Published on January 7, 2009
NEWS
RELEASE
21
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CONTACTS
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Media
|
Investor
Relations
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Mike
Martin – 585-218-3669
Angie
Blackwell – 585-218-3842
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Patty
Yahn-Urlaub – 585-218-3838
Bob
Czudak – 585-218-3668
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Constellation
Brands Reports
Q3
Fiscal 2009 Results
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·
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Company achieves significant
margin improvement
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·
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Generates strong free cash
flow
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·
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Reduces
debt
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·
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Updates reported and comparable
basis diluted EPS guidance
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FAIRPORT, N.Y., Jan. 7, 2009 –
Constellation Brands, Inc. (NYSE: STZ, ASX: CBR), the world’s largest wine
company and a leading international producer and marketer of beverage alcohol,
today reported its fiscal 2009 third quarter results. “We are pleased
with our performance especially given the challenging economic conditions that
evolved over the course of the year,” stated Rob Sands, Constellation Brands
president and chief executive officer. “We have significantly
improved margins, grown free cash flow, monetized assets and rapidly reduced
debt.”
On a reported basis, the company
recorded net income of $84 million, or $0.38 diluted earnings per share (“EPS”)
for the quarter ended Nov. 30, 2008 (“third quarter 2009”), compared with net
income of $120 million or $0.55 diluted EPS for the prior year.
Constellation’s third quarter 2009 net
income on a comparable basis, which excludes restructuring charges,
acquisition-related integration costs and unusual items, totaled $132 million
versus $121 million for the prior year, with $0.60 diluted EPS for the quarter
versus $0.55 for the prior year.
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Third
Quarter 2009 Net Sales Highlights*
(in
millions)
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Reported
|
Organic
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|||||||||||||||||||||||
|
Net
Sales
|
Change
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Constant
Currency
Change
|
Net
Sales
|
Change
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Constant
Currency
Change
|
|||||||||||||||||||
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Consolidated
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$
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1,031
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-6
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%
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1
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%
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$
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977
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-6
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%
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1
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%
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||||||||||||
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Branded
Wine
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$
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849
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-7
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%
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—
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$
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795
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-9
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%
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-2
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%
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|||||||||||||
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Spirits
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$
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111
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-5
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%
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-5
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%
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$
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111
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5
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%
|
5
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%
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||||||||||||
Third
Quarter 2009 Profit Highlights*
(in
millions, except per share data)
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Reported
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Change
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Comparable
|
Change
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|||||||||||||
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Operating
income
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$ | 198 | — | $ | 219 | 9 | % | |||||||||
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Equity
in earnings of equity method investees**
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$ | 76 | 3 | % | $ | 76 | 2 | % | ||||||||
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Earnings
before interest and taxes (EBIT)
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- | - | $ | 295 | 7 | % | ||||||||||
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Operating
margin
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19.2 | % |
110
bps
|
21.2 | % |
290
bps
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||||||||||
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Net
income
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$ | 84 | -30 | % | $ | 132 | 9 | % | ||||||||
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Diluted
earnings per share
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$ | 0.38 | -31 | % | $ | 0.60 | 9 | % | ||||||||
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*
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Definitions
of reported, comparable, organic and constant currency, as well as
reconciliations of non-GAAP financial measures, are contained elsewhere in
this news release.
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**
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Hereafter
referred to as “equity
earnings.”
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Net
Sales Commentary
Reported consolidated net sales
decreased six percent primarily due to the impact of year-over-year currency
exchange rate fluctuations. The net sales benefit from the
acquisition of the Clos du Bois and Wild Horse brands was essentially offset by
the divestiture of the Almaden, Inglenook and certain Pacific Northwest wine
brands, and certain spirits contract production services. Organic net
sales increased one percent on a constant currency basis.
The company continues to execute its
strategy of implementing price increases and SKU reductions in its key
markets. While these actions have unfavorably impacted volume growth,
they have enhanced worldwide wine margins and ROIC. Branded wine
organic net sales on a constant currency basis decreased two percent, which
includes a two percent increase for North America, an 11 percent decrease for
Europe and a two percent decrease for Australia/New Zealand.
“We believe that prioritizing profit
margin, free cash flow and ROIC is paramount in this environment and, on
balance, an appropriate tradeoff,” commented Sands.
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Total spirits organic net sales
increased five percent for the quarter, led by a 60 percent gain for SVEDKA
Vodka.
“As
consumers seek quality and value from established brands, mid-premium spirits
such as SVEDKA and Black Velvet continue to outperform their respective
categories in the marketplace and contribute significantly to our spirits
business performance,” said Sands. “In particular, SVEDKA’s ongoing
stellar growth rate illustrates the power of a brand that is connecting with
consumers in the U.S. from coast to coast.”
Operating
Income, Net Income, Diluted EPS Commentary
Wines segment operating income
increased $20 million versus the prior year quarter. This increase
reflects the benefits of our pricing initiative and the contribution from the
Clos du Bois and Wild Horse brands, partially offset by the divestiture of
Almaden, Inglenook and certain Pacific Northwest wine brands. The
repositioning of the company’s U.S. portfolio to more premium brands and
resulting synergies have positively impacted profit margins.
Spirits
segment operating income decreased $3 million primarily due to increased general
and administrative expenses.
Constellation’s
equity earnings from its 50 percent interest in the Crown Imports
joint venture totaled $62 million, which was even with the prior year third
quarter. For third quarter 2009, Crown Imports generated net sales of
$555 million, an increase of one percent, and operating income of $124 million,
which was flat with the prior year quarter.
For third quarter 2009, pre-tax
restructuring charges, acquisition-related integration costs and unusual items
totaled $21 million compared to $3 million for the prior year
quarter.
Interest
expense decreased five percent from $82 million for third quarter 2008 to $78
million for third quarter 2009. On a year-to-date basis through
November 2008, the company has generated free cash flow of $235 million,
compared with $173 million in the prior year.
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“Due primarily to strong free
cash flow, and the proceeds from asset dispositions during the first nine months
of fiscal 2009, total borrowings have
decreased by more than $475 million from fiscal year end 2008 levels, while our
cash position increased by more than $160 million during the same period,”
stated Bob Ryder, Constellation Brands chief financial
officer. “Subsequent to the third quarter, the company prepaid $195
million in term loans under its senior credit facility.”
As
previously announced, the company expects to realize approximately $50 million
in after-tax cash proceeds from the gain on settlement of certain foreign
currency economic hedges during fiscal 2009. The company’s third
quarter fiscal 2009 reported results reflect an unfavorable $0.15 diluted EPS
impact associated with the recognition of income tax expense related to these
hedge transactions.
Summary
“Given the current macroeconomic
environment impacting our key markets, we are recalibrating our sales
expectations while taking appropriate actions to reduce costs and capture the
benefits from ongoing debt reduction to better ensure that we will meet our
future financial objectives,” said Sands. As a result, the company is
tightening its comparable diluted EPS range to $1.68 - $1.72 from the company’s
previous estimate of $1.68 - $1.76.
Outlook
The table below sets forth management’s
current diluted EPS expectations for fiscal year 2009 compared to fiscal year
2008 actual results, both on a reported basis and a comparable
basis.
