Constellation Brands Reports Second Quarter Fiscal 2015 Results
(Thomson Reuters ONE) -
* Achieves comparable basis diluted EPS of $1.11 and reported basis diluted
EPS of $0.98; results impacted by higher tax rate and beer recall as company
expects beer sales shift from second to third quarter; maintains annual beer
guidance
* Reaffirms fiscal 2015 comparable basis diluted EPS outlook of $4.10 - $4.25
and updates reported basis diluted EPS outlook to $3.85 - $4.00
* Updates free cash flow projection driven by incremental brewery expansion
and glass sourcing initiatives: expects $275 - $350 million for fiscal 2015
including operating cash flow target of at least $1 billion and total
capital expenditure estimate of $725 - $775 million
+------------------------------------------------------------------------------+
|Second Quarter 2015 Financial |
|Highlights* |
| |
|(in millions, except per share |
|data) |
| |
| Comparable % Change Reported % Change|
| |
|Net sales $1,608 10% $1,604 10% |
| |
| |
| |
|Operating income $413 17% $379 -77% |
| |
| |
| |
|Operating margin 25.7% +160 bps 23.6% NM |
| |
| |
| |
|Earnings before interest and taxes |
|(EBIT) $413 16% NA NA |
| |
| |
| |
|Net income $222 18% $196 -87% |
| |
| |
| |
|Diluted earnings per share $1.11 16% $0.98 -87% |
+------------------------------------------------------------------------------+
*Definitions of reported and comparable, as well as reconciliations of non-GAAP
financial measures, are contained elsewhere in this news release.
NM=Not Meaningful
NA=Not Applicable
VICTOR, N.Y., OCT. 2, 2014 - Constellation Brands, Inc. (NYSE: STZ and STZ.B), a
leading beverage alcohol company, reported today its second quarter 2015
results.
"I am pleased with our results which reflect another quarter of excellent
performance from our beer business. This was driven by the outstanding efforts
of our wholesalers, retailers and employees in executing our plans in the
marketplace during the key summer selling season as we achieved eight percent
depletion growth during the quarter. I'm also grateful for the dedication and
diligence of this group who acted swiftly and thoroughly during our previously
announced recall efforts. Our wine and spirits performance for the quarter was
solid," said Rob Sands, president and chief executive officer, Constellation
Brands. "While we expect to see some shift in beer sales from the second quarter
into the third quarter as a result of the recall, we remain on track to achieve
our comparable basis EPS goal for fiscal 2015."
Net Sales Commentary
The 10 percent increase in consolidated net sales was driven by $73 million of
incremental net sales which represents the consolidation of one additional week
of beer business net sales in the second quarter 2015 due to the timing of the
beer business acquisition. In addition, the company posted consolidated organic
growth of five percent.
For the quarter, net sales for the beer segment increased nine percent primarily
due to volume growth driven by strong consumer demand. This result includes the
reversal of approximately two million case shipments to wholesalers as part of
the recall actions which translates to a reduction of approximately $37 million
of net sales for the second quarter. The company expects to replenish this
volume with shipments to wholesalers primarily during the third quarter.
"We continue to invest behind our beer portfolio with creative advertising and
promotional programs like our '120 Days of Summer' campaign. Our beer business
continued to significantly outperform the industry during the second quarter
driven by Modelo Especial, Corona Extra, the roll-out of Modelo Especial
Chelada, and market expansion for Victoria," said Sands. "We are also pleased
with the progress made in increasing our draft format presence in the on-premise
channel. These efforts are being led by the Corona Light draft, which expanded
to 35 new markets earlier this year."
Wine and spirits net sales on a constant currency basis increased three percent.
This primarily reflects higher shipment volume and lower promotion expense.
"During the second quarter, we experienced improving depletion trends and
favorable product mix driven by some of our fastest-growing wine and spirits
brands, including Kim Crawford, SVEDKA Vodka, Mark West, Ruffino, Black Box and
The Dreaming Tree," said Sands.
