-
Achieves comparable basis EPS
of $1.56 and reported basis EPS of $1.49 driven by beer business
and favorable quarterly tax rate
-
Generates $508 million of free
cash flow and $803 million of operating cash flow
-
Increases fiscal 2016 outlook
driven primarily by strong beer business results; expects
comparable basis EPS of $5.00 - $5.20 and reported basis EPS of
$4.73 - $4.93
-
Increases fiscal 2016 free cash
flow projection to $200 - $300 million including operating cash
flow target of at least $1.25 billion; total capital expenditure
estimate of $1.05 - $1.15 billion remains unchanged for fiscal
2016
-
Brewery and glass plant
expansions continue to proceed as planned
-
Completes Meiomi wine brand
acquisition in August 2015
-
Declares quarterly cash
dividend
Second Quarter 2016 Financial
Highlights* |
|
|
|
|
|
|
|
(in millions, except per share data) |
|
|
|
|
|
|
|
|
Comparable |
|
% Change |
|
Reported |
|
% Change |
Net sales |
$1,733 |
|
8% |
|
$1,733 |
|
8% |
|
|
|
|
|
|
|
|
Operating income |
$501 |
|
21% |
|
$479 |
|
27% |
|
|
|
|
|
|
|
|
Operating margin |
28.9% |
|
+320 bps |
|
27.7% |
|
+410 bps |
|
|
|
|
|
|
|
|
Earnings before interest and taxes (EBIT) |
$501 |
|
21% |
|
NA |
|
NA |
|
|
|
|
|
|
|
|
Net income attributable to CBI |
$318 |
|
43% |
|
$302 |
|
54% |
|
|
|
|
|
|
|
|
Diluted net income per share attributable to CBI
(EPS) |
$1.56 |
|
41% |
|
$1.49 |
|
52% |
*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. 7,
2015 - Constellation Brands, Inc. (NYSE: STZ and STZ.B), a
leading beverage alcohol company, reported today its second quarter
2016 results.
"We posted outstanding results for our second
quarter driven by the impressive, sustained momentum of our beer
business, which is also driving an increase in our EPS projection
for the year. I am pleased that our glass plant and Nava brewery
expansions continue to progress as planned, with our first
incremental five million hectoliters of capacity scheduled to
become operational by calendar year end. Our wine and spirits
business posted improved margins, strong sales growth for our
spirits portfolio and excellent financial results for our Canadian
business," said Rob Sands, president and chief executive officer,
Constellation Brands.
Net Sales Commentary
For the quarter, the company generated
consolidated organic net sales growth on a constant currency basis
of nine percent.
Beer net sales increased 14 percent, primarily due
to volume growth. Beer depletions grew 10 percent, reflecting
strong consumer demand for the beer portfolio. The company
estimates that beer recall activities during the second quarter of
fiscal 2015 resulted in the reversal of approximately two million
case shipments and a $37 million reduction of net sales. Net sales
growth for third quarter fiscal 2016 is expected to be impacted due
to the $37 million shift in net sales from second quarter fiscal
2015 to third quarter fiscal 2015 in connection with the product
recall.
"During the second quarter, Constellation's beer
business represented 45% of total U.S. beer industry volume growth
in IRI channels and posted its 22nd consecutive quarter of volume
share gains. These stellar results were powered by the continuing
success of our two largest brands, Corona Extra and Modelo
Especial," said Sands. "In addition to strong volume growth across
our portfolio, we are experiencing favorable commodity and foreign
currency benefits, as well as better than expected results from our
glass plant, that are driving improved operational results and
enabling an increase in our margin expectation for the beer
business in fiscal 2016."
Wine and spirits net sales on an organic constant
currency basis increased three percent. This primarily reflects
volume growth within the spirits portfolio.
"During the quarter, we experienced strong
depletion trends of more than six percent for our wine and spirits
focus brands, led by double digit growth of Kim Crawford, Black
Box, The Dreaming Tree and Ruffino, as investments in these key
brands are paying off. We have successfully integrated Meiomi into
our existing wine portfolio and we are working to expand
distribution to drive incremental growth for this brand," said
Sands. "The spirits business delivered growth across the portfolio,
led by Paul Masson Grande Amber Brandy and SVEDKA Vodka."
Operating Income and Net Income
Commentary
For the quarter, consolidated comparable basis
operating income increased 21 percent.