Constellation
Brands Fiscal Year 2009
Diluted
Earnings Per Share Outlook
|
Reported
Basis
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Comparable
Basis
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|||||||||||||||
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FY09
Estimate
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FY08
Actual
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FY09
Estimate
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FY08
Actual
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|||||||||||||
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Fiscal
Year Ending Feb. 28 or
Feb. 29
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$ | 0.65 - $0.69 | $ | (2.83 | ) | $ | 1.68 - $1.72 | $ | 1.44 | |||||||
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Full-year
fiscal 2009 guidance includes the following current assumptions:
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·
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Net
sales: mid single-digit growth in organic net sales combined with the
incremental benefit from the Beam Wine Estates acquisition, impact of
reporting the joint venture for the Matthew Clark wholesale business under
the equity method, and divestiture of the Almaden, Inglenook and certain
Pacific Northwest wine brands, are expected to result in reported net
sales increasing low-to-mid single-digits from net sales for fiscal
2008
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·
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Interest
expense: approximately $315 - $320
million
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·
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Tax
rate: approximately 60 percent on a reported basis, which includes a
provision of approximately 14 percentage points related to the recognition
of income tax expense in connection with the gain on settlement
of certain foreign currency economic hedges and approximately nine
percentage points related to the company’s inability to recognize tax
benefits on net operating losses resulting primarily from the Australian
initiative, or approximately 37 percent on a comparable
basis
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·
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Weighted
average diluted shares outstanding: approximately 220
million
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·
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Free
cash flow: $360 - $390 million
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Conference
Call
A conference call to discuss third
quarter 2009 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 Wednesday, Jan. 7, 2009 at 10:00 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: www.cbrands.com under “Investors,” prior to the
call.
Explanations
Reported basis (“reported”) operating
income, equity in earnings of equity method
investees, net income and diluted EPS are as reported under generally accepted
accounting principles. Operating income, equity in earnings of equity
method investees, 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.
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- 5
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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, 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 in its portfolio, sales in approximately 150 countries
and operates more than 50 wineries, distilleries and distribution
facilities. It is the largest wine producer in the world; the largest
premium wine company in the U.S.; the largest wine company in the U.K.,
Australia and Canada; the second largest wine company in New Zealand; and the
largest beer importer and marketer in the U.S. through its Crown Imports joint
venture with Mexico’s Grupo Modelo. Constellation Brands is an
S&P 500 Index and Fortune 500® company. Major brands in the
company’s portfolio include Corona Extra, Black Velvet Canadian Whisky, SVEDKA
Vodka, Robert Mondavi wines, Clos du Bois, Ravenswood, Blackstone, Hardys,
Banrock Station, Nobilo, Kim Crawford, Inniskillin, Jackson-Triggs and Arbor
Mist. To learn more about Constellation Brands and 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 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, or 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 Feb.
20, 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:
|
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·
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successful
integration of acquired businesses, realization of expected synergies and
completion of various portfolio
actions;
|
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·
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achievement
of all expected cost savings from the company’s various restructuring
plans and realization of expected asset sale proceeds from the sale of
inventory and other assets;
|
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·
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accuracy
of the bases for forecasts relating to joint ventures and associated costs
and capital investment
requirements;
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·
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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;
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·
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restructuring
charges, acquisition-related integration costs, other one-time 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;
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·
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raw
material supply, production or shipment difficulties could adversely
affect the company's ability to supply its
customers;
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|
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·
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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;
|
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|
·
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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 the U.S., continuing instability in world financial markets, or
unanticipated environmental liabilities and
costs;
