-
Achieves reported
basis EPS of $1.75 and comparable basis EPS of $1.77
-
Generates $1.04
billion of operating cash flow and $676 million of free cash
flow
-
Increases fiscal
2017 outlook driven primarily by strong beer business results;
expects reported basis EPS of $6.25 - $6.40 and comparable basis
EPS of $6.30 - $6.45
-
Affirms fiscal
2017 operating cash flow target of at least $1.5 billion and
increases free cash flow projection to $375 - $475 million; now
expects total capital expenditures to be $1.125 - $1.225 billion
for fiscal 2017
-
Agrees to acquire
the award-winning High West Distillery, based in Utah
-
Declares quarterly
cash dividend
Second Quarter 2017 Financial
Highlights* |
|
|
|
|
|
|
|
(in millions, except per share data) |
|
|
|
|
|
|
|
|
Reported |
|
% Change |
|
Comparable |
|
% Change |
Net sales |
$2,021 |
|
17% |
|
$2,021 |
|
17% |
|
|
|
|
|
|
|
|
Operating income |
$611 |
|
27% |
|
$620 |
|
24% |
|
|
|
|
|
|
|
|
Operating margin |
30.2% |
|
+250 bps |
|
30.7% |
|
+180 bps |
|
|
|
|
|
|
|
|
Earnings before interest and taxes (EBIT) |
NA |
|
NA |
|
$620 |
|
24% |
|
|
|
|
|
|
|
|
Net income attributable to CBI |
$359 |
|
19% |
|
$364 |
|
15% |
|
|
|
|
|
|
|
|
Diluted net income per share attributable to CBI
(EPS) |
$1.75 |
|
17% |
|
$1.77 |
|
13% |
*Definitions of reported and comparable, as well
as reconciliations of non-GAAP financial measures, are contained
elsewhere in this news release.
NA=Not Applicable
VICTOR, N.Y., Oct. 5, 2016 -
Constellation Brands, Inc. (NYSE: STZ and STZ.B), a leading
beverage alcohol company, reported today its second quarter 2017
results.
"The strong consumer demand for our portfolio
continues to propel our business. During the quarter, we gained
share and improved margins across our business, while continuing to
make smart investments designed to fuel growth today and in the
future. I am proud of our accomplishments in the first half of the
year, which are enabling an increase in our overall guidance for
the year," said Rob Sands, president and chief executive officer,
Constellation Brands.
Today, the company announced an agreement to
purchase the Utah-based High West Distillery for approximately $160
million. This acquisition includes a portfolio of distinctive,
award-winning and high-end American straight whiskeys and other
spirits brands. With High West, which has experienced double-digit
volume growth year over year for the past three years,
Constellation Brands enters the dynamic and profitable high-end
craft whiskey market segment. "High West will be an excellent
addition to our spirits portfolio and we look forward to partnering
with the team there to continue to develop distinctive high-quality
whiskeys that consumers love," said Sands. The transaction is
expected to close by the end of October.
Net Sales Commentary
For the quarter, the company generated
consolidated net sales growth of 17 percent. This reflects organic
net sales growth on a constant currency basis of 13 percent and
acquisition benefits from Ballast Point craft beer, as well as
Meiomi and The Prisoner wine brands.
Net sales for beer increased 20 percent. This was
due to a 15 percent increase in organic net sales driven primarily
by volume growth and favorable pricing, and the acquisition benefit
from Ballast Point.
"During the second quarter, our beer business
contributed 60% of IRI category dollar growth for the U.S. beer
industry and continues to outperform the high end of the market,
with accelerating growth trends versus the previous quarter, and
overall share gains driven by Corona Extra and Modelo Especial.
Strong consumer demand and excellent marketplace execution helped
us to win the July 4th holiday. These excellent results are driving
the upward revision to our EPS target for the year. In addition,
Ballast Point continues to expand distribution and achieved strong,
double-digit depletion growth for the quarter," said Sands.
Wine and spirits net sales increased 12 percent.
