Constellation Brands Reports First Quarter Fiscal 2016 Results

  • Achieves comparable basis EPS of $1.26 and reported basis EPS of $1.18
  • Generates $76 million of free cash flow and $206 million of operating cash flow
  • Increases fiscal 2016 outlook driven primarily by strong beer business performance; expects comparable basis EPS of $4.80 - $5.00 and reported basis EPS of $4.60 - $4.80
  • Reaffirms free cash flow projection of $100 - $200 million for fiscal 2016 including operating cash flow target of at least $1.15 billion and total capital expenditure estimate of $1.05 - $1.15 billion
  • Agrees to purchase the Meiomi wine brand for approximately $315 million; transaction expected to be accretive for fiscal 2016
  • Declares quarterly cash dividend
First Quarter 2016 Financial Highlights*              
(in millions, except per share data)              
  Comparable   % Change   Reported   % Change
Net sales $1,631   7%   $1,631   7%
Operating income $454   12%   $427   9%
Operating margin 27.8%   +130 bps   26.2%   +50 bps
Earnings before interest and taxes (EBIT) $455   12%   NA   NA
Net income attributable to CBI $256   19%   $239   15%
Diluted net income per share attributable to CBI (EPS) $1.26   18%   $1.18   15%

*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., JULY 1, 2015 - Constellation Brands, Inc. (NYSE: STZ and STZ.B), a leading beverage alcohol company, reported today its first quarter 2016 results.

"Our excellent first quarter results reflect a great start to our new fiscal year. We delivered exceptional performance for our beer business, which is the primary driver of the upward revision to our EPS outlook for the year, and our brewery expansion continues to proceed as planned. Within our wine and spirits business, we experienced improving market trends for our U.S. wine business, posted better than expected results in Canada and delivered excellent dollar sales and depletion volume growth for our portfolio of spirits brands," said Rob Sands, president and chief executive officer, Constellation Brands.

"Today, we are also announcing that we have agreed to purchase the Meiomi wine brand, which is a high-growth, high-margin, scale brand that can be effectively integrated into our powerful portfolio of wine brands," said Sands. Launched in 2006, Meiomi has grown from a 60,000 case brand in 2010 to almost 600,000 cases in 2014 and is experiencing IRI dollar sales growth of more than 50 percent over the last 52 weeks. Meiomi's pinot noir is also among the fastest-growing, major pinot noir brands in the latest 12-week period. "This strong record of growth demonstrates how well the brand resonates with consumers. We are excited about Meiomi's prospects going forward under our efficient operating structure and strong route-to-market," added Sands. The purchase price for the brand is approximately $315 million, subject to post-closing adjustments.  The transaction, which is subject to regulatory approval, is expected to close around the beginning of August and to be $0.03 - $0.04 accretive to EPS for fiscal 2016.

Net Sales Commentary

For the quarter, the company generated consolidated net sales growth on a constant currency basis of eight percent.

Beer net sales increased 11 percent, primarily due to volume growth. Beer depletions grew 10 percent, reflecting strong consumer demand for the beer portfolio.

"During the first quarter, our beer business kicked off the '120 Days of Summer' selling season by posting double-digit sales and depletion growth, with strong execution across our iconic portfolio led by our two largest brands, Corona Extra, which includes the new can launch, and Modelo Especial," said Sands. "As a result of this strong performance, we now expect sales growth of approximately 10 percent for our beer business in fiscal 2016."

Wine and spirits net sales on a constant currency basis increased four percent. This primarily reflects higher shipment volume and favorable mix. Net sales benefited from the overlap of a planned U.S. distributor inventory destocking, net of a related distributor destocking payment, which occurred during first quarter 2015.

"Our U.S. wine and spirits depletions grew 3.5% and gained traction during the quarter led by Kim Crawford, Ruffino, Black Box, Simi, Estancia, Clos du Bois, The Dreaming Tree and Woodbridge by Robert Mondavi," said Sands. "The strong sales and depletion growth for the spirits business during the quarter was driven by Casa Noble Tequila, Paul Masson Grande Amber Brandy and SVEDKA Vodka."

Operating Income and Net Income Commentary

For the quarter, consolidated comparable basis operating income increased 12 percent.

Beer operating income increased 17 percent, primarily due to higher volume and pricing for the beer portfolio, partially offset by an increase in marketing spend. The one percent increase in wine and spirits operating income primarily reflects favorable mix and lower cost of product sold.

For first quarter 2016, pre-tax comparable adjustments totaled $27 million. This included $13 million of costs associated with the company's recently initiated cost effectiveness plan, the goal of which is to streamline and simplify processes, and shift resources and investment to long-term, profitable growth opportunities across the business. The company expects total costs associated with this plan for fiscal 2016 to approximate $20 million.

Interest expense for first quarter 2016 totaled $78 million, a decrease of 10 percent. The decrease was primarily due to lower average interest rates.

The comparable basis effective tax rate for first quarter 2016 was 31.8 percent compared to a 32.5 percent tax rate for the prior year first quarter.

Free Cash Flow Commentary

Free cash flow for first quarter 2016 totaled $76 million as compared to $101 million for the same period last year.

"For fiscal 2016, we continue to expect to generate operating cash flow of $1.15 to $1.35 billion and free cash flow of $100 to $200 million as our brewery capital investments progress as planned," said David Klein, executive vice president and chief financial officer, Constellation Brands. "Despite our significant level of capital expenditures in fiscal 2016, the initiation of a dividend, and purchase of the Meiomi wine brand, our strong projected earnings and operating cash flow growth position us to cross below the 4X net debt to comparable basis EBITDA mark during fiscal 2016," added Klein.

Quarterly Dividend

On June 30, 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 August 25, 2015 to stockholders of record as of the close of business on August 11, 2015.


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
Fiscal Year Ending Feb. 28/29 $4.80 - $5.00 $4.44   $4.60 - $4.80 $4.17  

For fiscal 2016, the beer business is now targeting mid to high single-digit volume growth, net sales growth of approximately 10 percent, and 13 - 15 percent operating income growth. 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 expected acquisition of the Meiomi wine brand:

  • Interest expense: approximately $325 - $335 million
  • Tax rate: approximately 30.5 percent
  • Weighted average diluted shares outstanding: approximately 204 million
  • Free cash flow: approximately $100 - $200 million
  • Operating cash flow:  approximately $1.15 - $1.35 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 first 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, July 1, 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: under "Investors," prior to the call.


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"). 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, 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 7,600 talented employees. We express our company vision: to elevate life with every glass raised. To learn more, visit

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, 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 August 31, 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. There can be no assurance that the transaction to acquire the Meiomi wine brand will occur or will occur on the timetable projected by Constellation Brands.

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 acquisition of the Meiomi wine brand under the expected terms and the accuracy of projections associated with the Meiomi wine brand;
  • total costs associated with the cost effectiveness plan may vary from management's expectations due to actual costs varying from current management expectations;
  • 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;
  • 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.

Cheryl Gossin: 585-678-7191
Amy Martin: 585-678-7141
Investor Relations
Patty Yahn-Urlaub: 585-678-7483
Bob Czudak: 585-678-7170