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·
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changes
to accounting rules and tax laws, and other factors which could impact the
company’s reported financial position or effective tax
rate;
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·
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changes
in interest rates and the inherent unpredictability of currency
fluctuations, commodity prices and raw material costs;
and
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·
|
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. 29, 2008, which could cause actual
future performance to differ from current
expectations.
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# # #
- 7
- -
Constellation
Brands, Inc. and Subsidiaries
CONDENSED
CONSOLIDATED BALANCE SHEETS
(in
millions)
|
November 30,
2008
|
February 29,
2008
|
|||||||
|
Assets
|
||||||||
|
Current
Assets:
|
||||||||
|
Cash
and cash investments
|
$ | 181.3 | $ | 20.5 | ||||
|
Accounts
receivable, net
|
813.4 | 731.6 | ||||||
|
Inventories
|
1,978.5 | 2,179.5 | ||||||
|
Prepaid
expenses and other
|
172.2 | 267.4 | ||||||
|
Total
current assets
|
3,145.4 | 3,199.0 | ||||||
|
Property,
plant and equipment, net
|
1,582.8 | 2,035.0 | ||||||
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Goodwill
|
2,915.2 | 3,123.9 | ||||||
|
Intangible
assets, net
|
1,041.0 | 1,190.0 | ||||||
|
Other
assets, net
|
424.1 | 504.9 | ||||||
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Total
assets
|
$ | 9,108.5 | $ | 10,052.8 | ||||
|
Liabilities
and Stockholders' Equity
|
||||||||
|
Current
Liabilities:
|
||||||||
|
Notes
payable to banks
|
$ | 206.0 | $ | 379.5 | ||||
|
Current
maturities of long-term debt
|
451.6 | 229.3 | ||||||
|
Accounts
payable
|
344.6 | 349.4 | ||||||
|
Accrued
excise taxes
|
117.7 | 62.4 | ||||||
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Other
accrued expenses and liabilities
|
608.5 | 697.7 | ||||||
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Total
current liabilities
|
1,728.4 | 1,718.3 | ||||||
|
Long-term
debt, less current maturities
|
4,124.4 | 4,648.7 | ||||||
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Deferred
income taxes
|
551.2 | 535.8 | ||||||
|
Other
liabilities
|
362.8 | 384.1 | ||||||
|
Total
liabilities
|
6,766.8 | 7,286.9 | ||||||
|
Total
stockholders' equity
|
2,341.7 | 2,765.9 | ||||||
|
Total
liabilities and stockholders' equity
|
$ | 9,108.5 | $ | 10,052.8 | ||||
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Constellation
Brands, Inc. and Subsidiaries
CONSOLIDATED
STATEMENTS OF OPERATIONS
(in
millions, except per share data)
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
|
November 30,
2008
|
November 30,
2007
|
November 30,
2008
|
November 30,
2007
|
|||||||||||||
|
Sales
|
$ | 1,306.9 | $ | 1,406.4 | $ | 3,758.1 | $ | 3,749.7 | ||||||||
|
Excise
taxes
|
(275.7 | ) | (311.6 | ) | (838.6 | ) | (861.1 | ) | ||||||||
|
Net
sales
|
1,031.2 | 1,094.8 | 2,919.5 | 2,888.6 | ||||||||||||
|
Cost
of product sold
|
(627.2 | ) | (702.9 | ) | (1,880.7 | ) | (1,918.8 | ) | ||||||||
|
Gross
profit
|
404.0 | 391.9 | 1,038.8 | 969.8 | ||||||||||||
|
Selling,
general and administrative expenses
|
(200.5 | ) | (192.1 | ) | (659.2 | ) | (580.2 | ) | ||||||||
|
Impairment
of intangible assets
|
- | - | (21.8 | ) | - | |||||||||||
|
Restructuring
charges
|
(4.3 | ) | 0.1 | (40.3 | ) | (0.7 | ) | |||||||||
|
Acquisition-related
integration costs
|
(1.5 | ) | (1.6 | ) | (7.6 | ) | (5.2 | ) | ||||||||
|
Operating
income
|
197.7 | 198.3 | 309.9 | 383.7 | ||||||||||||
|
Equity
in earnings of equity method investees
|
76.3 | 74.2 | 218.5 | 230.1 | ||||||||||||
|
Interest
expense, net
|
(78.4 | ) | (82.4 | ) | (245.7 | ) | (248.8 | ) | ||||||||
|
Income
before income taxes
|
195.6 | 190.1 | 282.7 | 365.0 | ||||||||||||
|
Provision
for income taxes
|
(112.1 | ) | (70.5 | ) | (177.3 | ) | (143.5 | ) | ||||||||
|
Net
income
|
$ | 83.5 | $ | 119.6 | $ | 105.4 | $ | 221.5 | ||||||||
|
Earnings
Per Common Share:
|
||||||||||||||||
|
Basic
- Class A Common Stock
|
$ | 0.39 | $ | 0.56 | $ | 0.49 | $ | 1.02 | ||||||||
|
Basic
- Class B Common Stock
|
$ | 0.35 | $ | 0.51 | $ | 0.45 | $ | 0.92 | ||||||||
|
Diluted
- Class A Common Stock
|
$ | 0.38 | $ | 0.55 | $ | 0.48 | $ | 0.99 | ||||||||
|
Diluted
- Class B Common Stock
|
$ | 0.35 | $ | 0.50 | $ | 0.44 | $ | 0.91 | ||||||||
|
Weighted
Average Common Shares Outstanding:
|
||||||||||||||||
|
Basic
- Class A Common Stock
|
194.451 | 191.578 | 193.656 | 196.191 | ||||||||||||
|
Basic
- Class B Common Stock
|
23.744 | 23.809 | 23.756 | 23.817 | ||||||||||||
|
Diluted
- Class A Common Stock
|
220.006 | 219.432 | 219.970 | 224.093 | ||||||||||||
|
Diluted
- Class B Common Stock
|
23.744 | 23.809 | 23.756 | 23.817 | ||||||||||||
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- -
Constellation
Brands, Inc. and Subsidiaries
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in
millions)
|
Nine Months Ended
|
||||||||
|
November 30,
2008
|
November 30,
2007
|
|||||||
|
Cash
Flows From Operating Activities
|
||||||||
|
Net
income
|
$ | 105.4 | $ | 221.5 | ||||
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
|
Depreciation
of property, plant and equipment
|
109.2 | 109.3 | ||||||
|
Write-down
of inventory associated with the Australian Initiative
|
47.6 | - | ||||||
|
Stock-based
compensation expense
|
34.1 | 24.1 | ||||||
|
Loss
(gain) on disposal or impairment of long-lived assets, net
|
29.3 | (4.9 | ) | |||||
|
Impairment
of intangible assets
|
21.8 | - | ||||||
|
Loss
on businesses sold
|
15.8 | 6.8 | ||||||
|
Amortization
of intangible and other assets
|
10.0 | 8.2 | ||||||
|
Deferred
tax provision
|
9.6 | 29.9 | ||||||
|
Equity
in earnings of equity method investees, net of distributed
earnings
|
8.6 | 10.5 | ||||||
|
Change
in operating assets and liabilities, net of effects from purchases and
sales of businesses:
|
||||||||
|
Accounts
receivable, net
|
(187.4 | ) | (200.2 | ) | ||||
|
Inventories
|
(176.6 | ) | (58.5 | ) | ||||
|
Prepaid
expenses and other current assets
|
16.4 | 10.7 | ||||||
|
Accounts
payable
|
38.3 | 48.7 | ||||||
|
Accrued
excise taxes
|
75.9 | 46.9 | ||||||
|
Other
accrued expenses and liabilities
|
39.5 | 54.8 | ||||||
|
Other,
net
|
133.4 | (55.5 | ) | |||||
|
Total