This reflects an eight percent increase in organic net sales on a
constant currency basis driven primarily by volume growth and
favorable mix, and the acquisition benefit from Meiomi and The
Prisoner wine brands. U.S. shipment volume has outpaced depletion
volume during the first half of fiscal 2017. This is primarily
timing related as we expect U.S. shipment volume to be generally
aligned with depletion volume for the year.
"During the quarter, our U.S. wine business
improved margins and gained IRI volume and dollar share driven by
some of our largest and fastest-growing Focus Brands, including Kim
Crawford, Black Box, Clos du Bois, Ruffino, The Dreaming Tree and
Woodbridge by Robert Mondavi. We continue to achieve distribution
gains for our recently acquired Meiomi and The Prisoner wine
brands, both of which posted strong, double-digit depletion growth
during the quarter," said Sands.
Operating Income
Commentary
For the quarter, consolidated reported and
comparable basis operating income increased 27 percent and 24
percent, respectively.
For second quarter 2017, comparable adjustments
affecting operating income totaled $9 million as compared to $22
million for the same period last year.
Beer operating income increased 27 percent,
primarily due to organic volume growth, favorable pricing and the
Ballast Point acquisition, partially offset by higher marketing
investment. The 17 percent increase in wine and spirits operating
income primarily reflects the benefit from organic volume growth,
the Meiomi and Prisoner acquisitions and favorable mix, partially
offset by higher investment in SG&A and marketing.
Operating Cash Flow and Free Cash
Flow Commentary
For the first six months of fiscal 2017, operating
cash flow totaled $1.04 billion, an increase of 30 percent. Free
cash flow for the first half of fiscal 2017 totaled $676 million,
as compared to $508 million for the same period last year. This
reflects higher operating cash flow, partially offset by higher
capital expenditures.
"We are pleased with our strong operating cash
flow results for the first half of the year and continue to target
at least $1.5 billion for fiscal 2017," said David Klein, executive
vice president and chief financial officer, Constellation Brands.
"We are now expecting lower capital expenditures for the year due
to a shift in the timing of payments related to Nava capital
investments, which will drive free cash flow to be in the range of
$375 to $475 million for fiscal 2017," added Klein.
Quarterly Dividend
On October 4, 2016, Constellation's board of
directors declared a quarterly cash dividend of $0.40 per share of
Class A Common Stock and $0.36 per share of Class B Common Stock,
payable on November 22, 2016, to stockholders of record as of
the close of business on November 8, 2016.
Outlook
The table below sets forth management's current
EPS expectations for fiscal 2017 compared to fiscal 2016 actual
results, both on a reported basis and a comparable basis.
|
Reported Basis |
Comparable Basis |
|
FY17
Estimate |
FY16
Actual |
FY17
Estimate |
FY16
Actual |
Fiscal Year Ending Feb. 28/29 |
$6.25 -
$6.40 |
$5.18 |
|
$6.30 - $6.45 |
$5.43 |
|
For fiscal 2017, the beer business now expects net
sales growth of 16 - 17 percent and operating income growth at the
high teens level. These growth rates include an estimated
incremental benefit from the Ballast Point acquisition. For the
wine and spirits business, the company continues to expect net
sales growth in the mid single-digit range and operating income
growth in the mid to high single-digit range. These growth rates
include an estimated incremental benefit from the Meiomi and The
Prisoner wine brands acquisitions.
Fiscal 2017 guidance also includes the following current
assumptions:
-
Interest expense: approximately
$325 - $335 million
-
Tax rate: approximately 29 percent
-
Weighted average diluted shares outstanding:
approximately 206 million
-
Operating cash flow: approximately $1.5 - $1.7
billion
-
Capital expenditures: approximately $1.125 -
$1.225 billion
-
Free cash flow: approximately $375 - $475
million
Conference Call
A conference call to discuss second quarter 2017
results and outlook will be hosted by President and Chief Executive
Officer Rob Sands and Executive Vice President and Chief Financial
Officer David Klein on Wednesday, Oct. 5, 2016 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.
