Constellation Brands Reports Fiscal 2013 Results and Fiscal 2014 Outlook
(Thomson Reuters ONE) -
* Achieves comparable basis diluted EPS of $2.19 and reported basis diluted
EPS of $2.04; results include slightly lower than expected tax rate
* Gains market share across beer, wine and spirits businesses in fiscal 2013
* Provides fiscal 2014 outlook assuming end of Q1 fiscal 2014 close for beer
transaction; expects comparable basis diluted EPS of $2.55 - $2.85 and
reported basis diluted EPS of $2.29 - $2.59
* Generates free cash flow of $494 million in fiscal 2013 and projects free
cash flow of $475 - $575 million for fiscal 2014
* Reaches agreement in principle with U.S. Department of Justice advancing
completion of beer transaction and receives Mexican regulatory approval
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|Fiscal 2013 Financial Highlights* |
|(in millions, except per share data) |
| |
| |
| |
| Comparable % Change Reported % Change|
| |
|Consolidated net sales $2,796 5% $2,796 5%|
| |
| |
| |
|Operating income $557 3% $523 7%|
| |
| |
| |
|Operating margin 19.9% -40 bps 18.7% 40 bps|
| |
| |
| |
|Equity in earnings of $234 2% $233 2%|
|equity method |
|investees** |
| |
| |
| |
|Earnings before interest $791 3% NA NA|
|and taxes (EBIT) |
| |
| |
| |
|Net income $416 -15% $388 -13%|
| |
| |
| |
|Diluted earnings per $2.19 -6% $2.04 -4%|
|share |
| |
| |
+------------------------------------------------------------------------------+
(*Definitions of reported and comparable, 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
VICTOR, N.Y., April 10, 2013 - Constellation Brands, Inc. (NYSE: STZ and STZ.B),
the world's leading premium wine company, reported today its fiscal 2013
results.
"This has been an exciting year for Constellation," said Rob Sands, president
and chief executive officer, Constellation Brands. "From an operational
perspective, we outperformed the growth of the U.S. wine and spirits industry
gaining market share collectively across all channels. For the third consecutive
year, Crown achieved share gains as it outperformed the U.S. beer industry and
the import category in both on and off premise channels. Additionally, we
anticipate achieving a significant milestone by completing the most
transformational acquisition in the history of our company, making Constellation
the producer and brand owner under a perpetual license of the Modelo portfolio
of iconic beer brands in the U.S. including Corona Extra, the best selling
imported beer, Corona Light, the leading imported light beer and Modelo
Especial, the third largest and one of the fastest growing major imported beer
brands."
Fiscal 2013 Net Sales Commentary
Wine and spirits net sales on an organic constant currency basis increased three
percent primarily due to an increase in volume and favorable product mix,
partially offset by higher promotional costs. The acquisition of Mark West and
Ruffino complemented the organic growth as total net sales increased five
percent.
"Our U.S. wine and spirits business sustained positive momentum throughout the
year, posting depletion growth of nearly four percent driven by our ongoing
commitment to brand building, innovation and marketplace execution," said Sands.
"We experienced double-digit depletion growth for some of our award-winning
Focus Brands including Kim Crawford, Robert Mondavi, Simi, Ruffino, Mark West,
Black Box and Rex Goliath. Our new brands, including Simply Naked, Primal Roots
and The Dreaming Tree, also posted robust sales and depletion trends and gained
significant distribution at retail. These brands, along with SVEDKA Vodka,
Nobilo and Clos du Bois, captured industry growth awards for calendar 2012."
Fiscal 2013 Operating Income and Net Income Commentary
The increase in consolidated comparable basis operating income was driven
primarily by the favorable organic net sales growth combined with the benefits
from Mark West and Ruffino, partially offset by higher SG&A costs.
The company's comparable basis equity earnings from its 50 percent interest in
the Crown joint venture totaled $221 million compared to $215 million for the
prior year. For fiscal 2013, Crown generated net sales of $2.6 billion, an
increase of five percent, and operating income of $448 million, an increase of
four percent. The increase in net sales for Crown was largely driven by volume
growth but was tempered by the loss of the St. Pauli Girl brand volume. The
increase in operating income primarily reflects the volume growth.
"Crown's strong marketplace performance was driven by excellent sales and retail
execution with Modelo Especial, Corona Light, Negra Modelo and Pacifico
achieving record sales for the year," said Sands.
Interest expense totaled $227 million, an increase of 25 percent. The increase
was primarily due to higher average borrowings.
The comparable basis effective tax rate for fiscal 2013 was 26 percent, which
included the benefit of higher foreign tax credits, and compares to a 17 percent
rate for the prior year which reflected the favorable outcome of various tax
items.
Free Cash Flow Commentary and Share Repurchases Commentary
Free cash flow for fiscal 2013 totaled $494 million as compared to $716 million
for the prior year. The decrease was primarily due to higher U.S. grape and bulk
wine purchases in fiscal 2013 and the receipt of tax refunds in the prior year
period.