adjustments
|
225.5 | 30.8 | ||||||
|
Net
cash provided by operating activities
|
330.9 | 252.3 | ||||||
|
Cash
Flows From Investing Activities
|
||||||||
|
Proceeds
from sales of businesses
|
204.2 | 3.0 | ||||||
|
Capital
distributions from equity method investees
|
20.7 | - | ||||||
|
Proceeds
from sales of assets
|
18.9 | 8.7 | ||||||
|
Purchases
of businesses, net of cash acquired
|
0.2 | (389.7 | ) | |||||
|
Purchases
of property, plant and equipment
|
(95.6 | ) | (79.5 | ) | ||||
|
Investment
in equity method investee
|
(1.0 | ) | (1.5 | ) | ||||
|
Payment
of accrued earn-out amount
|
- | (4.0 | ) | |||||
|
Proceeds
from formation of joint venture
|
- | 185.6 | ||||||
|
Other
investing activities
|
9.9 | - | ||||||
|
Net
cash provided by (used in) investing activities
|
157.3 | (277.4 | ) | |||||
|
Cash
Flows From Financing Activities
|
||||||||
|
Principal
payments of long-term debt
|
(225.2 | ) | (168.6 | ) | ||||
|
Net
repayment of notes payable
|
(137.4 | ) | (57.6 | ) | ||||
|
Exercise
of employee stock options
|
25.5 | 17.7 | ||||||
|
Excess
tax benefits from stock-based payment awards
|
7.0 | 11.4 | ||||||
|
Proceeds
from employee stock purchases
|
2.9 | 3.0 | ||||||
|
Proceeds
from issuance of long-term debt
|
- | 716.1 | ||||||
|
Purchases
of treasury stock
|
- | (500.0 | ) | |||||
|
Payment
of financing costs of long-term debt
|
- | (6.1 | ) | |||||
|
Net
cash (used in) provided by financing activities
|
(327.2 | ) | 15.9 | |||||
|
Effect
of exchange rate changes on cash and cash investments
|
(0.2 | ) | 0.6 | |||||
|
Net
increase (decrease) in cash and cash investments
|
160.8 | (8.6 | ) | |||||
|
Cash
and cash investments, beginning of period
|
20.5 | 33.5 | ||||||
|
Cash
and cash investments, end of period
|
$ | 181.3 | $ | 24.9 | ||||
-more-
- 10
- -
Constellation
Brands, Inc. and Subsidiaries
SEGMENT
INFORMATION
(in
millions)
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||||||||||
|
November 30,
2008
|
November 30,
2007
|
Percent
Change
|
November 30,
2008
|
November 30,
2007
|
Percent
Change
|
|||||||||||||||||||
|
Segment
Net Sales and Operating Income
|
||||||||||||||||||||||||
|
Constellation
Wines
|
||||||||||||||||||||||||
|
Branded
wine net sales
|
$ | 848.7 | $ | 911.3 | (7 | )% | $ | 2,396.5 | $ | 2,270.1 | 6 | % | ||||||||||||
|
Wholesale
and other net sales
|
71.1 | 66.1 | 8 | % | 196.9 | 299.4 | (34 | )% | ||||||||||||||||
|
Segment
net sales
|
$ | 919.8 | $ | 977.4 | (6 | )% | $ | 2,593.4 | $ | 2,569.5 | 1 | % | ||||||||||||
|
Operating
income
|
$ | 221.8 | $ | 201.9 | 10 | % | $ | 515.3 | $ | 413.0 | 25 | % | ||||||||||||
|
%
Net sales
|
24.1 | % | 20.7 | % | 19.9 | % | 16.1 | % | ||||||||||||||||
|
Equity
in earnings of equity method investees
|
$ | 14.6 | $ | 13.2 | 11 | % | $ | 16.8 | $ | 17.1 | (2 | )% | ||||||||||||
|
Constellation
Spirits
|
||||||||||||||||||||||||
|
Segment
net sales
|
$ | 111.4 | $ | 117.4 | (5 | )% | $ | 326.1 | $ | 319.1 | 2 | % | ||||||||||||
|
Operating
income
|
$ | 18.7 | $ | 21.4 | (13 | )% | $ | 52.8 | $ | 58.1 | (9 | )% | ||||||||||||
|
%
Net sales
|
16.8 | % | 18.2 | % | 16.2 | % | 18.2 | % | ||||||||||||||||
|
Crown
Imports
|
||||||||||||||||||||||||
|
Segment
net sales
|
$ | 554.7 | $ | 547.7 | 1 | % | $ | 1,959.3 | $ | 1,928.5 | 2 | % | ||||||||||||
|
Operating
income
|
$ | 123.5 | $ | 123.0 | - | $ | 410.9 | $ | 426.6 | (4 | )% | |||||||||||||
|
%
Net sales
|
22.3 | % | 22.5 | % | 21.0 | % | 22.1 | % | ||||||||||||||||
|
Consolidation
and Eliminations
|
||||||||||||||||||||||||
|
Segment
net sales
|
$ | (554.7 | ) | $ | (547.7 | ) | 1 | % | $ | (1,959.3 | ) | $ | (1,928.5 | ) | 2 | % | ||||||||
|
Operating
income
|
$ | (123.5 | ) | $ | (123.0 | ) | - | $ | (410.9 | ) | $ | (426.6 | ) | (4 | )% | |||||||||
|
Equity
in earnings of Crown Imports
|
$ | 61.7 | $ | 61.7 | - | $ | 205.8 | $ | 213.9 | (4 | )% | |||||||||||||
|
Corporate
Operations and Other
|
||||||||||||||||||||||||
|
Consolidated
net sales
|
$ | 1,031.2 | $ | 1,094.8 | (6 | )% | $ | 2,919.5 | $ | 2,888.6 | 1 | % | ||||||||||||
|
Operating
income
|
$ | (21.9 | ) | $ | (22.9 | ) | (4 | )% | $ | (72.1 | ) | $ | (63.3 | ) | 14 | % | ||||||||
|
%
Net sales
|
2.1 | % | 2.1 | % | 2.5 | % | 2.2 | % | ||||||||||||||||
-more-
- 11
- -
Constellation
Brands, Inc. and Subsidiaries
GEOGRAPHIC
INFORMATION
(in
millions)
|
Constant
|
||||||||||||||||||||
|
Three Months Ended
|
Currency
|
|||||||||||||||||||
|
November 30,
|
November 30,
|
Percent
|
Currency
|
Percent
|
||||||||||||||||
|
2008
|
2007
|
Change
|
Impact
|
Change(3)
|
||||||||||||||||
|
Geographic Net Sales
(1)(2)
|
||||||||||||||||||||
|
North
America
|
$ | 780.0 | $ | 766.9 | 2 | % | (2 | )% | 4 | % | ||||||||||
|
Branded
wine
|
$ | 630.3 | $ | 622.4 | 1 | % | (2 | )% | 4 | % | ||||||||||
|
Spirits
|
$ | 111.4 | $ | 117.4 | (5 | )% | - | (5 | )% | |||||||||||
|
Wholesale
and other
|
$ | 38.3 | $ | 27.1 | 41 | % | (6 | )% | 47 | % | ||||||||||
|
Europe
|
$ | 163.3 | $ | 215.6 | (24 | )% | (17 | )% | (7 | )% | ||||||||||
|
Branded
wine
|
$ | 133.8 | $ | 183.0 | (27 | )% | (16 | )% | (11 | )% | ||||||||||
|
Wholesale
and other
|
$ | 29.5 | $ | 32.6 | (10 | )% | (20 | )% | 11 | % | ||||||||||
|
Australia/New
Zealand
|
$ | 87.9 | $ | 112.3 | (22 | )% | (17 | )% | (4 | )% | ||||||||||
|
Branded
wine
|
$ | 84.6 | $ | 105.9 | (20 | )% | (18 | )% | (2 | )% | ||||||||||
|
Wholesale
and other
|
$ | 3.3 | $ | 6.4 | (48 | )% | (11 | )% | (38 | )% | ||||||||||
|
Organic
|
||||||||||||||||||||||||||||
|
Constant
|
||||||||||||||||||||||||||||
|
Three Months Ended
|
Currency
|
|||||||||||||||||||||||||||
|
November 30,
|
November 30,
|
Percent
|
Acquisition
|
Divestiture
|
Currency
|
Percent
|
||||||||||||||||||||||
|
2008
|
2007
|
Change
|
Impact(4)
|
Impact(5)
|
Impact
|
Change(3)
|
||||||||||||||||||||||
|
Branded Wine Geographic Net
Sales (1)(2)
|
||||||||||||||||||||||||||||
|
North
America
|
$ | 630.3 | $ | 622.4 | 1 | % | 9 | % | (6 | )% | (2 | )% | 2 | % | ||||||||||||||
|
Europe
|
133.8 | 183.0 | (27 | )% | - | - | (16 | )% | (11 | )% | ||||||||||||||||||
|
Australia/New
Zealand
|
84.6 | 105.9 | (20 | )% | - | - | (18 | )% | (2 | )% | ||||||||||||||||||
|
Consolidated
branded wine net sales
|
$ | 848.7 | $ | 911.3 | (7 | )% | 6 | % | (4 | )% | (7 | )% | (2 | )% | ||||||||||||||
|
Constant
|
||||||||||||||||||||
|
Nine Months Ended
