- Plans to use $210 million in net after-tax cash proceeds from
sale of value spirits business to reduce borrowings in fiscal 2010
VICTOR, N.Y., March 25 /PRNewswire-FirstCall/ -- Constellation
Brands, Inc. (NYSE:STZNYSE:ASX:NYSE:CBR), the largest wine company
in the world, announced today that it has completed the sale of its
value spirits business to Sazerac Company, Inc. for $334 million,
subject to post-closing adjustments. (Logo:
http://www.newscom.com/cgi-bin/prnh/20040119/STZLOGO ) The company
also announced that it has updated its diluted earnings per share
("EPS") outlook for fiscal 2009. The company's new comparable basis
diluted EPS range for fiscal 2009 is targeted to be $1.60 - $1.62
compared to the company's previous estimate of $1.68 - $1.72. The
revision is driven primarily by an increasingly challenging global
economic environment, particularly the accelerated deterioration in
the company's U.K. and Australian businesses during its fourth
quarter. "We experienced weaker than expected demand in our
European and Australian businesses during the Christmas and New
Year holiday," said Rob Sands, president and chief executive
officer of Constellation Brands. "The most significant impact was
felt in the U.K., where the economy weakened during this critical
selling season, retail competition intensified, and we made the
decision to forego participation in significant price discounting
offered by multiple grocers. Previously, we passed through price
increases to offset two duty increases that were implemented
earlier in the year." "While we have already begun to take actions
in the U.K. to align the cost structure with the realities of the
marketplace, we believe it is appropriate to implement additional
cost reductions not only in the U.K., but across our global
businesses," Sands continued. "Although not finalized, these
initiatives are currently expected to result in the elimination of
approximately five percent of our global workforce." Additional
details of the restructuring will be included as part of the
company's earnings announcement scheduled for April 8, 2009. Also,
during the fourth quarter, the company expects to record an
estimated $430 million of after-tax charges, primarily related to
the non-cash impairments of certain goodwill, intangible assets and
equity method investments associated with the company's
international businesses. These one-time charges will drive a
reported basis loss for fiscal 2009 and will be excluded from
comparable basis results. For fiscal 2009, the company now expects
a reported basis diluted loss per share in the range of $1.26 -
$1.28. "Although we are experiencing the effects of the global
recession, we are pleased that Constellation's free cash flow
generation continues to be strong and is anticipated to be within
our previously guided $360 - $390 million range for fiscal 2009,"
said Bob Ryder, chief financial officer of Constellation Brands.
"We continue to be in a strong liquidity position, as total debt
has decreased by more than $800 million from year end fiscal 2008,
primarily through a combination of strong free cash flow and
proceeds from asset dispositions. Our focus on rapid deleveraging
has allowed us to achieve our debt to comparable basis EBITDA goal
for the year in the low four times range." In addition, in
connection with the sale of the value spirits business, the company
has received $274 million in cash proceeds and a note receivable
for $60 million. The entire net after-tax cash proceeds of
approximately $210 million will be used to further reduce
Constellation's borrowings. To achieve synergies and operating
efficiencies, the company will consolidate the retained premium
spirits business into its North American wine operations. For
fiscal 2010, the company expects the challenging macro-economic
operating environment to continue and as a result, is targeting
comparable basis diluted EPS growth in the low-to-mid single digit
range versus fiscal 2009. Free cash flow is expected to fall below
fiscal 2009 levels due primarily to the expected $65 million tax
impact from the sale of the value spirits business and $50 million
in favorable hedge transaction settlements that is not expected to
reoccur in fiscal 2010. The company will provide further details
relating to its fiscal 2010 outlook, including key strategic
initiatives, in connection with its fourth quarter fiscal 2009
earnings news release and conference call. "In North America, the
wine industry continues to grow and we continue to see consumers
trading up albeit at lower rates as compared to its peak. The
company's U.S. spirits business continues to experience strong
growth rates driven by sales of SVEDKA Vodka. Increased promotional
activities in the Crown imported beer business are expected to
offset the impact of the recession in some of our key markets,"
said Sands. "We are taking decisive action to ensure we are
adaptive and responsive to the rapidly-changing global economy by
remaining focused on creating efficiencies, generating cash flow
and paying down debt. The continuation of this strategy in
combination with worldwide cost reductions positions us well for
the future as we work through the current challenging macro
economic environment and take advantage of the recovery when it
occurs." Fourth Quarter Earnings Release and Conference Call The
company will report financial results for its fiscal fourth quarter
and full year ended Feb. 28, 2009, on Wednesday, April 8, 2009,
before the open of U.S. markets. A conference call to discuss the
financial results and outlook will be hosted by President and Chief
Executive Officer Rob Sands and Executive Vice President and Chief
Financial Officer Bob Ryder, at 10:30 a.m. eastern time, April 8,
2009. The conference call can be accessed by dialing +973-935-8505
beginning at 10:20 a.m. (eastern). A live, listen-only webcast of
the conference call will be available on the Internet at the
company's Web site, http://www.cbrands.com/, in the Investors
section. Financial and statistical information discussed in the
conference call, and a reconciliation of reported (GAAP) financial
measures with comparable or non-GAAP financial measures, will also
be available on the company's Web site when the call begins, under
Investors and by selecting Financial Information/Financial History.
