Eight Estates Fine Wines, LLC (doing business as Ascentia
Wine Estates), a Sonoma, Calif., based private firm. Under terms of the
agreement, Constellation received $209 million in cash, and could receive
up to
an additional $25 million in payments if certain objectives are achieved
by the
buyer. Constellation Brands will use the proceeds from the sale to reduce
borrowings.
Included
in the sale are assets for the following brands: Geyser Peak, Buena Vista,
Gary
Farrell, Atlas Peak and XYZin in California, which were acquired from Fortune
Brands in December 2007; Columbia Winery and Covey Run (including Sunnyside
winery) in Washington State; and Ste. Chapelle in Idaho, all acquired in
2001
from Corus Brands. Collectively, these brands represented approximately one
million cases of wine sold in calendar 2007.
“Sale
of
these assets will aid in streamlining Constellation’s U.S. wine portfolio by
eliminating brand duplication and excess production capacity,” said Rob Sands,
Constellation Brands president and chief executive officer. “We feel our
customers and consumers are well served by our extensive California wine
portfolio
and by the Hogue Cellars brand produced at its Prosser, Wash., winery. This
transaction also provides cash to further reduce our borrowings and demonstrates
our commitment to improve return on invested capital.”
Ascentia
is
a
partnership including Jim Debonis, the former chief operating officer of
Beam
Wine Estates, W.J. Deutsch & Sons, one of the largest marketers of wine in
the U.S., and GESD Capital Partners, a San Francisco-based private equity
firm.
As
a
result of this transaction, the company expects to record a pretax loss of
approximately $23 million or $0.08 diluted earnings per share on a reported
basis, which will be excluded from the company’s comparable basis earnings per
share. The loss on the disposal is primarily driven by the write-off of goodwill
as required by generally accepted accounting principles in the U.S.
The
impact of this transaction is expected to be neutral to ongoing reported
basis
and comparable basis diluted earnings per share for fiscal 2009 as the interest
savings is offset by the lost earnings from the brands. The proceeds from
this
transaction do not impact free cash flow, and therefore the company’s free cash
flow guidance for fiscal 2009 remains unchanged at $310 - $340
million.
Outlook
The
table
below sets forth management’s current diluted earnings per share expectations
for fiscal 2009 on a reported basis and a comparable basis.
Constellation
Brands Fiscal Year 2009
Diluted
Earnings Per Share Outlook
|
Reported
Basis
|
Comparable
Basis
|
|
|
FY09
Estimate
|
FY09
Estimate
|
|
|
Fiscal
Year
Ending
Feb. 28
|
$1.38
- $1.46
|
$1.68
- $1.76
|
The
above
guidance is based on information previously provided, taking into account
the
developments described above.
Full-year
fiscal 2009 guidance includes the following current
assumptions:
| · |
Net
sales: high single-digit growth in organic net sales combined with
the
incremental benefit from the Fortune Brands U.S. premium wine acquisition,
impact of reporting the joint venture for the Matthew Clark wholesale
business under the equity method, and divestiture of the Almaden
and
Inglenook brands, are expected to result in reported net sales increasing
mid single-digits from net sales for fiscal
2008
|
| · |
Interest
expense: approximately $335 - $345
million
|
| · |
Tax
rate: approximately 37 percent
|
| · |
Weighted
average diluted shares outstanding: approximately 222
million
|
| · |
Free
cash flow: $310 - $340 million
|
Explanations
Reported
basis (“reported”) diluted earnings per share are as reported under generally
accepted accounting principles. Diluted earnings per share on 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.
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 in the wine, spirits and imported beer categories, with significant
market presence in the U.S., Canada, U.K., Australia and New Zealand. Based
in
Fairport, N.Y., the company has more than 250 brands, sales in about 150
countries and operates approximately 60 facilities worldwide. It is also
the
largest wine producer in the world and an S&P 500 Index and Fortune 500®
company. Major brands in the company’s portfolio include Corona, Black Velvet,
SVEDKA Vodka, Robert Mondavi, Clos du Bois, Ravenswood, Blackstone, Hardys,
Banrock Station, Nobilo, Kim Crawford, Inniskillin, Jackson-Triggs and Arbor
Mist. To learn more about the company and its products visit Constellation’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 news release which are not historical facts 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.