|
Currency
|
|||||||||||||||||||
|
November 30,
|
November 30,
|
Percent
|
Currency
|
Percent
|
||||||||||||||||
|
2008
|
2007
|
Change
|
Impact
|
Change(3)
|
||||||||||||||||
|
Geographic Net Sales
(1)(2)
|
||||||||||||||||||||
|
North
America
|
$ | 2,098.6 | $ | 1,877.1 | 12 | % | - | 12 | % | |||||||||||
|
Branded
wine
|
$ | 1,695.7 | $ | 1,503.9 | 13 | % | - | 13 | % | |||||||||||
|
Spirits
|
$ | 326.1 | $ | 319.1 | 2 | % | - | 2 | % | |||||||||||
|
Wholesale
and other
|
$ | 76.8 | $ | 54.1 | 42 | % | (1 | )% | 43 | % | ||||||||||
|
Europe
|
$ | 536.5 | $ | 712.2 | (25 | )% | (6 | )% | (19 | )% | ||||||||||
|
Branded
wine
|
$ | 429.9 | $ | 489.1 | (12 | )% | (7 | )% | (5 | )% | ||||||||||
|
Wholesale
and other
|
$ | 106.6 | $ | 223.1 | (52 | )% | (3 | )% | (49 | )% | ||||||||||
|
Australia/New
Zealand
|
$ | 284.4 | $ | 299.3 | (5 | )% | - | (5 | )% | |||||||||||
|
Branded
wine
|
$ | 270.9 | $ | 277.1 | (2 | )% | - | (2 | )% | |||||||||||
|
Wholesale
and other
|
$ | 13.5 | $ | 22.2 | (39 | )% | 2 | % | (41 | )% | ||||||||||
|
Organic
|
||||||||||||||||||||||||||||
|
Constant
|
||||||||||||||||||||||||||||
|
Nine Months Ended
|
Currency
|
|||||||||||||||||||||||||||
|
November 30,
|
November 30,
|
Percent
|
Acquisition
|
Divestiture
|
Currency
|
Percent
|
||||||||||||||||||||||
|
2008
|
2007
|
Change
|
Impact(4)
|
Impact(5)
|
Impact
|
Change(3)
|
||||||||||||||||||||||
|
Branded Wine Geographic Net
Sales (1)(2)
|
||||||||||||||||||||||||||||
|
North
America
|
$ | 1,695.7 | $ | 1,503.9 | 13 | % | 10 | % | (7 | )% | - | 10 | % | |||||||||||||||
|
Europe
|
429.9 | 489.1 | (12 | )% | - | 2 | % | (7 | )% | (7 | )% | |||||||||||||||||
|
Australia/New
Zealand
|
270.9 | 277.1 | (2 | )% | - | - | - | (2 | )% | |||||||||||||||||||
|
Consolidated
branded wine net sales
|
$ | 2,396.5 | $ | 2,270.1 | 6 | % | 6 | % | (4 | )% | (2 | )% | 5 | % | ||||||||||||||
|
(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)
|
Acquisition
impact includes net sales of branded wine acquired in the BWE Acquisition
for the period September 1, 2008, through November 30, 2008, included in
the three months ended November 30, 2008, and March 1, 2008, through
November 30, 2008, included in the nine months ended November 30,
2008.
|
|
(5)
|
Divestiture
impact includes (i) the removal of Almaden and Inglenook
branded wine net sales for the period September 1, 2007, through November
30, 2007, included in the three months ended November 30, 2007, and for
the period March 1, 2007, through November 30, 2007, included in the nine
months ended November 30, 2007; (ii) the removal of branded
wine net sales associated with the Pacific Northwest brands for the period
September 1, 2007, through November 30, 2007, included in the three months
ended November 30, 2007, and for the period June 1, 2007, through November
30, 2007, included in the nine months ended November 30, 2007; and
(iii) the add-back of U.K. branded wine net sales previously
sold through the U.K. wholesale business for the period March 1, 2007,
through April 16, 2007, included in the nine months ended November 30,
2007.
|
-more-
- 12
- -
Constellation
Brands, Inc. and Subsidiaries
RECONCILIATION
OF REPORTED, ORGANIC AND CONSTANT CURRENCY NET SALES
(in
millions)
As the
company formed its U.K. wholesale joint venture on April 17, 2007; acquired BWE
on December 17, 2007; sold its Almaden and Inglenook wine brands on February 28,
2008; sold certain Pacific Northwest wine brands on June 5, 2008; and exited
certain spirits production contracts in connection with the sale of a Canadian
distilling facility on August 31, 2008, organic net sales for the respective
periods are defined by the company as reported net sales plus/less net sales of
U.K. wholesale, U.K. branded wine, BWE products, Almaden and Inglenook branded
wine, Pacific Northwest brands, or contract production services, as
appropriate. As the company acquired Svedka on March 19, 2007,
organic net sales for the nine months ended November 30, 2008, have not been
adjusted for net sales of Svedka products during the period March 1, 2008,
through March 18, 2008, as amounts are not significant. 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.
|
Constant
|
Constant
|
|||||||||||||||||||||||||||||||||||||||
|
Three Months Ended
|
Currency
|
Nine Months Ended
|
Currency
|
|||||||||||||||||||||||||||||||||||||
|
November
30,
|
November
30,
|
Percent
|
Currency
|
Percent
|
November
30,
|
November
30,
|
Percent
|
Currency
|
Percent
|
|||||||||||||||||||||||||||||||
|
2008
|
2007
|
Change
|
Impact
|
Change(1)
|
2008
|
2007
|
Change
|
Impact
|
Change(1)
|
|||||||||||||||||||||||||||||||
|
Consolidated
Net Sales
|
||||||||||||||||||||||||||||||||||||||||
|
Branded
wine
|
$ | 848.7 | $ | 911.3 | (7 | %) | (7 | %) | - | $ | 2,396.5 | $ | 2,270.1 | 6 | % | (2 | %) | 7 | % | |||||||||||||||||||||
|
Wholesale
and other
|
71.1 | 66.1 | 8 | % | (13 | %) | 21 | % | 196.9 | 299.4 | (34 | %) | (3 | %) | (32 | %) | ||||||||||||||||||||||||
|
Spirits
|
111.4 | 117.4 | (5 | %) | - | (5 | %) | 326.1 | 319.1 | 2 | % | - | 2 | % | ||||||||||||||||||||||||||
|
Consolidated
reported net sales
|
1,031.2 | 1,094.8 | (6 | %) | (7 | %) | 1 | % | 2,919.5 | 2,888.6 | 1 | % | (2 | %) | 3 | % | ||||||||||||||||||||||||
|
Less: BWE
(2)
|
(53.8 | ) | - | (147.3 | ) | - | ||||||||||||||||||||||||||||||||||
|
Less: U.K.
wholesale, net of U.K. branded wine (3)
|
- | - | - | (117.1 | ) | |||||||||||||||||||||||||||||||||||
|
Less: Almaden
and Inglenook branded wine net sales (4)
|
- | (31.1 | ) | - | (82.4 | ) | ||||||||||||||||||||||||||||||||||
|
Less: Pacific
Northwest branded wine net sales (5)
|
- | (9.1 | ) | - | (15.8 | ) | ||||||||||||||||||||||||||||||||||
|
Less: Spirits
contract production services net sales (6)
|
- | (11.1 | ) | - | (11.1 | ) | ||||||||||||||||||||||||||||||||||
|
Consolidated
organic net sales
|
$ | 977.4 | $ | 1,043.5 | (6 | %) | (7 | %) | 1 | % | $ | 2,772.2 | $ | 2,662.2 | 4 | % | (2 | %) | 6 | % | ||||||||||||||||||||
|
Branded
Wine Net Sales
|
||||||||||||||||||||||||||||||||||||||||
|
Branded
wine reported net sales
|
$ | 848.7 | $ | 911.3 | (7 | %) | (7 | %) | - | $ | 2,396.5 | $ | 2,270.1 | 6 | % | (2 | %) | 7 | % | |||||||||||||||||||||
|
Less: BWE
(2)
|
(53.8 | ) | - | (147.3 | ) | - | ||||||||||||||||||||||||||||||||||
|
Plus: U.K.