Operating Income and Net Income Commentary
The increase in consolidated comparable basis operating income includes an
incremental benefit of $22 million due to the timing of the beer business
acquisition and excellent volume growth for the base beer business. These
benefits were partially offset by higher marketing and general and
administrative expenses. The increase in wine and spirits operating income
primarily reflects higher volume and lower promotion expense.
For the second quarter 2015, pre-tax unusual items totaled $39 million. This
included an estimated $9 million reduction, net of recoveries, to operating
income as a result of the company's previously announced voluntary recall of
select packages containing 12-ounce bottles of Corona Extra where certain glass
bottles contained defects. The affected bottles came from a glass plant operated
by a third-party manufacturer which supplies the Nava brewery with bottles.
The second quarter of fiscal 2014 included a $1.6 billion non-cash gain on the
remeasurement to fair value of the company's original 50 percent interest in the
Crown Imports joint venture as a result of the beer business acquisition and
$301 million of charges related to non-cash impairments of goodwill and
intangible assets associated with the company's acquired Canadian wine business.
Interest expense for the second quarter totaled $85 million, a decrease of six
percent. The decrease was primarily due to lower average interest rates.
The comparable basis effective tax rate for the second quarter 2015 was 32
percent compared to a 29 percent tax rate for the prior year second quarter,
which reflected the favorable outcome of various tax items.
The reported basis effective tax rate for the second quarter 2015 was 32 percent
compared to a four percent tax rate for the prior year second quarter, which
reflected the recognition of the $1.6 billion non-taxable gain and the non-
deductible goodwill impairment charge.
Free Cash Flow Commentary
Free cash flow for the first six months of fiscal 2015 totaled $360 million as
compared to $440 million for the same period last year. Incremental benefits
from the beer business acquisition were more than offset by higher capital
expenditures related primarily to the expansion of the Nava brewery in Mexico.
"Earlier today we announced our new glass sourcing strategy and plans to add an
incremental five million hectoliters of production capacity to our brewery in
Nava, Mexico, which will take our total capacity to 25 million hectoliters at
this facility. In addition, we outlined the additional capital investments
needed for these initiatives which are designed to support the strong growth of
the beer business over the long-term. As a result of these activities, we are
increasing our total capital expenditure estimate for fiscal 2015 to a range of
$725 - $775 million versus our previous range of $575 - $625 million. Due to
this higher capital expenditure estimate, we are now targeting free cash flow
for fiscal 2015 to be in the range of $275 - $350 million versus our previous
range of $425 - $500 million," said Bob Ryder, chief financial officer,
Constellation Brands. "We still expect to generate operating cash flow of at
least $1 billion for fiscal 2015 and despite the higher capital expenditure
investments, we continue to expect our debt-to-comparable basis EBITDA ratio to
be below 4 times during fiscal 2016."
Beer Business Acquisition
The company completed its acquisition of Grupo Modelo's U.S. beer business from
Anheuser-Busch InBev on June 7, 2013 for approximately $5.3 billion, including
$558 million that was paid as a post-closing purchase price adjustment in June
2014. The transaction includes full ownership of Crown, which provides
Constellation with complete, independent control of its U.S. commercial
business; a state-of-the-art brewery in Nava, Mexico; and an exclusive perpetual
brand license in the U.S. to import, market and sell Corona and the other Modelo
brands Crown currently sells in the U.S. market. The perpetual brand license
also includes certain brands and brand extensions not currently marketed in the
U.S. by Crown and the freedom to develop new brand extensions and innovations.
Outlook
The table below sets forth management's current diluted EPS expectations for
fiscal 2015 compared to fiscal 2014 actual results, both on a reported basis and
a comparable basis.
