Constellation Brands Inc

Consumer GoodsFood & BeverageBeverages
    
    

    



  * Achieves comparable basis diluted EPS of $0.39 and reported basis diluted
    EPS of $0.35
  * Generates strong free cash flow of $220 million; reaffirms fiscal 2012 free
    cash flow target of $600 - $650 million
  * Decreases debt by $244 million
  * Implements restructuring initiative to gain efficiencies
  * Updates fiscal 2012 outlook: comparable basis diluted EPS of $1.90 - $2.00
    remains unchanged, expects reported basis diluted EPS of $1.82 - $1.92


+------------------------------------------------------------------------------+
|First Quarter 2012 Financial Highlights*                                      |
|(in millions, except per share data)                                          |
|                                                                              |
|                                                                              |
|                                                                              |
|                             Comparable     % Change     Reported     % Change|
|                                                                              |
|Consolidated net sales             $635         -19%         $635         -19%|
|                                                                              |
|                                                                              |
|                                                                              |
|Operating income                   $116          12%         $102           6%|
|                                                                              |
|                                                                              |
|                                                                              |
|Operating margin                  18.2%      510 bps        16.0%      380 bps|
|                                                                              |
|                                                                              |
|                                                                              |
|Equity in earnings of               $62          13%          $62          14%|
|equity method                                                                 |
|investees**                                                                   |
|                                                                              |
|                                                                              |
|                                                                              |
|Earnings before interest           $178          12%           NA           NA|
|and taxes (EBIT)                                                              |
|                                                                              |
|                                                                              |
|                                                                              |
|Net income                          $84           1%          $75          52%|
|                                                                              |
|                                                                              |
|                                                                              |
|Diluted earnings per              $0.39           3%        $0.35          59%|
|share                                                                         |
|                                                                              |
|                                                                              |
+------------------------------------------------------------------------------+

VICTOR, N.Y., June 30, 2011 - Constellation Brands, Inc. (NYSE: STZ), the
world's leading premium wine company, reported today its first quarter 2012
results.

"I am pleased with our first quarter financial performance which was generally
in-line with our expectations. Highlights for the quarter include greatly
improved operating margin and favorable U.S. product mix, strong free cash flow
and ongoing debt reduction. We believe focused marketing efforts at Crown are
driving momentum in the beer business," said Rob Sands, president and chief
executive officer, Constellation Brands. "With the sale of our Australian and
U.K. business, we have significantly improved our financial profile and
simplified our business. As a result, we are taking the next logical step to
increase efficiencies and streamline our operations worldwide."

+------------------------------------------------------------------------------+
|First Quarter 2012 Net Sales Highlights*                                      |
|(in millions)                                                                 |
|                                                                              |
|                          Reported                         Organic            |
|                                              |                               |
|                                              |                               |
|                                      Constant|                       Constant|
|                     Net        %     Currency|      Net        %     Currency|
|                   Sales   Change       Change|    Sales   Change       Change|
|                                              |                               |
|Consolidated        $635     -19%         -20%|     $635       3%           2%|
|                                              |                               |
|North               $635       8%           6%|     $635       3%           2%|
|America(1)                                    |                               |
|                                              |                               |
|                                              |                               |
+----------------------------------------------+-------------------------------+

*Definitions of reported, comparable, organic and constant currency, as well as
reconciliations of non-GAAP financial measures, are contained elsewhere in this
news release.
** Hereafter referred to as "equity earnings."
NA=Not applicable
(1) Prior to the divestiture of the Australian and U.K. business, net sales from
CWNA to CWAE were eliminated as intercompany net sales.  Subsequent to the
divestiture, these net sales are now recorded as third party net sales.
Accordingly, the prior intercompany net sales are added back to the prior
reported net sales for comparison purposes.

Net Sales Commentary

Reported consolidated net sales decreased 19 percent due primarily to the
divestiture of the Australian and U.K. wine business.

North American net sales on an organic constant currency basis increased two
percent primarily due to favorable product mix and lower promotion expense in
the U.S., partially offset by a decrease in volume. "As expected, our first
quarter depletions were somewhat muted due to recent price increases for some of
our value and specialty brands and the timing of promotional activities for our
U.S. wine and spirits portfolio," said Sands. "However, we remain committed to
growing depletions at least in line with category growth on an annual basis
while achieving our profit goals. This year's focus on innovation and new
product development has already led to the successful launch of almost half of
the planned new product introductions for the year including Rex Goliath
Moscato, Ruffino Prosecco, Arbor Mist Pomegranate Berry Pinot Noir and the
Simply Naked product line."

Operating Income and Net Income Commentary

The increase in consolidated comparable basis operating income was driven by
reduced corporate costs, an improvement in the North American operating results
and the divestiture of the Australian and U.K. business, which generated an
operating loss in the first quarter last year.

Constellation's equity earnings from its 50 percent interest in the Crown
Imports joint venture totaled $60 million, an increase of 10 percent from the
prior year.  For first quarter 2012, Crown generated net sales of $678 million,
an increase of nine percent, and operating income of $120 million, an increase
of 10 percent.  The increase in net sales and operating income for Crown was
primarily driven by volume growth due in part to the ongoing launch of the
Victoria brand. Net sales and operating income also benefited from improvement
in net pricing and product mix, partially offset by increased marketing spend.

"Crown's marketplace momentum continued during the first quarter as it
outperformed the industry and import category driven by key marketing
initiatives for Cinco de Mayo and the launch of the second consecutive 'Win the
Beach Getaway Sweepstakes,'" said Sands. "In addition, distributor inventories
are better positioned this year versus last year heading into the important
summer selling season."

For first quarter 2012, pre-tax restructuring charges and unusual items totaled
$14 million compared to $7 million for the prior year first quarter.