branded wine (3)
|
- | - | - | 8.4 | ||||||||||||||||||||||||||||||||||||
|
Less: Almaden
and Inglenook branded wine net sales (4)
|
- | (31.1 | ) | - | (82.4 | ) | ||||||||||||||||||||||||||||||||||
|
Less: Pacific
Northwest branded wine net sales (5)
|
- | (9.1 | ) | - | (15.8 | ) | ||||||||||||||||||||||||||||||||||
|
Branded
wine organic net sales
|
$ | 794.9 | $ | 871.1 | (9 | %) | (7 | %) | (2 | %) | $ | 2,249.2 | $ | 2,180.3 | 3 | % | (2 | %) | 5 | % | ||||||||||||||||||||
|
Wholesale
and Other Net Sales
|
||||||||||||||||||||||||||||||||||||||||
|
Wholesale
and other reported net sales
|
$ | 71.1 | $ | 66.1 | 8 | % | (13 | %) | 21 | % | $ | 196.9 | $ | 299.4 | (34 | %) | (3 | %) | (32 | %) | ||||||||||||||||||||
|
Less: U.K.
wholesale (3)
|
- | - | - | (125.5 | ) | |||||||||||||||||||||||||||||||||||
|
Wholesale
and other organic net sales
|
$ | 71.1 | $ | 66.1 | 8 | % | (13 | %) | 21 | % | $ | 196.9 | $ | 173.9 | 13 | % | (4 | %) | 18 | % | ||||||||||||||||||||
|
Spirits
Net Sales
|
||||||||||||||||||||||||||||||||||||||||
|
Spirits
reported net sales
|
$ | 111.4 | $ | 117.4 | (5 | %) | - | (5 | %) | $ | 326.1 | $ | 319.1 | 2 | % | - | 2 | % | ||||||||||||||||||||||
|
Less: Spirits
contract production services net sales (6)
|
- | (11.1 | ) | - | (11.1 | ) | ||||||||||||||||||||||||||||||||||
|
Spirits
organic net sales
|
$ | 111.4 | $ | 106.3 | 5 | % | - | 5 | % | $ | 326.1 | $ | 308.0 | 6 | % | - | 6 | % | ||||||||||||||||||||||
|
(1)
|
May
not sum due to rounding as each item is computed
independently.
|
|
(2)
|
For
the period September 1, 2008, through November 30, 2008, included in the
three months ended November 30, 2008, and March 1, 2008, through November
30, 2008, included in the nine months ended November 30,
2008.
|
|
(3)
|
For
the period March 1, 2007, through April 16, 2007, included in the nine
months ended November 30, 2007.
|
|
(4)
|
For
the period September 1, 2007, through November 30, 2007, included in the
three months ended November 30, 2007, and March 1, 2007, through November
30, 2007, included in the nine months ended November 30,
2007.
|
|
(5)
|
For
the period September 1, 2007, through November 30, 2007, included in the
three months ended November 30, 2007, and June 1, 2007, through November
30, 2007, included in the nine months ended November 30,
2007.
|
|
(6)
|
For
the period September 1, 2007, through November 30, 2007, included in the
three months and nine months ended November 30,
2007.
|
-more-
- 13
- -
Constellation
Brands, Inc. and Subsidiaries
RECONCILIATIONS
OF GAAP TO NON-GAAP FINANCIAL MEASURES (1)
(in
millions, except per share data)
|
Three Months Ended November 30,
2008
|
Three Months Ended November 30,
2007
|
|||||||||||||||||||||||||||||||||||||||||||||||
|
Reported
Basis
(GAAP)
|
Inventory
Step-up
|
Strategic
Business
Realignment(2)
|
Other(3)
|
Comparable
Basis
(Non-
GAAP)
|
Reported
Basis
(GAAP)
|
Inventory
Step-up
|
Strategic
Business
Realignment(2)
|
Other
|
Comparable
Basis
(Non-
GAAP)
|
Percent
Change
- -
Reported
Basis
(GAAP)
|
Percent
Change
- -
Comparable
Basis
(Non-
GAAP)
|
|||||||||||||||||||||||||||||||||||||
|
Net
sales
|
$ | 1,031.2 | $ | 1,031.2 | $ | 1,094.8 | $ | 1,094.8 | (6 | )% | (6 | )% | ||||||||||||||||||||||||||||||||||||
|
Cost
of product sold
|
(627.2 | ) | 6.1 | 2.3 | (618.8 | ) | (702.9 | ) | 2.9 | 2.5 | (697.5 | ) | (11 | )% | (11 | )% | ||||||||||||||||||||||||||||||||
|
Gross
profit
|
404.0 | 6.1 | 2.3 | - | 412.4 | 391.9 | 2.9 | 2.5 | - | 397.3 | 3 | % | 4 | % | ||||||||||||||||||||||||||||||||||
|
Selling,
general and administrative expenses ("SG&A")
|
(200.5 | ) | 6.7 | (193.8 | ) | (192.1 | ) | (4.8 | ) | (196.9 | ) | 4 | % | (2 | )% | |||||||||||||||||||||||||||||||||
|
Impairment
of intangible assets
|
- | - | - | - | N/A | N/A | ||||||||||||||||||||||||||||||||||||||||||
|
Restructuring
charges
|
(4.3 | ) | 4.3 | - | 0.1 | (0.1 | ) | - |
NM
|
N/A | ||||||||||||||||||||||||||||||||||||||
|
Acquisition-related
integration costs
|
(1.5 | ) | 1.5 | - | (1.6 | ) | 1.6 | - | (6 | )% | N/A | |||||||||||||||||||||||||||||||||||||
|
Operating
income
|
197.7 | 6.1 | 14.8 | - | 218.6 | 198.3 | 2.9 | (0.8 | ) | - | 200.4 | - | 9 | % | ||||||||||||||||||||||||||||||||||
|
Equity
in earnings of equity method investees
|
76.3 | 76.3 | 74.2 | 0.7 | 74.9 | 3 | % | 2 | % | |||||||||||||||||||||||||||||||||||||||
|
EBIT
|
294.9 | 275.3 | N/A | 7 | % | |||||||||||||||||||||||||||||||||||||||||||
|
Interest
expense, net
|
(78.4 | ) | (78.4 | ) | (82.4 | ) | (82.4 | ) | (5 | )% | (5 | )% | ||||||||||||||||||||||||||||||||||||
|
Income
before income taxes
|
195.6 | 6.1 | 14.8 | - | 216.5 | 190.1 | 3.6 | (0.8 | ) | - | 192.9 | 3 | % | 12 | % | |||||||||||||||||||||||||||||||||
|
Provision
for income taxes
|
(112.1 | ) | (2.3 | ) | (2.5 | ) | 32.4 | (84.5 | ) | (70.5 | ) | (1.2 | ) | 0.2 | - | (71.5 | ) | 59 | % | 18 | % | |||||||||||||||||||||||||||
|
Net
income
|
$ | 83.5 | $ | 3.8 | $ | 12.3 | $ | 32.4 | $ | 132.0 | $ | 119.6 | $ | 2.4 | $ | (0.6 | ) | $ | - | $ | 121.4 | (30 | )% | 9 | % | |||||||||||||||||||||||
|
Diluted
earnings per common share
|
$ | 0.38 | $ | 0.02 | $ | 0.06 | $ | 0.15 | $ | 0.60 | $ | 0.55 | $ | 0.01 | $ | - | $ | - | $ | 0.55 | (31 | )% | 9 | % | ||||||||||||||||||||||||
