Constellation Brands Reports Fiscal 2010 Results; Announces Share Repurchase Program

  
  • Achieves comparable basis diluted EPS of $1.69 and reported basis diluted EPS of $0.45; results reflect tax rate benefits
  • Generates strong free cash flow of $295 million
  • Decreases debt approximately $600 million for the year
  • Significantly improves cost structure during the year
  • Provides fiscal 2011 outlook; projects comparable basis diluted EPS of $1.53 - $1.68 and reported basis diluted EPS of $1.36 - $1.51
  • Projects fiscal 2011 free cash flow in the range of $350 - $400 million
  • Board of Directors authorizes $300 million share repurchase program
Fiscal 2010 Financial Highlights* (in millions, except per share data) Comparable Change Reported Change ---------- ------ -------- ------ Consolidated net sales $3,365 -8% $3,365 -8% Operating income $560 -7% $312 NM Operating margin 16.6% 10 bps 9.3% NM Equity in earnings of equity method investees** $239 -11% $214 14% Earnings before interest and taxes (EBIT) $799 -9% - - Net income $373 6% $99 NM Diluted earnings per share $1.69 6% $0.45 NM

Constellation Brands, Inc. (NYSE: STZ, ASX: CBR), the world's leading wine company, reported today its fiscal 2010 results and fiscal 2011 outlook.

(Logo: http://www.newscom.com/cgi-bin/prnh/20040119/STZLOGO )

"Given the lingering economic challenges throughout our key markets, I am pleased with our results for the year. We generated strong free cash flow, significantly reduced our debt and greatly improved our cost structure. Fiscal 2010 results reflect continued execution against key strategic goals, the most important of which is our U.S. distributor consolidation effort," said Rob Sands, president and chief executive officer, Constellation Brands. "As our fiscal year came to a close, we worked with our distributors to reduce their fourth quarter inventory levels while securing incremental distributor investments behind our brands. This action reduced fourth quarter sales and profits for our U.S. wine business. Overall, we believe this effort better positions the company and our distributors to drive profitable, organic growth into the future."



    Fiscal 2010 Net Sales Highlights*
    (in millions)

                             Reported                       Organic
                             --------                       -------
                                      Constant                     Constant
                       Net            Currency      Net            Currency
                     Sales   Change     Change    Sales   Change     Change
                    ------   ------    --------  ------   ------    --------
    Consolidated    $3,365       -8%        -6%  $3,365       -1%         1%
    Branded Wine    $2,928       -3%        -1%  $2,928       -3%        -1%
    Spirits           $224      -47%       -47%    $224       19%        19%
    Other             $213       -3%         5%    $213        1%         9%



*Definitions of reported, comparable, organic and constant currency, as well as reconciliations of non-GAAP financial measures, are contained elsewhere in this news release.

** Hereafter referred to as "equity earnings."

NM= Not Meaningful

Fiscal 2010 Net Sales Commentary

Reported consolidated net sales decreased eight percent due primarily to the impact of the value spirits divestiture and the unfavorable impact of year-over-year currency exchange rate fluctuations. Organic constant currency net sales increased one percent.

Branded wine organic net sales on a constant currency basis decreased one percent which included a three percent decrease in North America partially offset by increases of seven percent in Europe and four percent in Australia/New Zealand. The sales increase in Europe was primarily due to volume growth of lower priced products.

Total spirits organic net sales increased 19 percent for the year, led by a 38 percent gain for SVEDKA vodka. "Sales of SVEDKA vodka continue to experience strong momentum," said Sands. "The brand recently launched the first-ever SVEDKA television advertising campaign which marks an exciting milestone and serves as another example of how SVEDKA is setting itself apart in its quest to bring future fun to vodka lovers everywhere."

Fiscal 2010 Operating Income, Net Income, Diluted EPS Commentary

Wines segment operating income decreased $37 million versus the prior year. This is primarily due to the divestiture of the value spirits business, the decrease in U.S. branded wine sales and a decrease in operating income from the U.K. and Australian businesses, partially offset by savings from cost reduction initiatives.

Constellation's equity earnings from its 50 percent interest in the Crown Imports joint venture totaled $222 million, a decrease of 12 percent from the prior year. For fiscal 2010, Crown Imports generated net sales of $2.3 billion, a decrease of six percent, and operating income of $444 million, a decrease of 12 percent. Net sales for Crown were impacted primarily by volume declines. Operating income for Crown decreased primarily due to lower volumes, negative mix and a contractual cost increase.

"While the on-premise and convenience store channels were impacted by a challenging economic environment throughout the year, Crown experienced import category market share gains for the year in the grocery channel as they executed targeted promotional and media support programs and introduced new packages for consumers to enjoy at a wide variety of venues and price points," said Sands.

For fiscal 2010, pre-tax restructuring charges, acquisition-related integration costs and unusual items totaled $275 million, compared to $658 million for the prior year.

Interest expense totaled $265 million, a decrease of 18 percent. The decrease was primarily due to lower average borrowings during the year.

"We continue to reduce leverage and improve our credit profile as strong free cash flow generation and proceeds from asset sales drove a $600 million decrease in our debt level for fiscal 2010," said Bob Ryder, chief financial officer, Constellation Brands. "Additionally, in the fourth quarter we successfully amended our senior credit facility, extended a portion of our term loan obligations and prepaid a $250 million 8 1/8 percent senior subordinated note."

Free cash flow for the year totaled $295 million compared to $378 million in the prior year. The decrease was due in part to a $65 million tax payment related to the sale of the value spirits business. For fiscal 2011, the company is targeting free cash flow in the range of $350 - $400 million.

The comparable basis effective tax rate for the year was 30 percent which reflects the favorable outcome of various tax items, and compares to a 36 percent rate for the prior year.