Interest expense totaled $44 million, a decrease of nine percent. The decrease
was primarily due to lower average borrowings.

The comparable basis effective tax rate for the quarter was 37 percent and
compares to a 24 percent rate for the prior year first quarter which reflected
the favorable outcome of various tax items.

During first quarter 2012, the company began to implement operational changes to
further align the business, increase efficiencies and reduce its cost structure
following the sale of its Australian and U.K. business. Constellation
anticipates generating cost savings from this initiative of more than $10
million, the majority of which is expected to be realized in fiscal 2013. These
savings include synergies gained primarily from realigning certain
administrative, operational and commercial functions on a global basis.

In connection with this initiative, the company expects to incur one-time cash
charges of approximately $26 million. Nearly all of the charges are expected to
be recognized during fiscal 2012.

Free Cash Flow Commentary

Free cash flow for the quarter totaled $220 million. "Our strong free cash flow
generation helped drive a $244 million decrease in debt and reduce our debt to
comparable basis EBITDA ratio to the low three times range at the end of the
fiscal quarter," said Bob Ryder, chief financial officer, Constellation Brands.
"For fiscal 2012, the company is on target to achieve free cash flow in the
range of $600 to $650 million, including the funding of the restructuring
program."

Outlook

The table below sets forth management's current diluted EPS expectations for
fiscal year 2012 compared to fiscal year 2011 actual results, both on a reported
basis and a comparable basis.

                     Constellation Brands Fiscal Year 2012
                       Diluted Earnings Per Share Outlook

+--------------------+------------------------+------------------------+
|                    |     Reported Basis     |    Comparable Basis    |
|                    +---------------+--------+---------------+--------+
|                    |     FY12      |  FY11  |     FY12      |  FY11  |
|                    |   Estimate    | Actual |   Estimate    | Actual |
+--------------------+---------------+--------+---------------+--------+
| Fiscal Year Ending |               |        |               |        |
| Feb. 29/28         | $1.82 - $1.92 | $2.62  | $1.90 - $2.00 | $1.91  |
+--------------------+---------------+--------+---------------+--------+

Full-year fiscal 2012 guidance includes the following current assumptions but
excludes any impact from any repurchases of the company's common stock:

  * Interest expense: approximately $180 - $190 million
  * Tax rate: approximately 29 percent
  * Weighted average diluted shares outstanding: approximately 216 million
  * Free cash flow: $600 - $650 million


Conference Call

A conference call to discuss first quarter 2012 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 Thurs., June 30, 2011 at
10:30 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 during the call will be available on the Internet at Constellation's
website: www.cbrands.com under "Investors," prior to the call.

Explanations

Reported basis ("reported") operating income, net income and diluted EPS are as
reported under generally accepted accounting principles.  Operating income, net
income and diluted EPS on a comparable basis ("comparable"), exclude
restructuring charges and unusual items.  The company's measure of segment
profitability excludes restructuring charges and unusual items, which is
consistent with the measure used by management to evaluate results.

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.

Supplemental Financial Information

Tables reconciling non-GAAP measures, together with definitions of these
measures and the reasons management uses these measures, are attached to and are
part of this news release. Please see the link below.

About Constellation Brands

Constellation Brands is the world's leading premium wine company that achieves
success through an unmatched knowledge of wine consumers, storied brands that
suit varied lives and tastes, and talented employees worldwide. With a broad
portfolio of widely admired premium products across the wine, beer and spirits
categories, Constellation's brand portfolio includes Robert Mondavi, Clos du
Bois, Blackstone, Arbor Mist, Estancia, Ravenswood, Jackson Triggs, Kim
Crawford, Corona Extra, Black Velvet Canadian Whisky and SVEDKA Vodka.

Constellation Brands (NYSE: STZ and STZ.B) is a S&P 500 Index and Fortune 1000®
company with more than 100 brands in our portfolio, sales in about 125 countries
and operations in approximately 30 facilities. The company believes that
industry leadership involves a commitment to our brands, to the trade, to the
land, to investors and to different people around the world who turn to our
products when celebrating big moments or enjoying quiet ones. We express this
commitment through our vision: to elevate life with every glass raised. To learn
more about Constellation, visit the company's website atwww.cbrands.com.

Forward-Looking Statements

The statements made under the heading Outlook, and all statements other than
statements of historical facts set forth in this news release 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.

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 Aug. 31, 2011, 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, financing or share repurchase that may be
completed after the date of this release. There can be no assurance that a
settlement of matters relating to a put option in Ruffino S.r.l. will occur. 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:

  * actual costs associated with any settlement regarding Ruffino S.r.l.;
  * the exact duration of the share repurchase implementation; and the amount
    and timing of any share repurchases;
  * completion of various portfolio actions; implementation of consolidation
    activities and actual U.S. distributor transition experience;
  * 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;
  * accuracy of the bases for forecasts relating to joint ventures and
    associated costs, losses, purchase obligations and capital investment
    requirements;
  * restructuring charges and other one-time costs associated with 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 lower than expected sales or higher than expected expenses;

  * 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 of the U.S., continuing instability in world financial
    markets, or unanticipated environmental liabilities and costs;
  * changes to accounting rules and tax laws, and other factors which could
    impact the company's reported financial position, results of operations 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 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. 28, 2011, which could cause actual future
    performance to differ from current expectations.


                                 #     #     #

CONTACTS

Media
Angie Howland Blackwell-585-678-7141
Eric Thomas-585-678-7466

Investor Relations
Patty Yahn-Urlaub-585-678-7483
Bob Czudak-585-678-7170




Q1 FY 2012 Financial Tables: 
http://hugin.info/143788/R/1526745/462836.pdf




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Source: Constellation Brands Inc via Thomson Reuters ONE

[HUG#1526745]