|
Weighted
average common shares outstanding
- diluted
|
220.006 | 220.006 | 220.006 | 220.006 | 220.006 | 219.432 | 219.432 | 219.432 | 219.432 | 219.432 | ||||||||||||||||||||||||||||||||||||||
|
Gross
margin
|
39.2 | % | 40.0 | % | 35.8 | % | 36.3 | % | ||||||||||||||||||||||||||||||||||||||||
|
SG&A
as a percent of net sales
|
19.4 | % | 18.8 | % | 17.5 | % | 18.0 | % | ||||||||||||||||||||||||||||||||||||||||
|
Operating
margin
|
19.2 | % | 21.2 | % | 18.1 | % | 18.3 | % | ||||||||||||||||||||||||||||||||||||||||
|
Effective
tax rate
|
57.3 | % | 39.0 | % | 37.1 | % | 37.1 | % | ||||||||||||||||||||||||||||||||||||||||
NM =
Not Meaningful
-more-
- 14
- -
Constellation
Brands, Inc. and Subsidiaries
RECONCILIATIONS
OF GAAP TO NON-GAAP FINANCIAL MEASURES (1)
(in
millions, except per share data)
|
Nine
Months Ended November 30, 2008
|
Nine
Months Ended November 30, 2007
|
|||||||||||||||||||||||||||||||||||||||||||||||
|
Reported
Basis
(GAAP)
|
Inventory
Step-up
|
Strategic
Business
Realignment(4)
|
Other(5)
|
Comparable
Basis
(Non-
GAAP)
|
Reported
Basis
(GAAP)
|
Inventory
Step-up
|
Strategic
Business
Realignment(4)
|
Other
|
Comparable
Basis
(Non-
GAAP)
|
Percent
Change
-
Reported
Basis
(GAAP)
|
Percent
Change
-
Comparable
Basis
(Non-GAAP)
|
|||||||||||||||||||||||||||||||||||||
|
Net
sales
|
$ | 2,919.5 | $ | 2,919.5 | $ | 2,888.6 | $ | 2,888.6 | 1 | % | 1 | % | ||||||||||||||||||||||||||||||||||||
|
Cost
of product sold
|
(1,880.7 | ) | 16.7 | 56.2 | 0.1 | (1,807.7 | ) | (1,918.8 | ) | 8.1 | 6.8 | 0.1 | (1,903.8 | ) | (2 | )% | (5 | )% | ||||||||||||||||||||||||||||||
|
Gross
profit
|
1,038.8 | 16.7 | 56.2 | 0.1 | 1,111.8 | 969.8 | 8.1 | 6.8 | 0.1 | 984.8 | 7 | % | 13 | % | ||||||||||||||||||||||||||||||||||
|
Selling,
general and administrative expenses ("SG&A")
|
(659.2 | ) | 43.4 | (615.8 | ) | (580.2 | ) | 3.2 | (577.0 | ) | 14 | % | 7 | % | ||||||||||||||||||||||||||||||||||
|
Impairment
of intangible assets
|
(21.8 | ) | 21.8 | - | - | - | N/A | N/A | ||||||||||||||||||||||||||||||||||||||||
|
Restructuring
charges
|
(40.3 | ) | 40.3 | - | (0.7 | ) | 0.7 | - |
NM
|
N/A | ||||||||||||||||||||||||||||||||||||||
|
Acquisition-related
integration costs
|
(7.6 | ) | 7.6 | - | (5.2 | ) | 5.2 | - | 46 | % | N/A | |||||||||||||||||||||||||||||||||||||
|
Operating
income
|
309.9 | 16.7 | 169.3 | 0.1 | 496.0 | 383.7 | 8.1 | 15.9 | 0.1 | 407.8 | (19 | )% | 22 | % | ||||||||||||||||||||||||||||||||||
|
Equity
in earnings of equity method investees
|
218.5 | 4.1 | 222.6 | 230.1 | 0.9 | 231.0 | (5 | )% | (4 | )% | ||||||||||||||||||||||||||||||||||||||
|
EBIT
|
718.6 | 638.8 | N/A | 12 | % | |||||||||||||||||||||||||||||||||||||||||||
|
Interest
expense, net
|
(245.7 | ) | (245.7 | ) | (248.8 | ) | (248.8 | ) | (1 | )% | (1 | )% | ||||||||||||||||||||||||||||||||||||
|
Income
before income taxes
|
282.7 | 16.7 | 169.3 | 4.2 | 472.9 | 365.0 | 9.0 | 15.9 | 0.1 | 390.0 | (23 | )% | 21 | % | ||||||||||||||||||||||||||||||||||
|
Provision
for income taxes
|
(177.3 | ) | (6.3 | ) | (17.1 | ) | 32.4 | (168.3 | ) | (143.5 | ) | (3.2 | ) | 4.0 | (0.1 | ) | (142.8 | ) | 24 | % | 18 | % | ||||||||||||||||||||||||||
|
Net
income
|
$ | 105.4 | $ | 10.4 | $ | 152.2 | $ | 36.6 | $ | 304.6 | $ | 221.5 | $ | 5.8 | $ | 19.9 | $ | - | $ | 247.2 | (52 | )% | 23 | % | ||||||||||||||||||||||||
|
Diluted
earnings per common share
|
$ | 0.48 | $ | 0.05 | $ | 0.69 | $ | 0.17 | $ | 1.38 | $ | 0.99 | $ | 0.03 | $ | 0.09 | $ | - | $ | 1.10 | (52 | )% | 25 | % | ||||||||||||||||||||||||
|
Weighted
average common shares outstanding - diluted
|
219.970 | 219.970 | 219.970 | 219.970 | 219.970 | 224.093 | 224.093 | 224.093 | 224.093 | 224.093 | ||||||||||||||||||||||||||||||||||||||
|
Gross
margin
|
35.6 | % | 38.1 | % | 33.6 | % | 34.1 | % | ||||||||||||||||||||||||||||||||||||||||
|
SG&A
as a percent of net sales
|
22.6 | % | 21.1 | % | 20.1 | % | 20.0 | % | ||||||||||||||||||||||||||||||||||||||||
|
Operating
margin
|
10.6 | % | 17.0 | % | 13.3 | % | 14.1 | % | ||||||||||||||||||||||||||||||||||||||||
|
Effective
tax rate
|
62.7 | % | 35.6 | % | 39.3 | % | 36.6 | % | ||||||||||||||||||||||||||||||||||||||||
-more-
- 15
- -
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 nine months
ended November 30, 2008, and November 30, 2007. 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 November 30, 2008, strategic business realignment
items consist primarily of costs recognized by the company in connection
with its Australian initiative of $6.1 million, net of a tax benefit of
$0.0 million, and its Fiscal 2007 Wine Plan of $5.0 million, net of a tax
benefit of $1.8 million. For the three months ended November
30, 2007, strategic business realignment items primarily include a
realized gain on a prior asset sale of $3.3 million, net of additional tax
expense of $1.5 million, partially offset by costs recognized by the
company primarily in connection with (i) the Fiscal 2008 Plan
of $1.2 million, net of a tax benefit of $0.6 million, (ii) the
Fiscal 2007 Wine Plan of $0.8 million, net of a tax benefit of $0.4
million, and (iii) the Vincor Plan of $0.5 million, net of a
tax benefit of $0.2 million.