    Fourth Quarter 2010 Financial Highlights*
    (in millions, except per share data)


                               Comparable   Change  Reported   Change
                               ----------   ------  --------   ------
    Consolidated net sales           $709       -4%     $709       -4%

    Operating income (loss)           $75      -28%     ($49)      NM

                                              -360
    Operating margin                 10.5%     bps        NM       NM

    Equity earnings                   $43       -9%      $43       NM

    EBIT                             $118      -22%        -        -

    Net income (loss)                 $60       29%     ($51)      NM

    Diluted earnings (loss)
     per share                      $0.27       29%   ($0.23)      NM





    Fourth Quarter 2010 Net Sales Highlights*
    (in millions)

                               Reported                     Organic
                               --------                     -------
                                       Constant                    Constant
                        Net            Currency     Net            Currency
                      Sales   Change     Change   Sales   Change     Change
                     ------   ------    -------- ------   ------    --------
    Consolidated       $709       -4%       -10%   $709        5%        -2%
    Branded Wine       $620        2%        -6%   $620        2%        -6%
    Spirits             $48      -49%       -49%    $48       19%        19%
    Other               $42       24%        15%    $42       68%        57%



Fourth Quarter 2010 Net Sales Commentary

Reported consolidated net sales decreased four percent due primarily to the impact of the value spirits divestiture, partially offset by the favorable impact of year-over-year currency exchange rate fluctuations. Organic constant currency net sales decreased two percent.

Branded wine organic net sales on a constant currency basis decreased six percent versus last year which included a 12 percent decrease in North America and a 23 percent increase in Europe. Net sales for Australia/New Zealand were even with the prior year quarter.

The fourth quarter net sales decrease in North America primarily reflects the impact of decreasing inventory positions at U.S. distributors. The sales increase in Europe was primarily due to volume growth and a favorable comparison versus fourth quarter fiscal 2009. Total spirits organic net sales increased 19 percent for the quarter.

Fourth Quarter 2010 Operating Income, Net Income, Diluted EPS Commentary

Wines segment operating income decreased $22 million versus the prior year fourth quarter. This is primarily due to the decrease in U.S. branded wine sales.

Constellation's equity earnings from its 50 percent interest in the Crown Imports joint venture totaled $41 million, a decrease of 11 percent from the prior year fourth quarter. For fourth quarter 2010, Crown Imports generated net sales of $419 million, a decrease of four percent, and operating income of $82 million, a decrease of 12 percent. Net sales for Crown were impacted primarily by volume declines driven by the challenging economic conditions. Operating income for Crown decreased due to lower volume, negative mix and a contractual cost increase.

For fourth quarter 2010, pre-tax restructuring charges, acquisition-related integration costs and unusual items totaled $125 million, compared to $468 million for the prior year fourth quarter. During the fourth quarter, the company recorded $103 million of non-cash impairment charges related to intangible assets in connection with the company's annual impairment testing, primarily related to its Australian business.

Interest expense totaled $63 million, a decrease of 13 percent. The decrease was primarily due to lower average borrowings during the quarter.

The comparable basis effective tax rate for the fourth quarter was negative 11 percent which reflects the favorable outcome of various tax items, and compares to a 41 percent rate for the prior year quarter.

Common Share Repurchase Authorization

Constellation Brands' Board of Directors has authorized the repurchase of up to $300 million of the company's common stock. It is the company's intent to implement an accelerated stock buyback transaction when appropriate. "We believe repurchasing Constellation shares represents good value and is an appropriate investment for us at this time. Due to our continued strong cash flow generation and successful deleveraging and refinancing efforts, we believe we can redeploy a portion of free cash flow to repurchase stock while we continue to reduce debt," said Ryder.

Summary

"We have accomplished a great deal throughout the last year and remain focused on executing a strategy based on achieving profitable, organic growth, generating strong free cash flow and improving return on invested capital. Our guidance for fiscal 2011 reflects a number of factors including an uncertain economic environment, continuing pressures on the Crown joint venture and the Australian and U.K. operations and incremental investments in marketing and a new technology platform," said Sands. "We believe we are well positioned to execute on our business strategy for fiscal 2011."

Outlook

The table below sets forth management's current diluted EPS expectations for fiscal 2011 compared to fiscal 2010 actual results, both on a reported basis and a comparable basis.


    Constellation Brands Fiscal 2011 Diluted Earnings Per Share Outlook


                           Reported Basis          Comparable Basis
                           --------------          ----------------
                           FY11          FY10        FY11          FY10
                         Estimate       Actual     Estimate       Actual
                         --------       ------     --------       ------
    Fiscal Year Ending
     Feb. 28           $1.36 - $1.51       $0.45 $1.53 - $1.68       $1.69
    ------------------ -------------       ----- -------------       -----



Full-year fiscal 2011 guidance includes the following current assumptions but excludes any impact from any repurchases of the company's common stock:

  • Interest expense: approximately $210 - $220 million
  • Tax rate: approximately 35 percent
  • Weighted average diluted shares outstanding: approximately 224 million
  • Free cash flow: $350 - $400 million

Conference Call

A conference call to discuss fourth quarter and full year fiscal 2010 results and fiscal 2011 outlook will be hosted by President and Chief Executive Officer Rob Sands and Executive Vice President and Chief Financial Officer Bob Ryder on Fri., April 9, 2010 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 in the call will be available on the Internet at Constellation's Web site: www.cbrands.com under "Investors," prior to the call.

Explanations

Reported basis ("reported") operating income, net income and diluted EPS are as reported under generally accepted accounting principles. Operating income, net income and diluted EPS on a comparable basis ("comparable"), exclude restructuring charges, acquisition-related integration costs and unusual items. The company's measure of segment profitability excludes restructuring charges, acquisition-related integration costs and unusual items, 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.

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 is the world's leading wine company that achieves success through an unmatched knowledge of wine consumers, storied brands that suit varied lives and tastes and talented employees world-wide. With a broad portfolio of widely admired premium products across the wine, beer and spirits categories, Constellation's brand portfolio includes Robert Mondavi, Hardys, Clos du Bois, Blackstone, Arbor Mist, Estancia, Ravenswood, Jackson-Triggs, Kim Crawford, Corona Extra, Black Velvet Canadian Whisky and SVEDKA Vodka.

Constellation Brands (NYSE: STZ and STZ.B; ASX: CBR) is an S&P 500 Index and Fortune 1000(R) company with more than 100 total brands in our portfolio, sales in about 150 countries and operations in approximately 45 facilities. The company believes that industry leadership involves a commitment to our brands, to the trade, to the land, to investors and to different people around the world who turn to our products when celebrating big moments or enjoying quiet ones. We express this commitment through our vision: to elevate life with every glass raised. To learn more about Constellation Brands and its product portfolio visit the company's web site at www.cbrands.com.