Beer operating income increased 31 percent,
primarily due to volume growth, lower cost of product sold and
favorable pricing for the beer portfolio. The four percent increase
in wine and spirits operating income primarily reflects volume
growth and lower cost of product sold, partially offset by
unfavorable foreign currency translation.
For second quarter 2016, pre-tax comparable
adjustments totaled $23 million as compared to $39 million for the
same period last year.
Interest expense for second quarter 2016 totaled
$77 million, a decrease of nine percent. The decrease was primarily
due to lower average interest rates.
The comparable basis effective tax rate for second
quarter 2016 was 24.6 percent, which reflects the favorable outcome
of various tax items for the quarter, as compared to a 32.3 percent
tax rate for the prior year second quarter. The company continues
to expect a comparable basis effective tax rate of approximately
30.5 percent for fiscal year 2016.
Free Cash Flow Commentary
Free cash flow for the first six months of fiscal
2016 totaled $508 million as compared to $360 million for the same
period last year. The increase is primarily driven by higher
operating cash flow.
"We are increasing free cash flow guidance for
fiscal 2016 to a range of $200 to $300 million. The anticipated
increase is being primarily driven by higher earnings for the beer
business and lower tax and interest payments, as we now expect to
generate operating cash flow of $1.25 to $1.45 billion," said David
Klein, executive vice president and chief financial officer,
Constellation Brands.
Quarterly Dividend
On October 6, 2015, Constellation's board of
directors declared a quarterly cash dividend of $0.31 per share of
Class A Common Stock and $0.28 per share of Class B Common Stock,
payable on November 24, 2015, to stockholders of record as of the
close of business on November 9, 2015.
Outlook
The table below sets forth management's current
EPS expectations for fiscal 2016 compared to fiscal 2015 actual
results, both on a comparable basis and a reported basis.
|
Comparable Basis |
Reported Basis |
|
FY16
Estimate |
FY15
Actual |
FY16
Estimate |
FY15
Actual |
Fiscal Year Ending Feb. 28/29 |
$5.00 -
$5.20 |
$4.44 |
|
$4.73 - $4.93 |
$4.17 |
|
For fiscal 2016, the beer business continues to
expect net sales growth of approximately 10 percent but now expects
operating income growth in the 15 - 18 percent range. For the wine
and spirits business, the company continues to expect net sales and
operating income growth to be in the low-to-mid single-digit range
before any benefit from the Meiomi acquisition.
Fiscal 2016 guidance also includes the following
current assumptions, including the acquisition of the Meiomi wine
brand:
-
Interest expense: approximately $310 - $320
million
-
Tax rate: approximately 30.5 percent
-
Weighted average diluted shares outstanding:
approximately 204 million
-
Free cash flow: approximately $200 - $300
million
-
Operating cash flow: approximately $1.25 - $1.45
billion
-
Capital expenditures: approximately $1.05 -
$1.15 billion, including $950 million - $1.05 billion for the beer
business
Conference Call
A conference call to discuss second quarter 2016
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. 7, 2015 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, comparable basis
effective tax rate 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. In
2014, Constellation was one of the top performing stocks in the
S&P 500 Consumer Staples Index. Constellation is the number
three beer company in the U.S. with high-end, iconic imported
brands including Corona Extra, Corona Light, Modelo Especial, Negra
Modelo and Pacifico. Constellation is also the world's leader in
premium wine selling great brands that people love including Robert
Mondavi, Clos du Bois, Kim Crawford, Rex Goliath, Mark West,
Franciscan Estate, Ruffino and Jackson-Triggs. The company's
premium spirits brands include SVEDKA Vodka and Black Velvet
Canadian Whisky.
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
7,700 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,
2015, 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.
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:
-
brewery expansion activities and joint venture
glass plant expansion activities take place with expected scope, on
expected terms and timetable, and with receipt of any necessary
regulatory approvals;
-
accuracy of supply projections, including those
relating to brewery expansion and glass sourcing;
-
timeframe and actual costs associated with beer
supply, brewery expansion and glass sourcing, including joint
venture glass plant expansion, 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;
-
free cash flow, operating 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
Meiomi wine brand;
-
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 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. 28, 2015, 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
8K Earnings Release Financial
Statements_Final_10.6.15
This
announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX 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
HUG#1957221
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