|
|
(3)
|
For
the three months ended November 30, 2008, other consists of
$32.4 million associated with the recognition of income tax expense in
connection with the gain on settlement of certain foreign currency
economic hedges.
|
|
(4)
|
For
the nine months ended November 30, 2008, strategic business realignment
items consist primarily of (i) costs recognized by the company
in connection with the Australian initiative of $110.1 million, net of a
tax benefit of $0.6 million, the Fiscal 2007 Wine Plan of $9.2 million,
net of a tax benefit of $3.6 million, and the Fiscal 2008 Plan of $8.9
million, net of a tax benefit of $3.2 million; and (ii) 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. For the
nine months ended November 30, 2007, strategic business realignment items
primarily include a loss on disposal in connection with the company's
contribution of its U.K. wholesale business of $13.8 million, including
$7.2 million additional tax expense, and costs recognized by the company
primarily in connection with (i) the Fiscal 2007 Wine Plan of
$3.3 million, net of a tax benefit of $1.5 million, (ii) the
Vincor Plan of $2.9 million, net of a tax benefit of $1.4 million,
(iii) the Fiscal 2006 Plan of $1.9 million, net of a tax
benefit of $1.2 million, and (iv) the Fiscal 2008 Plan of $1.2
million, net of a tax benefit of $0.6 million, partially offset by a
realized gain on a prior asset sale of $3.3 million, net of additional tax
expense of $1.5
million.
|
|
(5)
|
For
the nine months ended November 30, 2008, other consists
primarily of $32.4 million associated with the recognition of income tax
expense in connection with the gain on settlement of certain foreign
currency economic hedges, and $4.1 million, net of a tax benefit of $0.0
million, associated with the impairment of an Australian equity method
investment.
|
DEFINITIONS
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.
Fiscal
2008 Plan
The
company's plan announced in November 2007 to streamline certain of its
international operations, primarily in Australia, 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 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").
Vincor
Plan
The
company's plan announced in July 2006 to restructure and integrate the
operations of Vincor International Inc. (the "Vincor Plan").
Fiscal
2006 Plan
The
company's worldwide wine reorganization plan announced in fiscal 2006, including
its program to consolidate certain west coast production processes in the U.S.
(collectively, the "Fiscal 2006 Plan").
-more-
- 16
- -
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 Guidance
|
Range for the Year
Ending February 28, 2009
|
|||||||
|
Forecasted
diluted earnings per share - reported basis (GAAP)
|
$ | 0.65 | $ | 0.69 | ||||
|
Inventory
step-up
|
0.06 | 0.06 | ||||||
|
Strategic
business realignment (1)
|
0.77 | 0.77 | ||||||
|
Other
(2)
|
0.20 | 0.20 | ||||||
|
Forecasted diluted earnings per
share - comparable basis (Non-GAAP) (3)
|
$ | 1.68 | $ | 1.72 | ||||
|
Actual for the
Year Ended
February 29,
2008
|
||||
|
Diluted
earnings per share - reported basis (GAAP)
|
$ | (2.83 | ) | |
|
Inventory
step-up
|
0.03 | |||
|
Strategic
business realignment (1)
|
0.31 | |||
|
Other
(2)
|
3.85 | |||
|
Impact
of anti-dilutive potential common shares (4)
|
0.08 | |||
|
Diluted earnings per share -
comparable basis (Non-GAAP) (3)
|
$ | 1.44 | ||
|
(1)
|
Includes
$0.53, $0.08, $0.06, $0.06, $0.02 and $0.01 diluted earnings per share for
the year ending February 28, 2009, associated with the Australian
initiative, the loss in connection with the disposal of the Pacific
Northwest wine brands, the Fiscal 2007 Wine Plan, the Fiscal 2008 Plan,
the loss in connection with the sale of a nonstrategic Canadian distilling
facility, and other previously announced restructuring plans,
respectively. Includes $0.12, $0.11, $0.06, $0.02, $0.02 and
($0.02) diluted earnings per share for the year ended February 29, 2008,
associated with the loss on disposal of the Almaden and Inglenook wine
brands, the Fiscal 2008 Plan, the loss on disposal in connection with the
company's contribution of its U.K. wholesale business to the Matthew Clark
joint venture and the company's provision for income taxes in connection
with the repatriation of proceeds associated with this transaction, the
Fiscal 2007 Wine Plan, other previously announced restructuring plans, and
the realized gain on a prior asset sale, respectively.(3)
|
|
(2)
|
Includes
$0.18 and $0.02 diluted earnings per share for the year ending February
28, 2009, associated with the recognition of income tax expense in
connection with the gain on settlement of certain foreign currency
economic hedges and the Australian initiative for impairment of an equity
method investment, respectively. Includes $3.57, $0.23, $0.07,
$0.02 and ($0.05) diluted earnings per share for the year ended February
29, 2008, associated with an impairment of goodwill and intangible assets,
a valuation allowance against net operating loss carryforwards in
Australia, an impairment of an equity method investment, a loss on
write-off of certain property, plant and equipment, and a tax benefit
related to prior period stock option exercises.(3)
|
|
(3)
|
May
not sum due to rounding as each item is computed
independently.
|
|
(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 earnings per share calculation for the year ended February 29,
2008. As a result of the company having net income on a
comparable basis for the year ended February 29, 2008, 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, 2009
|
||||||||
|
Net
cash provided by operating activities (GAAP)
|
$ | 510.0 | $ | 560.0 | ||||
|
Purchases
of property, plant and equipment
|
(150.0 | ) | (170.0 | ) | ||||
|
Free
cash flow (Non-GAAP)
|
$ | 360.0 | $ | 390.0 | ||||
|
Actual for the Nine
Months Ended
November 30, 2008
|
Actual for the Nine
Months Ended
November 30, 2007
|
|||||||
|
Net
cash provided by operating activities (GAAP)
|
$ | 330.9 | $ | 252.3 | ||||
|
Purchases
of property, plant and equipment
|
(95.6 | ) | (79.5 | ) | ||||
|
Free
cash flow (Non-GAAP)
|
$ | 235.3 | $ | 172.8 | ||||
- 17
- -