/C O R R E C T I O N -- Constellation Brands, Inc./ 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, highergrowth 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 approximate
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. The change in the company's fiscal 2009
reported basis diluted earnings per share guidance includes a
change in the company's assumption regarding its effective tax rate
on a reported basis from approximately 60 percent to 73 percent,
primarily due to the write-off of nondeductible goodwill in
connection with the disposal of the value spirits business. 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 business, 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.
Fiscal Year 2009 Diluted Earnings Per Share Guidance Range for the
Year Ending February 28, 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 business, 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. Fiscal
Year 2009 Free Cash Flow Guidance Range for the Year Ending
February 28, 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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