Forward-Looking Statements

The statements made under the heading Outlook, and all statements other than statements of historical facts set forth in this news release regarding Constellation's business strategy, future operations, financial position, estimated revenues, projected costs, prospects, 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 may reiterate the Projections. Prior to the start of the company's quiet period, which will begin at the close of business on May 28, 2010, 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, 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:

  
  • realization of expected synergies from acquired businesses;
  • completion of various portfolio actions; implementation of consolidation activities and actual U.S. distributor transition experience;
  • 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;
  • restructuring charges, acquisition-related integration costs and other one-time costs 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. 28, 2009, which could cause actual future performance to differ from current expectations.
Constellation Brands, Inc. and Subsidiaries CONDENSED CONSOLIDATED BALANCE SHEETS (in millions) February February 28, 28, 2010 2009 ---- ---- Assets Current Assets: Cash and cash investments $43.5 $13.1 Accounts receivable, net 514.7 524.6 Inventories 1,879.9 1,828.7 Prepaid expenses and other 151.0 168.1 ----- ----- Total current assets 2,589.1 2,534.5 Property, plant and equipment, net 1,567.2 1,547.5 Goodwill 2,570.6 2,615.0 Intangible assets, net 925.0 1,000.6 Other assets, net 442.4 338.9 ----- ----- Total assets $8,094.3 $8,036.5 ======== ======== Liabilities and Stockholders' Equity Current Liabilities: Notes payable to banks $371.2 $227.3 Current maturities of long-term debt 187.2 235.2 Accounts payable 268.8 288.7 Accrued excise taxes 43.8 57.6 Other accrued expenses and liabilities 501.6 517.6 ----- ----- Total current liabilities 1,372.6 1,326.4 Long-term debt, less current maturities 3,277.1 3,971.1 Deferred income taxes 536.2 543.6 Other liabilities 332.1 287.1 ----- ----- Total liabilities 5,518.0 6,128.2 Total stockholders' equity 2,576.3 1,908.3 ------- ------- Total liabilities and stockholders' equity $8,094.3 $8,036.5 ======== ======== Constellation Brands, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share data) Three Months Ended Year Ended ------------------ ---------- February February February February 28, 28, 28, 28, 2010 2009 2010 2009 ---- ---- ---- ---- Sales $893.0 $964.9 $4,213.0 $4,723.0 Excise taxes (184.3) (229.8) (848.2) (1,068.4) ------ ------ ------ -------- Net sales 708.7 735.1 3,364.8 3,654.6 Cost of product sold (486.3) (543.9) (2,220.0) (2,424.6) ------ ------ -------- -------- Gross profit 222.4 191.2 1,144.8 1,230.0 Selling, general and administrative expenses (148.2) (169.4) (682.3) (823.8) Impairment of intangible assets and goodwill (103.2) (278.6) (103.2) (300.4) Restructuring charges (20.4) (27.7) (47.6) (68.0) Acquisition-related integration costs - (0.6) (0.2) (8.2) --- ---- ---- ---- Operating (loss) income (49.4) (285.1) 311.5 29.6 Equity in earnings (losses) of equity method investees 43.0 (31.9) 213.6 186.6 Interest expense, net (63.1) (72.5) (265.1) (323.0) Loss on write-off of financing costs (0.7) - (0.7) - ---- --- ---- --- (Loss) income before income taxes (70.2) (389.5) 259.3 (106.8) Benefit from (provision for) income taxes 19.2 (17.3) (160.0) (194.6) Net (loss) income $(51.0) $(406.8) $99.3 $(301.4) ====== ======= ===== ======= (Loss) Earnings Per Common Share: Basic -Class A Common Stock $(0.23) $(1.88) $0.46 $(1.40) Basic -Class B Common Stock $(0.21) $(1.71) $0.41 $(1.27) Diluted -Class A Common Stock $(0.23) $(1.88) $0.45 $(1.40) Diluted -Class B Common Stock $(0.21) $(1.71) $0.41 $(1.27) Weighted Average Common Shares Outstanding: Basic -Class A Common Stock 196.752 194.669 196.095 193.906 Basic -Class B Common Stock 23.729 23.744 23.736 23.753 Diluted -Class A Common Stock 196.752 194.669 221.210 193.906 Diluted -Class B Common Stock 23.729 23.744 23.736 23.753 Constellation Brands, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year Ended ---------- February February 28, 28, 2010 2009 ---- ---- Cash Flows From Operating Activities Net income (loss) $99.3 $(301.4) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation of property, plant and equipment 143.8 143.6 Impairment of intangible assets and goodwill 103.2 300.4 Stock-based compensation expense 56.3 46.1 Loss on contractual obligation from put option of Ruffino shareholder 34.3 - Loss on disposal or impairment of long-lived assets, net 15.7 44.9 Amortization of intangible and other assets 12.1 13.4 Noncash portion of loss on extinguishment of debt 0.7 - Deferred tax (benefit) provision (30.6) 2.3 Equity in earnings of equity method investees, net of distributed earnings (13.1) 90.3 (Gain) loss on business sold or held for sale (10.4) 31.5 Write-down of Australian inventory - 75.5 Change in operating assets and liabilities, net of effects from purchases and sales of businesses: Accounts receivable, net 61.9 87.4 Inventories 51.0 (86.0) Prepaid expenses and other current assets 2.6 9.4 Accounts payable (42.7) (26.9) Accrued excise taxes (18.1) 12.1 Other accrued expenses and liabilities (110.6) (95.0) Other, net 47.1 159.3 ---- ----- Total adjustments 303.2 808.3 ----- ----- Net cash provided by operating activities 402.5 506.9 ----- ----- Cash Flows From Investing Activities Proceeds from sales of businesses 349.6 204.2 Proceeds from sales of assets 17.2 25.4 Capital distributions from equity method investees 0.2 20.8 Purchases of property, plant and equipment (107.7) (128.6) Investments in equity method investees (0.9) (3.2) Purchase of business, net of cash acquired - 0.1 Other investing activities (1.8) 9.9 ---- --- Net cash provided by investing activities 256.6 128.6 ----- ----- Cash Flows From Financing Activities Principal payments of long-term debt (781.3) (577.6) Payment of financing costs of long- term debt (11.5) - Net proceeds from (repayment of) notes payable 117.1 (109.7) Proceeds from maturity of derivative instrument 33.2 - Exercise of employee stock