During fiscal 2013, the company repurchased 18 million shares of common stock at
a cost of $383 million.
"Our strong free cash flow generation, improved credit profile and diligent
capital structure management enabled stock repurchases, the Mark West
acquisition and the reduction of our net debt position in fiscal 2013. This has
effectively positioned us to fund the pending acquisition of the remaining
interest in Crown Imports, as well as the Piedras Negras brewery in Mexico and
the perpetual brand rights for the Modelo brands in the U.S.," said Bob Ryder,
chief financial officer, Constellation Brands.
+------------------------------------------------------------------------------+
|Fourth Quarter 2013 Financial Highlights* |
|(in millions, except per share data) |
| |
| |
| |
| Comparable % Change Reported % Change|
| |
|Consolidated net sales $696 11% $696 11%|
| |
| |
| |
|Operating income $134 9% $127 60%|
| |
| |
| |
|Operating margin 19.2% -40 bps 18.3% 570 bps|
| |
| |
| |
|Equity earnings $50 3% $50 1%|
| |
| |
| |
|EBIT $184 7% NA NA|
| |
| |
| |
|Net income $90 -35% $82 -21%|
| |
| |
| |
|Diluted earnings per $0.47 -32% $0.43 -16%|
|share |
| |
| |
+------------------------------------------------------------------------------+
Fourth Quarter 2013 Net Sales Commentary
Wine and spirits net sales on an organic constant currency basis increased eight
percent primarily due to an increase in volume and favorable product mix. The
organic net sales growth combined with benefits from the Mark West acquisition
drove the total net sales increase.
Fourth Quarter 2013 Operating Income and Net Income Commentary
The increase in consolidated comparable basis operating income was driven
primarily by the favorable net sales growth.
The company's comparable basis equity earnings from its 50 percent interest in
the Crown joint venture totaled $50 million compared to $49 million from the
prior year fourth quarter. For fourth quarter 2013, Crown generated net sales of
$528 million, an increase of one percent, and operating income of $103 million,
an increase of four percent. Net sales growth was tempered by fewer selling
days during the quarter and the loss of the St. Pauli Girl brand volume.
Interest expense totaled $60 million, an increase of 26 percent. The increase
was primarily due to higher average borrowings.
The comparable basis effective tax rate for fourth quarter 2013 was 27 percent,
which included the benefit of higher foreign tax credits, and compares to a
negative 11 percent rate for the prior year fourth quarter which reflected the
favorable outcome of various tax items.
Beer Business Acquisition
In February 2013, Constellation announced that in addition to its previous
agreement with AB InBev to acquire the remaining 50 percent interest in Crown
Imports, it had also entered into an agreement to purchase the Piedras Negras
brewery in Mexico and the perpetual brand rights for Corona and all other Modelo
brands in the U.S.
The purchase price for the combined transaction is $4.75 billion. This includes
$1.85 billion for the remaining interest in Crown, and $2.9 billion for the
brewery and perpetual brand rights which is based on an initial assumed EBITDA
of $310 million representing the profit stream from Modelo's sales of beer to
Crown Imports for calendar 2012. The $2.9 billion purchase price is subject to a
post-closing adjustment. Constellation has fully committed bridge financing in
place for acquisition activities. Permanent financing is expected to consist of
a combination of senior notes and term loans, with the remainder of the funding
coming from the company's revolving credit facility, accounts receivable
securitization facility and available cash.
"Constellation will become a fully independent beer competitor in the U.S. and
will have perpetual rights for all Modelo brands with autonomous control of
distribution, marketing, promotion and pricing. In addition, Constellation will
have full control of its production and supply chain," Sands added. "Overall,
this transaction will nearly double the sales of our company, significantly
enhance our earnings and free cash flow, diversify our profit stream and provide
new avenues for growth."
The company has reached two key milestones for regulatory approvals for the
transaction including an agreement in principle with the U.S. Department of
Justice and approval by the Mexican Antitrust Commission.
At this time, the closing of the transaction is expected to occur around the end
of Constellation's first quarter fiscal 2014 or shortly thereafter.
Outlook
The table below sets forth management's current diluted EPS expectations for
fiscal 2014 compared to fiscal 2013 actual results, both on a reported basis and
a comparable basis.
+------------------+---------------------------+---------------------------+
| | Reported Basis | Comparable Basis |
| +-----------------+---------+-----------------+---------+
| | FY14 | FY13 | FY14 | FY13 |
| | Estimate | Actual | Estimate | Actual |
+------------------+-----------------+---------+-----------------+---------+
|Fiscal Year Ending| | | | |
|Feb. 28 | $2.29 - $2.59| $2.04| $2.55 - $2.85| $2.19|
+------------------+-----------------+---------+-----------------+---------+
For fiscal 2014, the company is projecting free cash flow of $475 - $575
million.
