Constellation Brands Inc: Constellation Brands Reports First Quarter Fiscal
oBeer business acquisition drives significant increase in first quarter
sales, earnings and free cash flow
oAchieves comparable basis diluted EPS of $1.07 and reported basis diluted
EPS of $1.03
oIncreases fiscal 2015 outlook driven by strong beer business performance;
expects comparable basis diluted EPS of $4.10 - $4.25 and reported basis
diluted EPS of $3.90 - $4.05
oReaffirms free cash flow of $425 - $500 million for fiscal 2015 including
operating cash flow target of at least $1 billion and capital expenditure
estimate of $575 - $625 million
First Quarter 2015 Financial
(in millions, except per share
Comparable % Change Reported % Change
Net sales $1,526 127% $1,526 127%
Operating income $405 NM $392 NM
Operating margin 26.5% +1,110 bps 25.7% +1,520 bps
Earnings before interest and
taxes (EBIT) $405 138% NA NA
Net income $215 192% $207 NM
Diluted earnings per share $1.07 182% $1.03 NM
*Definitions of reported and comparable, as well as reconciliations of
non-GAAP financial measures, are contained elsewhere in this news release.
VICTOR, N.Y., JULY2, 2014 - Constellation Brands, Inc. (NYSE: STZ and STZ.B),
a leading beverage alcohol company, reported today its first quarter 2015
"We posted a great quarter reflecting outstanding results for our beer
business as well as wine and spirits performance that was generally in-line
with our expectations," said Rob Sands, president and chief executive officer,
Constellation Brands. "Within our beer business, we continue to capitalize on
our industry-leading performance and excellent retail execution across our
entire Mexican beer portfolio. These strong results are driving the upward
revision to our EPS guidance for fiscal 2015."
Net Sales Commentary
The significant increase in consolidated net sales was driven by $868 million
of incremental net sales related to the consolidation of Crown Imports'
commercial beer business. For the quarter, net sales for the beer segment
increased 14 percent primarily due to volume growth driven by strong consumer
"Our beer business kicked off the summer selling season with strong execution
during Cinco de Mayo and Memorial Day with the launch of the '120 Days of
Summer' advertising campaign. These activities helped to drive strong
marketplace performance during the first quarter as we continue to
significantly outperform the industry and the import category, driven by
Modelo Especial, Corona Extra and the rollout of Modelo Especial Chelada.
These results are driving a change in our full year beer guidance, as we now
expect beer segment net sales growth of approximately 10 percent and beer
segment operating income growth in the range of 25 to 30 percent," said Sands.
Wine and spirits net sales on a constant currency basis decreased one percent.
This reflects lower shipment volume primarily resulting from planned
distributor inventory destocking, partially offset by the recognition of an
agreed upon "make whole" distributor payment associated with this destocking
activity, as well as favorable mix. "While first quarter depletion trends were
impacted by some inventory destocking at retail, we gained market share in IRI
channels and experienced excellent performance for a number of our focus
brands including Mark West, Black Box, Kim Crawford, Ruffino, Rex Goliath, and
Woodbridge by Robert Mondavi. Our wine and spirits business remains on track
to meet its goals for the year," said Sands.
^(1) In fiscal 2014, beer segment operating income totaled $773 million
and included 100 percent of the beer commercial business (Crown) operating
income for the entire year and brewery profits from the date of the beer
business acquisition in June 2013.
Operating Income and Net Income Commentary
The increase in consolidated comparable basis operating income includes an
incremental benefit of $288 million from the consolidation of results for
Crown and the Mexican brewery as a result of the beer business acquisition.
The increase in wine and spirits operating income primarily reflects favorable
mix and lower SG&A costs.
Equity in earnings of equity method investees totaled $1 million compared to
$67 million for the prior year first quarter. The decrease was due primarily
to the timing of the close of the beer business acquisition.
Interest expense totaled $86 million, an increase of 58 percent. The increase
was primarily due to higher average borrowings driven by the financing for the
beer business acquisition, partially offset by lower average interest rates.
The effective tax rate for first quarter 2015 was 33 percent which reflected
the benefits from integrating the beer business as compared to a 36 percent
tax rate for the prior year first quarter.
Free Cash Flow Commentary
Free cash flow for first quarter 2015 totaled $101 million as compared to a
use of cash of $19 million for the prior year first quarter. The increase was
primarily due to incremental benefits from the beer business acquisition,
partially offset by higher capital expenditures related primarily to the
expansion of the brewery.
"Our free cash flow generation and planned brewery investments are on track
for the year. We continue to work diligently to finalize our plans for
commodity sourcing and longer-term capacity expansion," said Bob Ryder, chief
financial officer, Constellation Brands.
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 the 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.
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 $3.90 - $4.05 $9.83 $4.10 - $4.25 $3.25
Full-year fiscal 2015 guidance includes the following current assumptions:
oInterest expense: approximately $345 - $355 million
oTax rate: approximately 30 percent
oWeighted average diluted shares outstanding: approximately 201 million
oFree cash flow: approximately $425 - $500 million
oCapital expenditures: approximately $575 - $625 million, including $450 -
$500 million for the beer business
A conference call to discuss first quarter 2015 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, July2, 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) 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.
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.
(Please see the link below.)
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
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 Aug. 29, 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.
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:
obrewery expansion activities take place with expected scope, on expected
terms and timetable, and with receipt of any necessary regulatory
oaccuracy of supply projections, including those relating to brewery
otimeframe and actual costs associated with the brewery expansion may vary
from management's current expectations due to market conditions, the
company's cash and debt position, and other factors as determined by
othe 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;
othe exact duration of the share repurchase implementation and the amount
and timing of any additional share repurchases;
oraw material and water supply, production or shipment difficulties could
adversely affect the company's ability to supply its customers;
oincreased 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
ogeneral economic, geo-political and regulatory conditions, instability in
world financial markets, or unanticipated environmental liabilities and
ochanges 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;
ochanges in interest rates and the inherent unpredictability of currency
fluctuations, commodity prices and raw material costs;
oaccuracy of the bases for forecasts relating to joint ventures and
associated costs, losses, purchase obligations and capital investment
oother 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.
Cheryl Gossin: 585-678-7191
Patty Yahn-Urlaub: 585-678-7483
Bob Czudak: 585-678-7170
Q1 FY15 Press Release Final Financial Statements--7-1-14
This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf
of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for
the content, accuracy and originality of the information contained therein.
Source: Constellation Brands Inc via Globenewswire
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