options 12.3 27.1 Proceeds from employee stock purchases 4.5 5.6 Excess tax benefits from stock- based payment awards 2.7 7.2 --- --- Net cash used in financing activities (623.0) (647.4) ------ ------ Effect of exchange rate changes on cash and cash investments (5.7) 4.5 ---- --- Net increase (decrease) in cash and cash equivalents 30.4 (7.4) Cash and cash investments, beginning of year 13.1 20.5 Cash and cash investments, end of year $43.5 $13.1 ===== ===== Constellation Brands, Inc. and Subsidiaries SEGMENT INFORMATION (in millions) Three Months Ended ------------------ February February Percent 28, 28, Change 2010 2009 ---- ---- Segment Net Sales and Operating Income Constellation Wines (1) Branded wine net sales $619.6 $608.9 2% Spirits net sales 47.6 92.6 (49%) Other net sales 41.5 33.6 24% ---- ---- Segment net sales $708.7 $735.1 (4%) Operating income $101.1 $123.3 (18%) % Net sales 14.3% 16.8% Equity in earnings of equity method investees $1.8 $0.8 NM Crown Imports Segment net sales $418.5 $436.1 (4%) Operating income $82.0 $93.2 (12%) % Net sales 19.6% 21.4% Consolidation and Eliminations Segment net sales $(418.5) $(436.1) (4%) Operating income $(82.0) $(93.2) (12%) Equity in earnings of Crown Imports $41.2 $46.5 (11%) Corporate Operations and Other Consolidated net sales $708.7 $735.1 (4%) Operating loss (2) $(26.6) $(19.5) 36% % Net sales 3.8% 2.7% Year Ended ---------- February February Percent 28, 28, Change 2010 2009 ---- ---- Segment Net Sales and Operating Income Constellation Wines (1) Branded wine net sales $2,928.0 $3,015.3 (3%) Spirits net sales 223.9 418.7 (47%) Other net sales 212.9 220.6 (3%) ----- ----- Segment net sales $3,364.8 $3,654.6 (8%) Operating income $654.9 $691.4 (5%) % Net sales 19.5% 18.9% Equity in earnings of equity method investees $17.1 $17.6 (3%) Crown Imports Segment net sales $2,256.2 $2,395.4 (6%) Operating income $444.1 $504.1 (12%) % Net sales 19.7% 21.0% Consolidation and Eliminations Segment net sales $(2,256.2) $(2,395.4) (6%) Operating income $(444.1) $(504.1) (12%) Equity in earnings of Crown Imports $221.9 $252.3 (12%) Corporate Operations and Other Consolidated net sales $3,364.8 $3,654.6 (8%) Operating loss (2) $(94.7) $(86.8) 9% % Net sales 2.8% 2.4% NM = Not Meaningful (1) In connection with the company's divestiture of its value spirits business and the integration of the retained spirits brands into the Constellation Wines business, the company changed its internal management financial reporting on May 1, 2009. The company now reports its operating results in three segments: Constellation Wines, Crown Imports and Corporate Operations and Other. Prior results have been restated to conform with the new segment presentation. (2) During the fourth quarter of fiscal 2010, the company changed its policy relating to the recording of amortization of deferred financing costs from selling, general and administrative expenses to interest expense, net. As such, operating loss within the Corporate Operations and Other segment for all periods presented have been restated to reflect the impact of this policy change. Constellation Brands, Inc. and Subsidiaries GEOGRAPHIC INFORMATION (in millions) Three Months Ended ------------------ February 28, February 28, 2010 2009 --- --- Geographic Net Sales (1)(2) North America $479.9 $553.2 Branded wine $404.7 $449.1 Spirits $47.6 $92.6 Other $27.6 $11.5 Europe $136.4 $111.8 Branded wine $123.2 $91.4 Other $13.2 $20.4 Australia/New Zealand $92.4 $70.1 Branded wine $91.7 $68.4 Other $0.7 $1.7 Constant Currency Percent Currency Percent Change Impact Change(3) Geographic Net Sales (1)(2) North America (13%) 2% (16%) Branded wine (10%) 3% (12%) Spirits (49%) - (49%) Other NM NM NM Europe 22% 11% 11% Branded wine 35% 12% 23% Other (35%) 6% (41%) Australia/New Zealand 32% 34% (2%) Branded wine 34% 34% - Other NM NM NM Three Months Ended ------------------ February 28, February 28, 2010 2009 --- --- Branded Wine Geographic Net Sales (1)(2) North America $404.7 $449.1 Europe 123.2 91.4 Australia/New Zealand 91.7 68.4 Consolidated branded wine net sales $619.6 $608.9 ====== ====== Organic Constant Currency Percent Currency Percent Change Impact Change(3) Branded Wine Geographic Net Sales (1)(2) North America (10%) 3% (12%) Europe 35% 12% 23% Australia/New Zealand 34% 34% - Consolidated branded wine net sales 2% 8% (6%) Year Ended ---------- February 28, February 28, 2010 2009 --- --- Geographic Net Sales (1)(2) North America $2,382.7 $2,651.8 Branded wine $2,069.8 $2,154.7 Spirits $223.9 $418.7 Other $89.0 $78.4 Europe $622.0 $648.3 Branded wine $504.9 $521.3 Other $117.1 $127.0 Australia/New Zealand $360.1 $354.5 Branded wine $353.3 $339.3 Other $6.8 $15.2 Constant Currency Percent Currency Percent Change Impact Change(3) Geographic Net Sales (1)(2) North America (10%) - (10%) Branded wine (4%) - (4%) Spirits (47%) - (47%) Other 14% - 14% Europe (4%) (11%) 7% Branded wine (3%) (10%) 7% Other (8%) (14%) 6% Australia/New Zealand 2% - 1% Branded wine 4% - 4% Other (55%) - (55%) Year Ended ---------- February 28, February 28, 2010 2009 --- --- Branded Wine Geographic Net Sales (1)(2) North America $2,069.8 $2,154.7 Europe 504.9 521.3 Australia/New Zealand 353.3 339.3 Consolidated branded wine net sales $2,928.0 $3,015.3 ======== ======== Organic Constant Currency Percent Divestiture Currency Percent Change Impact(4) Impact Change(3) Branded Wine Geographic Net Sales (1)(2) North America (4%) - - (3%) Europe (3%) - (10%) 7% Australia/New Zealand 4% - - 4% Consolidated branded wine net sales (3%) - (2%) (1%) (1) Refer to discussion under "Reconciliation of Reported, Organic and Constant Currency Net Sales" on following page for definition of constant currency net sales and organic constant currency net sales and reasons for use. (2) Net sales are attributed to countries based on the location of the selling company. (3) May not sum due to rounding as each item is computed independently. (4) Divestiture impact includes the removal of branded wine net sales associated with the Pacific Northwest brands for the period March 1, 2008, through May 31, 2008, included in the year ended February 28, 2009. Constellation Brands, Inc. and