- Increases focus on higher-margin mid-premium spirits brands
FAIRPORT, N.Y., Jan. 12 /PRNewswire-FirstCall/ -- Constellation
Brands, Inc. (NYSE:STZNYSE:ASX:NYSE:CBR), the world's largest wine
company and a leading international producer and marketer of
beverage alcohol, today announced it has entered into an agreement
to sell its value spirits business to New Orleans-based Sazerac
Company, Inc. for $334 million, subject to closing adjustments. The
transaction is subject to routine and customary regulatory review,
and is expected to close by the end of February 2009. The entire
net after-tax proceeds of approximately $210 million will be used
to reduce Constellation's borrowings. The sale price includes $274
million in cash and $60 million in medium-term financing by
Constellation at market interest rates. "This transaction is
consistent with our strategic focus on premium, higher-growth and
higher-margin brands in our portfolio, and allows us to continue
the process of reducing debt, generating free cash flow, creating
efficiencies and increasing ROIC," stated Rob Sands, Constellation
Brands president and chief executive officer. "With the proceeds
from asset sales, along with our targeted free cash flow for fiscal
2009, we now expect our debt to comparable basis EBITDA ratio to be
approximately four times by the end of the current fiscal year,
which underscores the effectiveness of our focus on cash flow
generation." Spirits brands the company is retaining include SVEDKA
Vodka, Black Velvet Canadian Whisky and Paul Masson Grande Amber
Brandy. SVEDKA Vodka is the fourth largest imported vodka brand in
the U.S. and one of the fastest growing major spirits brands in the
world. Black Velvet Canadian Whisky and Paul Masson Grande Amber
Brandy are mid-premium spirits that are each number two by volume
in their respective categories. "Totaling almost five million
cases, the three principal spirits brands we are retaining have
scale in the marketplace, good margins, are at mid-premium price
points and continue to grow ahead of their respective categories,"
said Sands. "These are exactly the type of scale brands that fit
well within Constellation's portfolio strategy, which is focused on
well-known, trusted premium brands that represent good value to
consumers." As a result of this transaction, Constellation is
divesting more than 40 brands including Barton, Skol, Mr. Boston,
Fleischmann's, the 99 schnapps line, the di Amore line, Chi-Chi's
pre-mixed cocktail line, Montezuma Tequila, in addition to numerous
other brands representing over 600 SKUs. The total volume for
brands being sold was more than 10 million cases for fiscal year
2008, with net sales for the divested brands totaling approximately
$200 million. Distillery and bottling facilities included in the
sale are located at Bardstown and Owensboro, Ky., as well as a
leased bottling facility at Carson, Calif. Constellation will
retain its distillery and production facility at Lethbridge,
Alberta, Canada. For complete listings of brands being sold and
retained, please visit http://www.cbrands.com/. "To achieve
synergies and operating efficiencies we will consolidate the
retained premium spirits business into our North American wine
operations," explained Sands. "A consolidation plan is expected to
be finalized by the close of the transaction. This is a good
example of how we are creating efficiencies in our business by
leveraging our existing infrastructure to propel growth and enhance
ROIC." The transaction is expected to result in a pre-tax reported
loss of approximately $11 million or an after-tax loss of
approximately $0.20 diluted earnings per share on a reported basis,
and will be excluded from the company's comparable basis diluted
earnings per share. The loss on the disposal is primarily driven by
the write-off of non-deductible goodwill unrelated to the brands
being sold as required by generally accepted accounting principles
in the U.S. Due to the anticipated impact on reported results, and
assuming the completion of this transaction, the company is
adjusting its fiscal 2009 reported diluted EPS guidance to $0.45 -
$0.49, from its previous reported diluted EPS guidance of $0.65 -
$0.69. The impact of this transaction is expected to be neutral to
ongoing reported basis and comparable basis diluted earnings per
share for fiscal 2009 and fiscal 2010. As a result, the company's
fiscal 2009 comparable basis diluted EPS guidance remains $1.68 -
$1.72. The gross proceeds from this transaction do not impact free
cash flow as defined by the company. Free cash flow guidance for
fiscal 2009 remains unchanged at $360 - $390 million. "The brands
being sold will be in good hands and complement Sazerac's existing
portfolio," said Sands. "Sazerac has a track record for growing
brands they own, which makes this a mutually beneficial
transaction." While many employees associated with the brands being
sold will transfer to the new owner, some will be impacted by this
change and the company is taking appropriate actions to support
those who are displaced. Explanations Reported basis ("reported")
diluted earnings per share are as reported under generally accepted
accounting principles. Diluted earnings per share on a comparable
basis ("comparable"), exclude acquisition-related integration
costs, restructuring charges and unusual items. The company
discusses additional non-GAAP measures in this news release,
including free cash flow. Tables reconciling non-GAAP measures,
together with definitions of these measures and the reasons
management uses these measures, are included in this news release.
About Constellation Brands Constellation Brands, Inc. is a leading
international producer and marketer of beverage alcohol in the
wine, spirits and imported beer categories, with significant market
presence in the U.S., Canada, U.K., Australia and New Zealand.
Based in Fairport, N.Y., the company has more than 250 brands in
its portfolio, sales in approximately 150 countries and operates
more than 50 wineries, distilleries and distribution facilities. It
is the largest wine producer in the world; the largest premium wine
company in the U.S.; the largest wine company in the U.K.,
Australia and Canada; the second largest wine company in New
Zealand; and the largest beer importer and marketer in the U.S.
through its Crown Imports joint venture with Mexico's Grupo Modelo.
