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2014-04-09

Constellation Brands Inc: Constellation Brands Reports Fiscal 2014 Results and Fiscal 2015 Outlook

* Beer business acquisition drives significant increase in fiscal 2014 sales,
earnings and free cash flow; beer segment exceeds expectations
* Achieves fiscal 2014 comparable basis diluted EPS of $3.25 and reported
basis diluted EPS of $9.83
* Generates free cash flow of $603 million for fiscal 2014
* Provides fiscal 2015 outlook; expects comparable basis diluted EPS of $3.95
- $4.15 and reported basis diluted EPS of $3.75 - $3.95
* Projects 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
* Brewery expansion investment now targeted at $900 million - $1.1 billion

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|Fiscal 2014 Financial Highlights* |
| |
| |
|(in millions, except per share data) |
| |
| Comparable % Change Reported % Change |
|Net sales $4,868 74% $4,868 74% |
| |
|Operating income $1,168 110% $2,438 NM |
| |
|Operating margin 24.0% +410 bps 50.1% NM |
| |
|Equity in earnings of equity method investees** $88 -62% $88 -62% |
| |
|Earnings before interest and taxes (EBIT) $1,256 59% NA NA |
| |
|Net income $642 54% $1,943 NM |
| |
|Diluted earnings per share $3.25 48% $9.83 NM |
| |
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*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

NM=Not Meaningful

VICTOR, N.Y., APRIL 9, 2014
- Constellation Brands, Inc. (NYSE: STZ and STZ.B), a leading beverage alcohol
company, reported today its fiscal 2014 results.

"This has been another exciting year for Constellation," said Rob Sands,
president and chief executive officer, Constellation Brands. "We kicked off
the year with a smooth transition for our transformational beer acquisition.
We are executing an effective integration plan as we work diligently to
expand our new brewery in Mexico while maintaining the strong momentum of our
U.S. commercial beer business.

From a marketplace perspective, this is the fourth consecutive year of market
share gains for our iconic beer portfolio with Corona Extra registering
strong growth and Modelo Especial continuing to grow double digits while
surpassing the 50 million case milestone. Within our wine and spirits
portfolio, our brand building investments drove U.S. market share volume
gains, while we maintained dollar share across measured channels."

Fiscal
2014 Net Sales Commentary

The significant increase in consolidated net sales was driven by $2 billion of
incremental net sales related to the consolidation of Crown's commercial beer
business. For the year, net sales for the beer segment increased 10 percent
primarily due to volume growth driven by strong consumer demand.

"Our beer business exceeded our expectations for the year fueled by robust
consumer demand, strong sales execution and support from our wholesalers, as
well as creative, new marketing and advertising programs. The overall
portfolio continued to significantly outperform the growth of the U.S. beer
market with depletions increasing almost eight percent, driven by Corona
Extra and Modelo Especial, the fastest growing major beer brand," said Sands.

Wine and spirits net sales on an organic constant currency basis increased two
percent as wine volume growth was partially offset by higher promotional
expense, unfavorable mix and lower bulk spirits sales. "For the year, our
U.S. wine and spirits portfolio posted depletion growth of 3.5 percent, with
depletions for our Focus Brands growing almost six percent," Sands added.
"These trends were driven by strong performance of some of our well-known
brands including Rex Goliath, Mark West, Kim Crawford, SIMI, Estancia,
Ruffino, Black Box and Woodbridge by Robert Mondavi."

Fiscal 2014 Operating Income and Net Income Commentary

The increase in consolidated comparable basis operating income includes an
incremental benefit of $630 million from the consolidation of results for
Crown and the Mexican brewery as a result of the beer business acquisition.
The decrease in wine and spirits operating income primarily reflects higher
promotion, selling, marketing and product costs, partially offset by volume
growth.

Equity earnings from the company's original 50 percent interest in the Crown
joint venture totaled $70 million compared to $221 million for the prior
year. The decrease was due to the timing of the close of the beer business
acquisition.

As a result of the beer business acquisition, Constellation recorded a $1.6
billion non-cash gain on the remeasurement to fair value of the company's
original 50 percent interest in Crown for the second quarter of fiscal 2014.
The company also recorded $301 million of charges related to non-cash
impairments of goodwill and intangible assets associated with the company's
Canadian wine business for the second quarter.

Interest expense totaled $323 million, an increase of 42 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 comparable basis effective tax rate was 31 percent which reflected the
benefits from integrating the beer business and the benefit of foreign tax
credits. This compares to a 26 percent tax rate for the prior year which also
included the benefit of foreign tax credits.

The reported basis effective tax rate was 12 percent. This 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 fiscal 2014 totaled $603 million as compared to $494
million for the prior year. The increase was primarily due to incremental
benefits from the beer business acquisition, partially offset by higher
interest payments, lower contribution from wine and spirits and capital
expenditures primarily related to the expansion of the brewery.

"We delivered better than expected free cash flow results for the year driven
by strong performance from our beer business," said Bob Ryder, chief
financial officer, Constellation Brands. "For fiscal 2015, our free cash flow
estimate of $425 - $500 million will be impacted by higher levels of capital
investment than we originally planned for our Nava, Mexico brewery expansion.
The increase versus our previous estimate is primarily related to higher
engineering costs and incremental investments to improve brewery efficiency,
flexibility and capacity utilization in an effort to better support the
growth of the business. The total expansion investment is now targeted to be
in the range of $900 million to $1.1 billion and we remain confident in our
ability to complete this project in calendar 2016."

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|Fourth Quarter 2014 Financial Highlights* |
| |
| |
|(in millions, except per share data) |
| |
| Comparable % Change Reported % Change |
|Net sales $1,291 86% $1,291 86% |
| |
|Operating income $338 153% $329 159% |
| |
|Operating margin 26.2% +700 bps 25.5% +720 bps |
| |
|Equity earnings ($1) NM ($1) NM |
| |
|EBIT $337 83% NA NA |
| |
|Net income $162 80% $157 92% |
| |
|Diluted earnings per share $0.81 72% $0.79 84% |
| |
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Fourth Quarter 2014
Net Sales Commentary

The significant increase for consolidated net sales was driven by $598 million
of incremental net sales related to the consolidation of Crown. Net sales
for the beer segment increased 13 percent primarily due to volume growth
driven by strong consumer demand. Wine and spirits net sales on an organic
constant currency basis increased one percent as volume growth was mostly
offset by unfavorable mix and higher promotional spend.

Fourth Quarter 2014 Operating Income and Net Income Commentary

The increase in consolidated comparable basis operating income includes an
incremental benefit of $200 million of operating income from the
consolidation of results for Crown and the Mexican brewery. The increase in
wine and spirits operating income primarily reflects the net sales benefit
combined with lower product related costs.

Due to the timing of the close of the beer acquisition, the company did not
recognize equity earnings from its original 50 percent interest in the Crown
joint venture during the fourth quarter. For the prior year fourth quarter,
Constellation recorded $50 million of equity earnings ...

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