Subsidiaries RECONCILIATION OF REPORTED, ORGANIC AND CONSTANT CURRENCY NET SALES (in millions) As the company sold certain Pacific Northwest wine brands on June 5, 2008; exited certain spirits production contracts in connection with the sale of a Canadian distilling facility on August 31, 2008; sold certain value spirits brands on March 24, 2009; and sold its European cider business on January 15, 2010, organic net sales for the respective periods are defined by the company as reported net sales less net sales of Pacific Northwest wine brands and/or net sales of certain spirits contract production services and/or net sales of certain spirits value brands and/or net sales of cider, as appropriate. Organic net sales and percentage increase (decrease) in constant currency net sales (which excludes the impact of year over year currency exchange rate fluctuations) are provided because management uses this information in monitoring and evaluating the underlying business trends of the continuing operations of the company. 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. Three Months Ended ------------------ February February 28, 28, 2010 2009 --- --- Consolidated Net Sales Branded wine $619.6 $608.9 Spirits 47.6 92.6 Other 41.5 33.6 ---- ---- Consolidated reported net sales 708.7 735.1 Less: Pacific Northwest branded wine net sales (2) - - Less: Spirits net sales (3) - (52.7) Less: Cider net sales (4) - (8.9) --- ---- Consolidated organic net sales $708.7 $673.5 ====== ====== Branded Wine Net Sales Branded wine reported net sales $619.6 $608.9 Less: Pacific Northwest branded wine net sales (2) - - Branded wine organic net sales $619.6 $608.9 ====== ====== Spirits Net Sales Spirits reported net sales $47.6 $92.6 Less: Spirits net sales (3) - (52.7) Spirits organic net sales $47.6 $39.9 ===== ===== Other Net Sales Other reported net sales $41.5 $33.6 Less: Cider net sales (4) - (8.9) Other organic net sales $41.5 $24.7 ===== ===== Constant Currency Percent Currency Percent Change Impact Change(1) Consolidated Net Sales Branded wine 2% 8% (6%) Spirits (49%) - (49%) Other 24% 8% 15% Consolidated reported net sales (4%) 7% (10%) Less: Pacific Northwest branded wine net sales (2) Less: Spirits net sales (3) Less: Cider net sales (4) Consolidated organic net sales 5% 7% (2%) Branded Wine Net Sales Branded wine reported net sales 2% 8% (6%) Less: Pacific Northwest branded wine net sales (2) Branded wine organic net sales 2% 8% (6%) Spirits Net Sales Spirits reported net sales (49%) - (49%) Less: Spirits net sales (3) Spirits organic net sales 19% - 19% Other Net Sales Other reported net sales 24% 8% 15% Less: Cider net sales (4) Other organic net sales 68% 11% 57% Year Ended ---------- February 28, February 28, 2010 2009 --- --- Consolidated Net Sales Branded wine $2,928.0 $3,015.3 Spirits 223.9 418.7 Other 212.9 220.6 ----- ----- Consolidated reported net sales 3,364.8 3,654.6 Less: Pacific Northwest branded wine net sales (2) - (7.9) Less: Spirits net sales (3) - (230.0) Less: Cider net sales (4) - (8.9) --- ---- Consolidated organic net sales $3,364.8 $3,407.8 ======== ======== Branded Wine Net Sales Branded wine reported net sales $2,928.0 $3,015.3 Less: Pacific Northwest branded wine net sales (2) - (7.9) Branded wine organic net sales $2,928.0 $3,007.4 ======== ======== Spirits Net Sales Spirits reported net sales $223.9 $418.7 Less: Spirits net sales (3) - (230.0) Spirits organic net sales $223.9 $188.7 ====== ====== Other Net Sales Other reported net sales $212.9 $220.6 Less: Cider net sales (4) - (8.9) Other organic net sales $212.9 $211.7 ====== ====== Constant Currency Percent Currency Percent Change Impact Change(1) Consolidated Net Sales Branded wine (3%) (2%) (1%) Spirits (47%) - (47%) Other (3%) (8%) 5% Consolidated reported net sales (8%) (2%) (6%) Less: Pacific Northwest branded wine net sales (2) Less: Spirits net sales (3) Less: Cider net sales (4) Consolidated organic net sales (1%) (2%) 1% Branded Wine Net Sales Branded wine reported net sales (3%) (2%) (1%) Less: Pacific Northwest branded wine net sales (2) Branded wine organic net sales (3%) (2%) (1%) Spirits Net Sales Spirits reported net sales (47%) - (47%) Less: Spirits net sales (3) Spirits organic net sales 19% - 19% Other Net Sales Other reported net sales (3%) (8%) 5% Less: Cider net sales (4) Other organic net sales 1% (8%) 9% (1) May not sum due to rounding as each item is computed independently. (2) For the period March 1, 2008, through May 31, 2008, included in the year ended February 28, 2009. (3) Includes certain spirits contract production services net sales and certain value spirits brands net sales for the period December 1, 2008, through February 28, 2009, included in the three months ended February 28, 2009. Includes certain spirits contract production services net sales for the period March 1, 2008, through February 28, 2009, and certain value spirits brands net sales for the period March 25, 2008, through February 28, 2009, included in the year ended February 28, 2009. (4) For the period January 16, 2009, through February 28, 2009, included in the year ended February 28, 2009. Constellation Brands, Inc. and Subsidiaries RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES (1) (in millions, except per share data) Three Months Ended February 28, 2010 ------------------------------------ Strategic Reported Inventory Business Basis Step- Realignment (GAAP) up (2) -------- ---------- -------------- Net Sales $708.7 Cost of product sold (486.3) 1.2 3.0 ------ --- --- Gross Profit 222.4 1.2 3.0 Selling, general and administrative expenses ("SG&A") (4) (148.2) (3.9) Impairment of intangible assets and goodwill (103.2) Restructuring charges (20.4) 20.4 Acquisition-related integration costs - --- Operating (Loss) Income (49.4) 1.2 19.5 Equity in earnings (losses) of equity method investees 43.0 EBIT Interest expense, net (4) (63.1) Loss on write-off of financing costs (0.7) ---- (Loss) Income Before Income Taxes (70.2) 1.2 19.5 Benefit from (provision for) income taxes 19.2 (0.5) (7.3) ---- ---- ---- Net (Loss) Income $(51.0) $0.7 $12.2 ====== ==== ===== Diluted (Loss) Earnings Per Common Share $(0.23) ====== Weighted Average Common Shares 196.752 Outstanding -Diluted (5) ======= Gross Margin 31.4% SG&A as a percent of net sales 20.9% Operating Margin NM Effective Tax Rate 27.4% ---- Three Months Ended February 28, 2010 ------------------------------------ Other Comparable (3) Basis -------- (Non-GAAP) ---------- Net Sales $708.7 Cost of product sold (482.1) ------ Gross Profit - 226.6 Selling, general and administrative expenses ("SG&A") (4) (152.1) Impairment of intangible assets and goodwill 103.2 - Restructuring charges - Acquisition-related integration costs - --- Operating (Loss) Income 103.2 74.5 Equity in earnings (losses) of equity method investees 43.0 ---- EBIT 117.5 Interest expense, net (4) (63.1) Loss on write-off of financing costs 0.7 - --- --- (Loss) Income Before Income Taxes 103.9 54.4 Benefit from (provision for) income taxes (5.6) 5.8 ---- --- Net (Loss) Income $98.3 $60.2 ===== ===== Diluted (Loss) Earnings Per Common Share $0.27 ===== Weighted Average Common Shares 222.594 Outstanding -Diluted (5) ======= Gross Margin 32.0% SG&A as a percent of net sales 21.5% Operating Margin 10.5% Effective Tax Rate -10.7% ----- Three Months Ended February 28, 2009 ------------------------------------ Strategic Reported Inventory Business Basis Step- Realignment (GAAP) up (2) -------- ---------- -------------- Net Sales $735.1 Cost of product sold (543.9) 5.5 11.8 ------ --- ---- Gross Profit 191.2 5.5 11.8 Selling, general and administrative expenses ("SG&A") (4) (169.4) 27.7 Impairment of intangible assets and goodwill (278.6) 0.4 Restructuring charges (27.7) 27.7 Acquisition-related integration costs (0.6) 0.6 ---- --- Operating (Loss) Income (285.1) 5.5 68.2 Equity in earnings (losses) of equity method investees (31.9) EBIT Interest expense, net (4) (72.5) Loss on write-off of financing costs - --- (Loss) Income Before Income Taxes (389.5) 5.5 68.2 Benefit from (provision for) income taxes (17.3) (2.2) (7.2) ----- ---- ---- Net (Loss) Income $(406.8) $3.3 $61.0 ======= ==== ===== Diluted (Loss) Earnings Per Common Share $(1.88) ====== Weighted Average Common Shares 194.669 Outstanding -Diluted (5) ======= Gross Margin 26.0% SG&A as a percent of net sales 23.0% Operating Margin NM Effective Tax Rate -4.4% ---- Three Months Ended February 28, 2009 ------------------------------------ Other Comparable (3) Basis -------- (Non-GAAP) ---------- Net Sales $735.1 Cost of product sold 37.0 (489.6) ---- ------ Gross Profit 37.0 245.5 Selling, general and administrative expenses ("SG&A") (4) (141.7) Impairment of intangible assets and goodwill 278.2 - Restructuring charges - Acquisition-related integration costs - --- Operating (Loss) Income 315.2 103.8 Equity in earnings (losses) of equity method investees 79.2 47.3 ---- EBIT 151.1 Interest expense, net (4) (72.5) Loss on write-off of financing costs - --- (Loss) Income Before Income Taxes 394.4 78.6 Benefit from (provision for) income taxes (5.2) (31.9) ---- ----- Net (Loss) Income $389.2 $46.7 ====== ===== Diluted (Loss) Earnings Per Common Share $0.21 ===== Weighted Average Common Shares 219.850 Outstanding -Diluted (5) ======= Gross Margin 33.4% SG&A as a percent of net sales 19.3% Operating Margin 14.1% Effective Tax Rate 40.6% ---- Percent Change - Percent Reported Change - Basis Comparable (GAAP) Basis (Non- -------- GAAP) ------ Net Sales (4%) (4%) Cost of product sold (11%) (2%) Gross Profit 16% (8%) Selling, general and administrative expenses ("SG&A") (4) (13%) 7% Impairment of intangible assets and goodwill NM N/A Restructuring charges (26%) N/A Acquisition-related integration costs NM N/A Operating (Loss) Income NM (28%) Equity in earnings (losses) of equity method investees NM (9%) EBIT N/A (22%) Interest expense, net (4) (13%) (13%) Loss on write-off of financing costs N/A N/A (Loss) Income Before Income Taxes NM (31%) Benefit from (provision for) income taxes NM (118%) Net (Loss) Income NM 29% Diluted (Loss) Earnings Per Common Share NM 29% Weighted Average Common Shares Outstanding - Diluted (5) Gross Margin SG&A as a percent of net sales Operating Margin Effective Tax Rate Constellation Brands, Inc. and Subsidiaries RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES (1) (in millions, except per share data) Year Ended February 28, 2010 ---------------------------- Strategic Reported Inventory Business Basis Step- Realignment (GAAP) up (6) -------- ---------- -------------- Net Sales $3,364.8 Cost of product sold (2,220.0) 8.4 24.0 -------- Gross Profit 1,144.8 8.4 24.0 Selling, general and administrative expenses ("SG&A") (4) (682.3) 31.0 Impairment of intangible assets and goodwill (103.2) Restructuring charges (47.6) 47.6 Acquisition-related integration costs (0.2) 0.2 ---- Operating Income 311.5 8.4 102.8 Equity in earnings of equity method investees 213.6 EBIT Interest expense, net (4) (265.1) Loss on write-off of financing costs (0.7) ---- Income (Loss) Before Income Taxes 259.3 8.4 102.8 (Provision for) benefit from income taxes (160.0) (3.3) 8.1 ------ Net Income (Loss) $99.3 $5.1 $110.9 ===== ==== ====== Diluted Earnings (Loss) Per Common Share $0.45 ===== Weighted Average Common Shares 221.210 Outstanding -Diluted (5) ======= Gross Margin 34.0% SG&A as a percent of net sales 20.3% Operating Margin 9.3% Effective Tax Rate 61.7% ---- Year Ended February 28, 2010 ---------------------------- Other Comparable (7) Basis -------- (Non-GAAP) ---------- Net Sales $3,364.8 Cost of product sold (2,187.6) -------- Gross Profit - 1,177.2 Selling, general and administrative expenses ("SG&A") (4) 34.3 (617.0) Impairment of intangible assets and goodwill 103.2 - Restructuring charges - Acquisition-related integration costs - --- Operating Income 137.5 560.2 Equity in earnings of equity method investees 25.4 239.0 ----- EBIT 799.2 Interest expense, net (4) (265.1) Loss on write-off of financing costs 0.7 - --- --- Income (Loss) Before Income Taxes 163.6 534.1 (Provision for) benefit from income taxes (5.6) (160.8) ---- ------ Net Income (Loss) $158.0 $373.3 ====== ====== Diluted Earnings (Loss) Per Common Share $1.69 ===== Weighted Average Common Shares 221.210 Outstanding -Diluted (5) ======= Gross Margin 35.0% SG&A as a