Constellation Brands is an S&P 500 Index and Fortune 500(R)
company. Major brands in the company's portfolio include Corona
Extra, Black Velvet Canadian Whisky, SVEDKA Vodka, Robert Mondavi
wines, Clos du Bois, Ravenswood, Blackstone, Hardys, Banrock
Station, Nobilo, Kim Crawford, Inniskillin, Jackson-Triggs and
Arbor Mist. To learn more about Constellation Brands and its
product portfolio visit the company's Web site at
http://www.cbrands.com/. Forward-Looking Statements The statements
and estimates in this news release update the statements and
estimates set forth in the company's news release dated Jan. 7,
2009. The statements set forth in this news release which are not
historical facts regarding Constellation's business strategy,
future operations, financial position, estimated revenues,
projected costs, prospects, plans and objectives of management, or
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 Feb. 20,
2009, 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, or
financing 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. Furthermore, there can be no
assurance that any transaction to sell the value spirits business
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: -- successful integration of acquired businesses; --
successful divestiture of the value spirits business and receipt of
all consideration; -- realization of expected synergies and
completion of various portfolio actions; -- 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 and
capital investment requirements; -- final management determinations
and independent appraisals may vary materially from current
management estimates of the fair value of assets acquired and
liabilities assumed in the company's acquisitions and from
estimates of goodwill and intangible asset impairment charges; --
restructuring charges, acquisition-related integration costs, other
one-time costs and purchase accounting adjustments associated with
integration and 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 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, 2008, and its
Quarterly Report on Form 10-Q for the fiscal quarter ended Nov. 30,
2008, which could cause actual future performance to differ from
current expectations. Constellation Brands, Inc. and Subsidiaries
GUIDANCE - DILUTED EARNINGS PER SHARE AND FREE CASH FLOW
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES (in
millions, except per share data) The company reports its financial
results in accordance with generally accepted accounting principles
in the U.S. ("GAAP"). However, non-GAAP financial measures, as
defined in the reconciliations below, are provided because
management uses this information in evaluating the results of the
continuing operations of the company and/or internal goal setting.
In addition, the company believes this information provides
investors better insight on underlying business trends and results
in order to evaluate year over year financial performance. See the
tables below for supplemental financial data and corresponding
reconciliations of these non-GAAP financial measures to GAAP
financial measures for the year ending February 28, 2009. Non-GAAP
financial measures should be viewed in addition to, and not as an
alternative for, the company's reported results prepared in
accordance with GAAP. Please refer to the company's Web site at
http://www.cbrands.com/CBI/investors.htm for more detailed
description and further discussion of the historical non-GAAP
financial measures. The below guidance is based on information
previously provided taking into account the developments described
in this news release. In addition, the change in the company's
fiscal 2009 reported basis diluted earnings per share guidance
includes and, is limited to, a change in the company's previously
reported effective tax rate on a reported basis from 60 percent to
73 percent, primarily due to the write-off of nondeductible
goodwill in connection with the disposal of the value spirits
brands. The forecasted effective tax rate on a reported basis of 73
percent includes a provision of approximately 14 percentage points
in connection with the gain on settlement of certain foreign
currency economic hedges, a provision of approximately 13
percentage points on the disposal of the value spirits brands, and
approximately 9 percentage points in connection with the company's
inability to recognize tax benefits on net operating losses
resulting primarily from the Australian initiative. The company's
previously reported effective tax rate on a comparable basis of
approximately 37 percent has not changed as a result of the items
discussed above. Range for the Year Ending Fiscal Year 2009
February 28, Diluted Earnings Per Share Guidance 2009 -------------
Forecasted diluted earnings per share - reported basis (GAAP) $0.45
$0.49 Inventory step-up 0.06 0.06 Strategic business realignment(1)
0.97 0.97 Other(2) 0.20 0.20 ---- ---- Forecasted diluted earnings
per share - comparable basis (Non-GAAP)(3) $1.68 $1.72 ===== =====
(1) Includes $0.53, $0.20, $0.08, $0.06, $0.06, $0.02 and $0.01
diluted earnings per share for the year ending February 28, 2009,
associated with the Australian initiative, the loss in connection
with the disposal of the value spirits brands, the loss in
connection with the disposal of the Pacific Northwest wine brands,
the Fiscal 2008 Plan, the Fiscal 2007 Wine Plan, the loss in
connection with the sale of a nonstrategic Canadian distilling
facility, and other previously announced restructuring plans,
respectively.(3) (2) Includes $0.18 and $0.02 diluted earnings per
share for the year ending February 28, 2009, associated with the
recognition of income tax expense in connection with the gain on
settlement of certain foreign currency economic hedges and the
Australian initiative for impairment of an equity method
investment, respectively.(3) (3) May not sum due to rounding as
each item is computed independently. Free cash flow, as defined in
the reconciliation below, is considered a liquidity measure and is
considered to provide useful information to investors about the
amount of cash generated, which can then be used, after required
debt service and dividend payments, for other general corporate
purposes. A limitation of free cash flow is that it does not
represent the total increase or decrease in the cash balance for
the period. Free cash flow should be considered in addition to, not
as a substitute for, or superior to, cash flow from operating
activities prepared in accordance with GAAP. Range for the Year
Ending Fiscal Year 2009 February 28, Free Cash Flow Guidance 2009
------------- Net cash provided by operating activities (GAAP)
$510.0 $560.0 Purchases of property, plant and equipment (150.0)
(170.0) ------ ------ Free cash flow (Non-GAAP) $360.0 $390.0
====== ====== DATASOURCE: Constellation Brands, Inc. CONTACT:
Media, Mike Martin, +1-585-218-3669, or Angie Blackwell,
+1-585-218-3842, or Investor Relations, Patty Yahn-Urlaub,
+1-585-218-3838, or Bob Czudak, +1-585-218-3668, all of
Constellation Brands, Inc. Web Site: http://www.cbrands.com/
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