The diluted EPS and free cash flow projections assume the beer business
acquisition closes at the end of the first quarter fiscal 2014 and exclude
acquisition accounting impacts.
"For the beer business in fiscal 2014, Crown is targeting depletions and net
sales growth in the low-to-mid single digit range," said Sands. "Operating
income growth for Crown before brewery profits is expected to exceed sales
growth. Although a final amount is not yet available, we currently project that
the EBITDA associated with the profit stream from Modelo's sales of beer to
Crown Imports in calendar 2012 was approximately $370 million."
"For the wine and spirits business, we believe our positive marketplace momentum
and continuing focus on innovation, brand building and sales execution positions
us to grow volume at least in-line with the U.S. wine and spirits category and
generate favorable product mix in fiscal 2014," Sands added. "The anticipated
impact of higher grape costs and additional marketing investments for key Focus
Brands are expected to result in operating income growth for the wine and
spirits business that is below net sales growth. Overall, we expect to gain
market share across our beer, wine and spirits businesses for fiscal 2014."
Full-year fiscal 2014 guidance also includes the following current assumptions:
* Interest expense: approximately $345 - $355 million
* Tax rate: approximately 37 percent
* Weighted average diluted shares outstanding: approximately 199 million
* Capital expenditures: approximately $200 - $230 million
The capital expenditures projection includes approximately $120 - $140 million
for expansion activities related to the Piedras Negras brewery. One-time costs
and tax rate projections factored in the guidance outlined above are based on
preliminary estimates.
2013 New York City Institutional Investor Meeting
Constellation will hold an institutional investor meeting Wed., June 5, 2013 in
New York City from 1-5 p.m. at a location to be determined.
Presentations will be made by Rob Sands, Bob Ryder and other members of
Constellation's management team. Following the meeting, a cocktail reception
will be held.
Conference Call
A conference call to discuss fourth quarter and full year fiscal 2013 results,
fiscal 2014 outlook and an update on the status of the pending beer transaction
will be hosted by President and Chief Executive Officer Rob Sands and Executive
Vice President and Chief Financial Officer Bob Ryder on Wed., April 10, 2013 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 the company'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,
comparable basis effective tax rate 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, Inc.
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 more than 4,400 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, Kim Crawford, Inniskillin, Franciscan Estate, Mark West, Ruffino,
Simi, Estancia, 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 100 countries
and operations in approximately 40 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 at www.cbrands.com.
Forward-Looking Statements
The statements made under the heading Outlook, and all statements other than
statements of historical fact set forth in this news release regarding
Constellation Brands' 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 Brands may reiterate the Projections.
Prior to the start of the company's quiet period, which will begin at the close
of business on June 5, 2013, the public can continue to rely on the Projections
as still being Constellation Brands' current expectations on the matters
covered, unless the company publishes a notice stating otherwise. During
Constellation Brands' "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. The Projections should not be
construed in any manner as a guarantee that such results will in fact occur.
The transaction between Constellation Brands and Anheuser-Busch InBev SA/NV
regarding the purchase by Constellation Brands of the 50% portion of Crown
Imports LLC which Constellation Brands does not already own, acquisition of the
Piedras Negras brewery and certain perpetual brand rights (collectively, the
"Crown Acquisition") is subject to the satisfaction of certain closing
conditions, including receipt of necessary regulatory approvals and the
consummation of certain transactions between Anheuser-Busch InBev SA/NV and
Grupo Modelo, S.A.B. de C.V., and certain of its affiliates (the "Modelo
Transaction"). There can be no assurance the Modelo Transaction or the Crown
Acquisition will occur or will occur on the timetable projected by the company.
The availability of financing under the company's senior credit facility and
its securitization facility is subject to satisfaction of the terms and
conditions contained in the underlying documents.
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:
* completion of the Modelo Transaction;
* completion of the Crown Acquisition and the associated brewery expansion
under the expected terms;
* availability of financing for the Crown Acquisition under the expected
sources and terms, including note issuances;
* accuracy of projections relating to the Crown Acquisition, including brewery
supply projections;
* the exact duration of the share repurchase implementation and the amount and
timing of any additional share repurchases;
* 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 and water 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. 29, 2012, as supplemented by the company's
Quarterly Report on Form 10-Q for the fiscal quarter ended May 31, 2012,
which could cause actual future performance to differ from current
expectations.
CONTACTS
Media
Angela Howland Blackwell: 585-678-7141
Cheryl Gossin: 585-678-7191
Investor Relations
Patty Yahn-Urlaub: 585-678-7483
Bob Czudak: 585-678-7170
Fiscal 2013 Financial Tables:
http://hugin.info/143788/R/1691410/555678.pdf
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Constellation Brands Inc via Thomson Reuters ONE
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