The
Projections represent the company's estimates only as of the date they are
made,
and should not be relied upon as representing the company's estimates as
of any
subsequent date. While the company may elect to update Projections in the
future, the company specifically disclaims any obligation to do so, even
if its
estimates change.
The
Projections are based on management's current expectations and, unless otherwise
noted, do not
take
into account the impact of any future acquisition, merger or any other business
combination, divestiture, restructuring or other strategic business
realignments, or financing that may be completed after the date of this release.
The Projections should not be construed in any manner as a guarantee that
such
results will in fact occur.
In
addition to the risks and uncertainties of ordinary business operations,
the
Projections of the company contained in this news release are subject to
a
number of risks and uncertainties, including:
| · |
successful
integration of acquired businesses, realization of expected synergies
and
completion of various portfolio actions;
|
| · |
achievement
of all expected cost savings from the company’s various restructuring
plans and realization of expected asset sale
proceeds;
|
| · |
accuracy
of the bases for forecasts relating to joint ventures and associated
costs
and capital investment requirements;
|
| · |
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 company’s acquisitions and from estimates of
goodwill and intangible asset impairment
charges;
|
| · |
restructuring
and related charges, acquisition-related integration costs and purchase
accounting adjustments associated with integration and restructuring
plans
may vary materially from management's current estimates due to variations
in one or more of anticipated headcount reductions, contract terminations,
costs or timing of plan implementation;
|
| · |
raw
material supply, production or shipment difficulties could adversely
affect the company's ability to supply its customers;
|
| · |
increased
competitive activities in the form of pricing, advertising and promotions
could adversely impact consumer demand for the company's products
and/or
result in higher than expected expenses;
|
| · |
general
economic, geo-political and regulatory conditions or unanticipated
environmental liabilities and costs;
|
| · |
changes
to accounting rules and tax laws, as well as 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 from time to time 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. 29, 2008, which could
cause
actual future performance to differ from current
expectations.
|
#
#
#
|
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. See the tables below for
supplemental financial data and corresponding reconciliations of
these
non-GAAP financial measures to GAAP financial measures for the
year ending
February 28, 2009. 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 the historical non-GAAP financial
measures.
|
|
Fiscal
Year 2009
Diluted
Earnings Per Share Guidance
|
Range
for the Year
Ending
February 28, 2009
|
||||||
|
Forecasted
diluted earnings per share - reported basis
(GAAP)
|
$
|
1.38
|
$
|
1.46
|
|||
|
Inventory
step-up
|
0.06
|
0.06
|
|||||
|
Strategic
business realignment(1)
|
0.24
|
0.24
|
|||||
|
Forecasted
diluted earnings per share - comparable basis
(Non-GAAP)(2)
|
$
|
1.68
|
$
|
1.76
|
|||
|
(1)
|
Includes
$0.10, $0.08, $0.04, $0.02 and $0.01 diluted earnings per share
for the
year ending February 28, 2009, associated with the the Fiscal 2008
Plan,
the loss on the sale of certain California and Pacific Northwest
Wine
Assets and other related charges, the Fiscal 2007 Wine Plan, the
Fiscal
2006 Plan and the Vincor Plan, respectively.
(2)
|
||||||
|
(2)
|
May
not sum due to rounding as each item is computed
independently.
|
||||||
|
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.
|
|
Fiscal
Year 2009
Free
Cash Flow Guidance
|
Range
for the Year
Ending
February 28, 2009
|
||||||
|
Net
cash provided by operating activities (GAAP)
|
$
|
460.0
|
$
|
510.0
|
|||
|
Purchases
of property, plant and equipment
|
(150.0
|
)
|
(170.0
|
)
|
|||
|
Free
cash flow (Non-GAAP)
|
$
|
310.0
|
$
|
340.0
|
|||