For anyone unable to participate in the conference call, a replay
will be available on the company's Web site. Explanations Reported
basis ("reported") diluted earnings (loss) per share are as
reported under generally accepted accounting principles in the U.S.
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 the largest wine company in the world
with a strong portfolio of consumer-preferred premium wine brands
complemented by spirits, imported beer and other select beverage
alcohol products. The company has significant market presence in
the U.S., Canada, U.K., Australia and New Zealand. Based in Victor,
N.Y., the company has more than 200 brands in its portfolio, sales
in about 150 countries and operates approximately 50 facilities. It
is 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 a S&P 500 Index and
Fortune 500(R) company. Major brands in the company's portfolio
include Robert Mondavi wines, Hardys, Clos du Bois, Blackstone,
Banrock Station, Arbor Mist, Estancia, Ravenswood, Jackson-Triggs,
Kim Crawford, Corona Extra, Black Velvet Canadian Whisky and SVEDKA
Vodka. 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 under
the heading Outlook in the company's news release dated Jan. 7,
2009, and the statements and estimates set forth in the company's
news release dated Jan. 12, 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. The
Projections are as of March 25, 2009, and to the best of the
company's knowledge, timely and accurate when made. After April 7,
2009, the Projections should be considered historical and not
subject to update by the company to reflect subsequent
developments. 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. 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 and realization of
expected synergies; -- completion of various portfolio actions; --
achievement of all expected cost savings from the company's various
restructuring plans, realization of expected asset sale proceeds
from the sale of inventory and other assets, and receipt of all
consideration from the divestiture of the value spirits business;
-- 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 ended 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. Fiscal Year 2009 Range for the Year Diluted
(Loss) Earnings Per Share Guidance Ended February 28, 2009
----------------------- Forecasted diluted loss per share -
reported basis (GAAP) $(1.28) $(1.26) Inventory step-up 0.06 0.06
Strategic business realignment(1) 0.96 0.96 Other(2) 1.84 1.84
Impact of anti-dilutive potential common shares(3) 0.02 0.02 ----
---- Forecasted diluted earnings per share - comparable basis
(Non-GAAP)(4) $1.60 $1.62 ===== ===== (1) Includes $0.64, $0.09,
$0.08, $0.07, $0.05, $0.02 and $0.02 diluted earnings per share for
the year ended February 28, 2009, associated with the Australian
Initiative, a loss, primarily on assets held for sale, 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 2007 Wine Plan, the Fiscal 2008 Plan, the loss
in connection with the sale of a nonstrategic Canadian distilling
facility, and other previously announced restructuring plans,
respectively.(4) (2) Includes $1.23, $0.38, $0.18 and $0.05 diluted
earnings per share for the year ended February 28, 2009, associated
with impairments of certain goodwill and intangible assets,
impairments of certain equity method investments, the recognition
of income tax expense in connection with the gain on settlement of
certain foreign currency economic hedges, and a loss on the
write-down of certain inventory. The amounts associated with the
impairments of certain goodwill, intangible assets and equity
method investments represent the company's current estimates and
are subject to change in connection with the completion of the
company's annual impairment testing.(4) (3) In accordance with the
antidilution provisions of SFAS No. 128, the dilutive impact of
potential common shares is excluded from the company's reported
basis diluted loss per share calculation. As a result of the
company having net income on a comparable basis, the dilutive
impact of potential common shares is included in the company's
comparable basis diluted earnings per share calculation. (4) 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 Range for the Year Free Cash Flow Guidance
Ended February 28, 2009 ----------------------- Net cash provided
by operating activities (GAAP) $490.0 $520.0 Purchases of property,
plant and equipment (130.0) (130.0) ------ ------ Free cash flow
(Non-GAAP) $360.0 $390.0 ====== ======
http://www.newscom.com/cgi-bin/prnh/20040119/STZLOGODATASOURCE:
Constellation Brands, Inc. CONTACT: Media, Angie Blackwell,
+1-585-678-7141, or Cheryl Gossin, +1-585-678-7191, Investor
Relations, Patty Yahn-Urlaub, +1-585-678-7483, or Bob Czudak,
+1-585-678-7170 Web Site: http://www.cbrands.com/
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