Constellation Brands Reports Fiscal 2011 Results
(Thomson Reuters ONE) -
* Achieves comparable basis diluted EPS of $1.91 and reported basis diluted
EPS of $2.62; reported results reflect favorable tax benefit
* Generates record free cash flow of $530 million
* Decreases debt by approximately $600 million
* Provides fiscal 2012 outlook; projects diluted EPS of $1.90 - $2.00 and
free cash flow of $600 - $650 million
* Completes sale of Australian and U.K. business
* Board of Directors authorizes $500 million share repurchase program;
management currently expects multi-year implementation
Fiscal 2011 Financial Highlights*
(in millions, except per share data)
Comparable % Reported %
Change Change
Consolidated net sales $3,332 -1% $3,332 -1%
Operating income $534 -5% $503 61%
Operating margin 16.0% -60 bps 15.1% NM
Equity in earnings of equity $244 2% $244 14%
method investees**
Earnings before interest and $778 -3% NA NA
taxes (EBIT)
Net income $408 9% $560 NM
Diluted earnings per share $1.91 13% $2.62 NM
VICTOR, N.Y., April 7, 2011 - Constellation Brands, Inc. (NYSE: STZ), the
world's leading premium wine company, reported today its fiscal 2011 results.
"Fiscal 2011 marks another year of significant accomplishments as we
successfully executed on several of our key strategic goals and business
initiatives," said Rob Sands, president and chief executive officer. "We are
realizing the benefits from the implementation of our U.S. distributor
initiative through improvements in depletion and consumer take-away trends. We
generated record free cash flow, executed an accelerated stock buyback
transaction and reduced debt by almost $600 million for the second consecutive
year. Additionally, we sold our Australian and U.K. business as part of our
efforts to further premiumize our portfolio, improve ROIC and generate
profitable organic growth."
Fiscal 2011 Net Sales Highlights*
(in millions)
Reported Organic
Constant Constant
Net % Currency Net % Currency
Sales Change Change Sales Change Change
Consolidated $3,332 -1% -3% $3,332 5% 3%
North America $2,557 5% 4% $2,557 5% 4%
Australia and Europe $775 -17% -18% $775 2% --
*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
NM=Not meaningful
Fiscal 2011 Net Sales Commentary
Reported consolidated net sales decreased one percent due primarily to the
divestitures of the U.K. cider and Australian and U.K. wine businesses. Organic
net sales on a constant currency basis increased three percent versus the prior
year.
North America net sales on an organic constant currency basis increased four
percent primarily due to a combination of U.S. volume growth and favorable U.S.
product mix, partially offset by higher promotion cost. "While the distributor
initiative favorably impacted sales, depletions for our total U.S. domestic
business increased three percent while depletions for our focus brands increased
almost 10 percent," said Sands. "For the 2010 calendar year, we maintained
market share on a volume basis across all channels for the wine and spirits
categories driven by strong performance of brands including Robert Mondavi, Clos
du Bois, Estancia, Kim Crawford, Simi, Wild Horse and SVEDKA."
Australia and Europe net sales on an organic constant currency basis were level
with the prior year.
Fiscal 2011 Operating Income and Net Income Commentary
The consolidated comparable basis operating income decline reflected investments
in selling, general and administrative expense for the North America and
Corporate segments. In addition, operating income for the Australia and Europe
segment decreased primarily due to the January 2010 divestiture of the U.K.
cider business.
Constellation's equity earnings from its 50 percent interest in the Crown
Imports joint venture totaled $226 million, an increase of two percent from the
prior year. For fiscal 2011, Crown generated net sales of $2.4 billion, an
increase of six percent, and operating income of $453 million, an increase of
two percent. The net sales increase for Crown was driven by volume growth
reflecting improvement in consumer demand and distributor inventories returning
to more optimum levels. Operating income for Crown increased primarily due to
the higher volume partially offset by a contractual cost increase and higher
SG&A expense.
"Throughout the year, Crown built positive momentum in a number of areas by
launching new products and packaging configurations and executing key
advertising programs. This resulted in Crown outperforming the industry and the
import category overall, with depletions growing low- to mid-single digits for
the year," commented Sands.
For fiscal 2011, pre-tax restructuring charges and unusual items totaled $32
million compared to $275 million for the prior year.
Interest expense totaled $195 million, a decrease of 26 percent. The decrease
was due to lower average interest rates and borrowings.
The comparable basis effective tax rate for fiscal 2011 and fiscal 2010 was 30
percent. The comparable basis effective tax rate for both periods reflects the
favorable outcome of various tax items.