Explanations
Reported basis ("reported") operating income, net
income and EPS are as reported under generally accepted accounting
principles. Operating income, net income and EPS on a comparable
basis ("comparable"), exclude items that affect comparability
("comparable adjustments"), as they are not reflective of core
operations of the segments. The company's measure of segment
profitability excludes comparable adjustments, 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 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.
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.
Constellation is a Fortune 500® company and
one of the top performing stocks in the S&P 500 Consumer
Staples Index. Constellation is the No. 3 beer company in the U.S.
with high-end, iconic imported brands, such as Corona Extra, Corona
Light, Modelo Especial, Modelo Negra and Pacifico. The company's
beer portfolio also includes Ballast Point, one of the most awarded
craft brewers in the U.S. In addition, Constellation is the world's
leader in premium wine selling great brands that people love,
including Robert Mondavi, Clos du Bois, Kim Crawford, Meiomi, Mark
West, Franciscan Estate, Ruffino and Jackson-Triggs. The company's
premium spirits brands include SVEDKA Vodka and Casa Noble
Tequila.
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
9,000 talented employees. We express our company vision: to elevate life with every glass raised. To learn more,
visit www.cbrands.com.
Forward-Looking
Statements
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, estimated diluted EPS, expected cash flow, prospects, future
payments of dividends, 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 Nov. 30,
2016, 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.
Any decision whether to pursue a potential initial
public offering for a portion of the company's Canadian wine
business (the "Canadian IPO") is subject to the determination and
discretion of the company. There can be no assurance that the
Canadian IPO will occur or will occur on any contemplated
timetable. The proposed High West Distillery transaction is subject
to regulatory approvals and certain closing conditions. There
can be no assurance the High West Distillery transaction 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:
-
Completion of the announced High
West Distillery transaction on the expected terms, timetable and
costs, and with receipt of any necessary regulatory
approvals;
-
Mexicali brewery construction, Nava
brewery expansion activities and joint venture glass plant
expansion activities take place with expected scope, on expected
terms and timetables, and with receipt of any necessary permits and
regulatory approvals;
-
accuracy of supply projections,
including those relating to Mexicali brewery construction, Nava
brewery expansions and glass sourcing;
-
timeframe and actual costs
associated with beer supply, Mexicali brewery construction, Nava
brewery expansions and glass sourcing, including joint venture
glass plant expansions, may vary from management's current
expectations due to market conditions, the company's cash and debt
position, and other factors as determined by management;
-
operating cash flow, free cash
flow, and capital expenditures to support long-term growth may vary
from management's current estimates;
-
timing and volume amount of beer
shipments to wholesalers may vary from current expectations due to
actual consumer demand;
-
accuracy of projections associated
with the proposed High West Distillery transaction and the
acquisitions of the Meiomi wine brand, Ballast Point, and The
Prisoner Wine Company brand portfolio;
-
the 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;
-
the exact duration of the share
repurchase implementation and the amount and timing of any
additional share repurchases;
-
amount and timing of future
dividends are subject to the determination and discretion of the
Board of Directors;
-
ability to use cash flow to fund
dividends and acquisitions could be affected by unanticipated
increases in net total debt, inability to generate cash flow at the
levels anticipated, and failure to generate expected
earnings;
-
raw material and water 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, 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, results of operations or effective tax
rate;
-
changes in interest rates and the
inherent unpredictability of currency fluctuations, commodity
prices and raw material costs;
-
accuracy of the bases for forecasts
relating to joint ventures and associated costs, losses, purchase
obligations and capital investment requirements; 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, 2016, which could cause actual future
performance to differ from current expectations.
CONTACTS
Media
Cheryl Gossin: 585-678-7191
Amy Martin: 585-678-7141
Investor Relations
Patty Yahn-Urlaub: 585-678-7483
Bob Czudak: 585-678-7170
STZ Second Quarter Fiscal 2017
Results - Financial Tables
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq 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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