percent of net sales 18.3% Operating Margin 16.6% Effective Tax Rate 30.1% ---- Year Ended February 28, 2009 ---------------------------- Strategic Reported Inventory Business Basis Step- Realignment (GAAP) up (6) -------- ---------- -------------- Net Sales $3,654.6 Cost of product sold (2,424.6) 22.2 68.0 -------- Gross Profit 1,230.0 22.2 68.0 Selling, general and administrative expenses ("SG&A") (4) (823.8) 71.1 Impairment of intangible assets and goodwill (300.4) 22.2 Restructuring charges (68.0) 68.0 Acquisition-related integration costs (8.2) 8.2 ---- Operating Income 29.6 22.2 237.5 Equity in earnings of equity method investees 186.6 EBIT Interest expense, net (4) (323.0) Loss on write-off of financing costs - --- Income (Loss) Before Income Taxes (106.8) 22.2 237.5 (Provision for) benefit from income taxes (194.6) (8.5) (24.3) ------ Net Income (Loss) $(301.4) $13.7 $213.2 ======= ===== ====== Diluted Earnings (Loss) Per Common Share $(1.40) ====== Weighted Average Common Shares 193.906 Outstanding -Diluted (5) ======= Gross Margin 33.7% SG&A as a percent of net sales 22.5% Operating Margin NM Effective Tax Rate -182.2% ------ Year Ended February 28, 2009 ---------------------------- Other Comparable (7) Basis (Non-GAAP) ---------- Net Sales $3,654.6 Cost of product sold 37.1 (2,297.3) -------- Gross Profit 37.1 1,357.3 Selling, general and administrative expenses ("SG&A") (4) (752.7) Impairment of intangible assets and goodwill 278.2 - Restructuring charges - Acquisition-related integration costs - --- Operating Income 315.3 604.6 Equity in earnings of equity method investees 83.3 269.9 ----- EBIT 874.5 Interest expense, net (4) (323.0) Loss on write-off of financing costs - --- Income (Loss) Before Income Taxes 398.6 551.5 (Provision for) benefit from income taxes 27.2 (200.2) Net Income (Loss) $425.8 $351.3 ====== ====== Diluted Earnings (Loss) Per Common Share $1.60 ===== Weighted Average Common Shares 219.930 Outstanding -Diluted (5) ======= Gross Margin 37.1% SG&A as a percent of net sales 20.6% Operating Margin 16.5% Effective Tax Rate 36.3% ---- Percent Change - Comparable Percent Basis Change - Reported Basis (Non- (GAAP) GAAP) -------- ----- Net Sales (8%) (8%) Cost of product sold (8%) (5%) Gross Profit (7%) (13%) Selling, general and administrative expenses ("SG&A") (4) (17%) (18%) Impairment of intangible assets and goodwill NM N/A Restructuring charges (30%) N/A Acquisition-related integration costs NM N/A Operating Income NM (7%) Equity in earnings of equity method investees 14% (11%) EBIT N/A (9%) Interest expense, net (4) (18%) (18%) Loss on write-off of financing costs N/A N/A Income (Loss) Before Income Taxes NM (3%) (Provision for) benefit from income taxes NM (20%) Net Income (Loss) NM 6% Diluted Earnings (Loss) Per Common Share NM 6% Weighted Average Common Shares Outstanding - Diluted (5) Gross Margin SG&A as a percent of net sales Operating Margin Effective Tax Rate Constellation Brands, Inc. and Subsidiaries RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES (continued) NOTES 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 reconciliation tables above, 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 above for supplemental financial data and corresponding reconciliations of these non-GAAP financial measures to GAAP financial measures for the three months and year ended February 28, 2010, and 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 these non-GAAP (1) financial measures. For the three months ended February 28, 2010, strategic business realignment items consist primarily of (i) costs recognized by the company in connection with the Australian Initiative of $13.9 million, net of a tax benefit of $0.0 million, and the Global Initiative of $8.5 million, net of a tax benefit of $3.9 million, and (ii) a gain recognized by the company in connection with the sale of its European cider business of $14.0 million, including a tax benefit of $2.8 million. For the three months ended February 28, 2009, strategic business realignment items consist primarily of (i) costs recognized by the company in connection with the Australian Initiative of $29.2 million, net of a tax benefit of $0.0 million, and the Fiscal 2007 Wine Plan of $6.5 million, net of a tax benefit of $2.2 million, and (ii) a loss, primarily on assets held for sale, in connection with the March 2009 disposal of the value spirits business of $19.6 million, net of a tax benefit of $5.6 (2) million. For the three months ended February 28, 2010, other consists primarily of impairment of certain intangible assets of $97.9 million, net of a tax benefit of $5.3 million. For the three months ended February 28, 2009, other consists primarily of (i) impairment of certain goodwill and intangible assets of $271.6 million, net of a tax benefit of $6.6 million, (ii) impairment of certain equity method investments of $79.2 million, net of a tax benefit of $0.0 million, and a loss on the adjustment of certain inventory, primarily Australian, related to prior years of $32.1 million, net (3) of a tax benefit of $4.9 million. During the fourth quarter of fiscal 2010, the company changed its policy relating to the recording of amortization of deferred financing costs from selling, general and administrative expenses to interest expense, net. Accordingly, all periods presented have been (4) restated to reflect the impact of this policy change. In accordance with the antidilution provisions of the Financial Accounting Standards Board guidance for earnings per share, the dilutive impact of potential common shares is excluded from the company's reported diluted weighted average common shares outstanding for the three months ended February 28, 2010, and the three months and year ended February 28, 2009. 