Constellation completed the sale of its Australian and U.K. business to CHAMP
Private Equity on Jan. 31, 2011 in a transaction that was valued at
approximately A$290 million. The company retained an approximate 20 percent
interest in the business and received net cash proceeds of about $220 million,
subject to post-closing adjustments. In connection with the sale, the company
recorded a net pre-tax gain of $84 million and a net tax benefit of $198
million.
During fourth quarter 2011, the company recorded a charge of $60 million related
to the potential settlement of the Ruffino put option by its majority
shareholder. During fiscal 2011, the company completed an accelerated stock
buyback transaction under which it paid $300 million and received 17.2 million
shares.
Free Cash Flow Commentary
Free cash flow for the year totaled $530 million. "Our record free cash flow
generation and proceeds from the sale of the Australian and U.K. business
enabled the company to fund the accelerated stock buyback transaction, decrease
debt by approximately $600 million and reduce our debt to comparable basis
EBITDA ratio to the mid three times range at the end of the fiscal year," said
Bob Ryder, chief financial officer, Constellation Brands. "For fiscal 2012, the
company is targeting free cash flow in the range of $600 to $650 million."
Fourth Quarter 2011 Financial Highlights*
(in millions, except per share data)
Comparable % Reported %
Change Change
Consolidated net sales $715 1% $715 1%
Operating income $104 39% $103 NM
Operating margin 14.5% 400 bps 14.4% NM
Equity earnings $52 20% $52 20%
EBIT $155 32% NA NA
Net income $75 24% $280 NM
Diluted earnings per share $0.35 30% $1.32 NM
Fourth Quarter 2011 Net Sales Highlights*
(in millions)
Reported Organic
Constant Constant
Net % Currency Net % Currency
Sales Change Change Sales Change Change
Consolidated $715 1% -- $715 12% 10%
North America $580 17% 16% $580 16% 14%
Australia and $135 -37% -39% $135 -3% -5%
Europe
Fourth Quarter 2011 Net Sales Commentary
Reported consolidated net sales increased one percent as a 10 percent organic
constant currency net sales increase was essentially offset by the divestitures
of the Australian and U.K. wine business and the U.K. cider business.
North America net sales on an organic constant currency basis increased 14
percent due primarily to a combination of U.S. volume growth and favorable U.S.
product mix. The fourth quarter fiscal 2010 net sales reflected the impact of
inventory reductions at certain U.S. distributors.
Fourth Quarter 2011 Operating Income and Net Income Commentary
The consolidated comparable basis operating income increase was primarily driven
by U.S. volume growth in the North America segment.
Constellation's equity earnings from its 50 percent interest in the Crown
Imports joint venture totaled $49 million, an increase of 18 percent from the
prior year fourth quarter. For fourth quarter 2011, Crown generated net sales
of $480 million, an increase of 15 percent, and operating income of $97 million,
an increase of 18 percent. Net sales and operating income benefited primarily
from volume growth.
For fourth quarter 2011, pre-tax restructuring charges and unusual items totaled
$1 million compared to $125 million for the prior year fourth quarter.
Interest expense totaled $47 million, a decrease of 25 percent. The decrease was
due to lower average interest rates and borrowings during the quarter.
The comparable basis effective tax rate for the quarter was 31 percent compared
to negative 11 percent for the prior year fourth quarter. Both periods reflected
the favorable outcome of various tax items.
Common Share Repurchase Authorization
Constellation's Board of Directors has authorized the repurchase of up to $500
million of the company's common stock. The repurchase of shares may be
accomplished from time to time, subject to market and other conditions. "While
our near-term focus is on debt reduction, we believe it is important to have a
share repurchase authorization in place to provide flexibility over a multi-year
period as part of our ongoing evaluation of the optimal capital structure for
our business," said Ryder.
Summary
"We experienced a strong finish to a year where we invested in our business and
began building momentum around our product portfolio to drive future growth. We
are well positioned from a strategic, market, and financial perspective for the
year ahead," said Sands. "Our guidance for fiscal 2012 is being tempered by
comparison impacts from the U.S. distributor initiative, incremental marketing
investment at Crown and the divestiture of the Australian and U.K. business.
However, we continue to target healthy underlying depletion and consumer trends
for our business."
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 $1.90 - $2.00 $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 fourth quarter and full year fiscal 2011 results
and fiscal outlook will be hosted by President and Chief Executive Officer Rob
Sands and Executive Vice President and Chief Financial Officer Bob Ryder on
Thurs., April 7, 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 Web site: 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 Web site at www.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 May 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:
* the actual amount of any closing adjustments associated with the sale of
80.1% of the company's Australian and U.K. business to CHAMP Private
Equity;
* 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, 2010, 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
STZ Fiscal 2011 Financials:
http://hugin.info/143788/R/1503805/439122.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
[HUG#1503805]
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Datum: 07.04.2011 - 13:36 Uhr
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