+--------------------------+---------------------+---------------------+
| | Reported Basis | Comparable Basis |
| +-------------+-------+-------------+-------+
| | FY15 | FY14 | FY15 | FY14 |
| | Estimate |Actual | Estimate |Actual |
+--------------------------+-------------+-------+-------------+-------+
|Fiscal Year Ending Feb. 28|$3.85 - $4.00|$9.83 |$4.10 - $4.25|$3.25 |
+--------------------------+-------------+-------+-------------+-------+
Full-year fiscal 2015 guidance includes the following current assumptions:
* Interest expense: approximately $345 - $355 million
* Tax rate: approximately 30 percent
* Weighted average diluted shares outstanding: approximately 201 million
* Free cash flow: approximately $275 - $350 million
* Capital expenditures: approximately $725 - $775 million, including $600 -
$650 million for the beer business
Conference Call
A conference call to discuss second quarter 2015 results and outlook, including
the company's glass sourcing strategy and incremental brewery expansion will be
hosted by President and Chief Executive Officer Rob Sands and Executive Vice
President and Chief Financial Officer Bob Ryder on Thursday, Oct. 2, 2014 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), a copy of the company's announcement
regarding its glass sourcing strategy and incremental brewery expansion, 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 items that
affect comparability ("unusual items"). The company's measure of segment
profitability excludes 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.
About Constellation Brands
Constellation Brands (NYSE: STZ and STZ.B) is a leading international producer
and marketer of beer, wine and spirits with operations in the U.S., Canada,
Mexico, New Zealand and Italy. In 2013, Constellation was one of the best
performing stocks in the S&P 500. Constellation is the number three beer company
in the U.S. with high-end, iconic imported brands including Corona Extra, Corona
Light, Modelo Especial, Negra Modelo and Pacifico. Constellation is also the
world's leader in premium wine selling great brands that people love including
Robert Mondavi, Clos du Bois, Kim Crawford, Rex Goliath, Mark West, Franciscan
Estate, Ruffino and Jackson-Triggs. The company's premium spirits brands include
SVEDKA Vodka and Black Velvet Canadian Whisky.
Based in Victor, N.Y., the company believes that industry leadership involves a
commitment to brand-building, our trade partners, the environment, our investors
and to consumers around the world who choose our products when celebrating big
moments or enjoying quiet ones. Founded in 1945, Constellation has grown to
become a significant player in the beverage alcohol industry with more than 100
brands in its portfolio, sales in approximately 100 countries, about 40
facilities and approximately 6,300 talented employees. We express our company
vision: to elevate life with every glass raised. To learn more, visit
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 Nov. 28, 2014, 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
glass sourcing strategy transactions between Constellation Brands and Anheuser-
Busch InBev SA/NV regarding a glass plant purchase and between Constellation
Brands and Owens-Illinois regarding formation of a joint venture and expansion
of a glass plant are subject to the satisfaction of certain closing conditions
and receipt of any required regulatory approvals. There can be no assurance
that either of these transactions will occur or will occur on the timetable
contemplated hereby.
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:
* brewery expansion activities and glass sourcing strategy transactions take
place with expected scope, on expected terms and timetable, and with receipt
of any necessary regulatory approvals;
* accuracy of supply projections, including those relating to brewery
expansion and glass sourcing;
* timeframe and actual costs associated with brewery expansion and glass
sourcing may vary from management's current expectations due to market
conditions, the company's cash and debt position, and other factors as
determined by management;
* free cash flow, operating cash flow, capital expenditures to support long-
term growth, and debt leverage ratios may vary from management's current
estimates;
* timing and volume amount of beer shipments to wholesalers may vary from
current expectations due to actual consumer demand;
* the impact of and the ability to realize the anticipated benefits of
acquisitions, including as a result of difficulty in integrating the
businesses of the companies involved;
* the exact duration of the share repurchase implementation and the amount and
timing of any additional share repurchases;
* 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, 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;
* accuracy of the bases for forecasts relating to joint ventures and
associated costs, losses, purchase obligations and capital investment
requirements; 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, 2014, which could cause actual future
performance to differ from current expectations.
CONTACTS
Media
Cheryl Gossin: 585-678-7191
Amy Martin: 585-678-7141
Investor Relations
Patty Yahn-Urlaub: 585-678-7483
Bob Czudak: 585-678-7170
Q2 FY15 Earnings Release Financial Statements:
http://hugin.info/143788/R/1860177/651939.pdf
This announcement is distributed by GlobeNewswire on behalf of
GlobeNewswire 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 GlobeNewswire
[HUG#1860177]
Unternehmensinformation / Kurzprofil:
Datum: 02.10.2014 - 13:30 Uhr
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