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 diluted weighted average common shares outstanding for all periods (5) presented. For the year ended February 28, 2010, strategic business realignment items consist primarily of (i) costs recognized by the company in connection with the Global Initiative of $51.2 million, net of a tax benefit of $24.4 million, the Australian Initiative of $22.0 million, net of a tax benefit of $0.0 million, and the Fiscal 2007 Wine Plan of $11.5 million, net of a tax benefit of $2.6 million; (ii) tax expense associated with the March 2009 divestiture of the value spirits business of $37.5 million; and (iii) a gain recognized by the company in connection with the sale of its European cider business of $14.0 million, including a tax benefit of $2.8 million. For the year ended February 28, 2009, strategic business realignment items consist primarily of (i) costs recognized by the company in connection with the Australian Initiative of $139.3 million, net of a tax benefit of $0.6 million, the Fiscal 2007 Wine Plan of $15.7 million, net of a tax benefit of $5.8 million, and the Fiscal 2008 Plan of $10.0 million, net of a tax benefit of $4.1 million; (ii) a loss, primarily on assets held for sale, in connection with the March 2009 disposal of the value spirits business of $19.6 million, net of a tax benefit of $5.6 million; and (iii) a loss in connection with the June 2008 disposal of the Pacific Northwest wine brands of $17.1 million, net of a tax (6) benefit of $6.1 million. For the year ended February 28, 2010, other consists primarily of (i) impairment of certain intangible assets of $97.9 million, net of a tax benefit of $5.3 million; (ii) a loss of $34.3 million, net of a tax benefit of $0.0 million, on the contractual obligation created by the notification by the 9.9% shareholder of Ruffino S.r.l. ("Ruffino") to exercise the option to put its entire equity interest in Ruffino to the Company for a specified minimum value; and (iii) $25.4 million, net of a tax benefit of $0.0 million, associated with the impairment of the Company's investment in Ruffino. For the year ended February 28, 2009, other consists primarily of (i) impairment of certain goodwill and intangible assets of $271.6 million, net of a tax benefit of $6.6 million; (ii) impairment of certain equity method investments of $83.3 million, net of a tax benefit of $0.0 million; (iii) the recognition of income tax expense in connection with the gain on settlement of certain foreign currency economic hedges of $38.7 million; and (iv) a loss on the adjustment of certain inventory, primarily Australian, related to (7) prior years of $32.1 million, net of a tax benefit of $4.9 million. DEFINITIONS Global Initiative The company's plan announced in April 2009 to simplify its business, increase efficiencies and reduce its cost structure on a global basis (the "Global Initiative"). Australian Initiative The company's plan announced in August 2008 to sell certain assets and implement operational changes designed to improve the efficiencies and returns associated with its Australian business (the "Australian Initiative"). Fiscal 2008 Plan The company's plan announced in November 2007 to streamline certain of its international operations, primarily in Australia; certain other restructuring charges incurred during the third quarter of fiscal 2008 in connection with the consolidation of certain spirits production processes in the U.S.; and its plan announced in January 2008 to streamline certain of its operations in the U.S., primarily in connection with the restructuring and integration of the operations of Beam Wine Estates, Inc. (collectively, the "Fiscal 2008 Plan"). Fiscal 2007 Wine Plan The company's plan announced in August 2006 to invest in new distribution and bottling facilities in the U.K. and to streamline certain Australian wine operations (collectively, the "Fiscal 2007 Wine Plan"). Constellation Brands, Inc. and Subsidiaries RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES (continued) GUIDANCE - DILUTED EARNINGS PER SHARE AND FREE CASH FLOW (in millions, except per share data) Diluted Earnings Per Share Guidance Range for the Year Ending February 28, 2011 ------------------------ Forecasted diluted earnings per share - reported basis (GAAP) $1.36 $1.51 Strategic business realignment (1) 0.17 0.17 ---- ---- Forecasted diluted earnings per share - comparable basis (Non-GAAP) (2) $1.53 $1.68 ===== ===== Actual for the Year Ended February 28, 2010 ---- Diluted earnings per share -reported basis (GAAP) $0.45 Inventory step-up 0.02 Strategic business realignment (1) 0.50 Other (3) 0.71 ---- Diluted earnings per share - comparable basis (Non-GAAP) (2) $1.69 ===== (1) Includes $0.12, $0.04 and $0.01 diluted earnings per share for the year ending February 28, 2011, associated with the Global Initiative; the Australian Initiative and the Fiscal 2008 Plan, respectively. Includes $0.23, $0.17, $0.10, $0.05, $ 0.01 and ($0.06) diluted earnings per share for the year ended February 28, 2010, associated with the Global Initiative; tax expense associated with the March 2009 divestiture of the value spirits business; the Australian Initiative; the Fiscal 2007 Wine Plan; other previously announced restructuring plans; and a gain recognized by the company in connection with the sale of its European cider business, respectively.(2) (2) May not sum due to rounding as each item is computed independently. (3) Includes $0.44, $0.16 and $0.11 diluted earnings per share for the year ended February 28, 2010, associated with impairment of certain intangible assets; loss on the contractual obligation created by the notification by the 9.9% shareholder of Ruffino to exercise the option to put its entire equity interest in Ruffino to the Company for a specified minimum value; and the impairment of the Company's investment in Ruffino, respectively. (2) Free Cash Flow Guidance 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. Range for the Year Ending February 28, 2011 ------------------------ Net cash provided by operating activities (GAAP) $460.0 $530.0 Purchases of property, plant and equipment (110.0) (130.0) ------ ------ Free cash flow (Non-GAAP) $350.0 $400.0 ====== ====== Actual for the Actual for the Year Ended Year Ended February 28, February 28, 2010 2009 ------------- ------------- Net cash provided by operating activities (GAAP) $402.5 $506.9 Purchases of property, plant and equipment (107.7) (128.6) ------ ------ Free cash flow (Non-GAAP) $294.8 $378.3 ====== ======

SOURCE Constellation Brands, Inc.