• Achieves comparable basis diluted EPS of $0.38 and reported basis diluted EPS of $0.27

  • Updates fiscal 2014 outlook to reflect reduced interest expense estimate; expects

  • comparable basis diluted EPS of $2.60 - $2.90 and reported basis diluted EPS of $2.32 - $2.62

  • Gains market share in IRI channels across beer, wine and spirits businesses

  • Reaffirms free cash flow projection of $475 - $575 million for fiscal 2014

  • Completes acquisition of Grupo Modelo's U.S. beer business on June 7, 2013

First Quarter 2014 Financial Highlights*
(in millions, except per share data)
Comparable % Change Reported % Change
Net sales $673 6% $673 6%
Operating income $104 -5% $71 -34%
Operating margin 15.4% -190 bps 10.5% -620 bps
Equity in earnings of equity method investees** $67 10% $67 10%
Earnings before interest and taxes (EBIT) $170 --% NA NA
Net income $74 -3% $53 -27%
Diluted earnings per share $0.38 -5% $0.27 -29%

*Definitions of reported and comparable, as well as reconciliations of non-GAAP financial measures, are contained elsewhere in this news release.
**Hereafter referred to as "equity earnings."
NA=Not applicable

VICTOR, N.Y., July 2, 2013 - Constellation Brands, Inc. (NYSE: STZ and STZ.B), a leading beverage alcohol company, reported today its first quarter 2014 results.

"The recent closing of our transformational beer acquisition has been a rewarding way to kick off fiscal 2014. This deal positions Constellation within the top ranks of the U.S. beer industry and significantly increases the size and scope of our company," said Rob Sands, president and chief executive officer, Constellation Brands. "From an operational perspective, we are off to a positive start for the year, as we achieved our first quarter goals and objectives. I am particularly pleased with our commercial results as we continued to gain market share in IRI channels across our beer, wine and spirits businesses during the quarter."

Net Sales Commentary

Wine and spirits net sales on an organic constant currency basis increased four percent primarily due to an increase in volume. The acquisition of Mark West complemented the organic growth as total net sales increased six percent.

"We experienced positive top line results for our U.S. wine and spirits business in the first quarter driven primarily by our Focus Brands including double-digit depletion trends for Rex Goliath, Kim Crawford, Nobilo, SIMI and Black Box," said Sands. "In addition, we continue to gain traction with our award winning portfolio of new products including Simply Naked, Thorny Rose and The Dreaming Tree."

Operating Income and Net Income Commentary

The decrease in consolidated comparable basis operating income reflects the impact of higher grape and SG&A costs, partially offset by net sales growth.

The company's comparable basis equity earnings from its 50 percent interest in the Crown joint venture totaled $66 million compared to $61 million for the prior year first quarter. For first quarter 2014, Crown generated net sales of $762 million, an increase of five percent, and operating income of $134 million, an increase of nine percent. The increase in net sales and operating income for Crown was driven primarily by volume growth and the benefit of increased product pricing taken in select U.S. markets last fall.

"Crown continues to outperform the U.S. beer market and experienced robust first quarter sales performance driven by Modelo Especial, Corona Light and Pacifico. Strong retail execution by the Crown team and its distributor network drove excellent marketplace execution during the first quarter," said Sands. "In addition, Crown's creative lineup of product advertising and promotions is well positioned for the key summer selling season."

Interest expense totaled $55 million, an increase of eight percent. The increase was primarily due to higher average borrowings.

The comparable basis effective tax rate for first quarter 2014 was 36.2 percent, compared to a 36.4 percent rate for the prior year first quarter.

Free Cash Flow Commentary

The company used $19 million of free cash flow for the quarter as compared to the generation of $77 million of free cash flow for first quarter 2013. The decrease was primarily due to funding of transaction-related costs for the beer business acquisition, higher interest expense payments and GAAP requirement to present excess tax benefits from stock-based compensation in cash from financing activities.

"As a result of our improved credit profile and the attractive interest rate environment, we were able to obtain an attractive financing package for the beer transaction and lower our expected interest expense projection for the year," said Bob Ryder, chief financial officer, Constellation Brands.

Beer Business Acquisition

The company completed its acquisition of Grupo Modelo's U.S. beer business from Anheuser-Busch InBev for approximately $4.75 billion on June 7, 2013. The transaction includes full ownership of Crown Imports LLC which provides Constellation with complete, independent control of the U.S. commercial business; a state-of-the-art brewery in Nava (Piedras Negras), Mexico; an exclusive perpetual brand license in the U.S. to import, market and sell Corona and the other Modelo brands Crown currently sells in the U.S. market with the freedom to develop brand extensions and innovations.


The table below sets forth management's current diluted EPS expectations for fiscal 2014 compared to fiscal 2013 actual results, both on a reported basis and a comparable basis.

Reported Basis Comparable Basis
Fiscal Year Ending
Feb. 28

$2.32 - $2.62


$2.60 - $2.90


The diluted EPS and free cash flow projections exclude acquisition accounting impacts.
Full-year fiscal 2014 guidance also includes the following current assumptions:

  • Interest expense: approximately $325 - $335 million

  • Tax rate: approximately 37 percent

  • Weighted average diluted shares outstanding: approximately 199 million

  • Free cash flow: approximately $475 - $575 million

  • Capital expenditures: approximately $200 - $230 million

The capital expenditures projection includes approximately $120 - $140 million for expansion activities related to the Piedras Negras brewery. One-time costs associated with the beer business acquisition and tax rate projections factored in the guidance outlined above are based on preliminary estimates.

Conference Call

A conference call to discuss first quarter 2014 results and outlook will be hosted by President and Chief Executive Officer Rob Sands and Executive Vice President and Chief Financial Officer Bob Ryder on Tues., July 2, 2013 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.


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 and unusual items. The company's measure of segment profitability excludes restructuring charges 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, 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. Please see the link below.

About Constellation Brands

Constellation Brands (NYSE: STZ and STZ.B) is an S&P 500 Index and Fortune 1000® wine, beer and spirits company with more than 100 brands in its portfolio, sales in approximately 100 countries, operations in about 40 facilities and 5,500 talented employees. Founded in 1945, Constellation has grown to become the world's leader in premium wine, the number one beer importer, and the number three beer company in the U.S. with brands that people love, including: Arbor Mist, Black Box, Blackstone, Clos du Bois, Estancia, Franciscan Estate, Inniskillin, Kim Crawford, Mark West, Mount Veeder, Nobilo, Ravenswood, Rex Goliath, Robert Mondavi, Ruffino, SIMI, Toasted Head, Wild Horse, Corona Extra, Corona Light, Modelo Especial, Negra Modelo, Pacifico, Tsingtao, Victoria, Black Velvet Canadian Whisky and SVEDKA Vodka.

Based in Victor, N.Y., the company believes that industry leadership involves a commitment to its brands, to the trade, to the land, to investors and to people around the world who turn to our products when celebrating big moments or enjoying quiet ones. This commitment is echoed through the company's 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, 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 Brands may reiterate the Projections. Prior to the start of the company's quiet period, which will begin at the close of business on Aug. 30, 2013, 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 take place on expected terms and timetable and receipt of any necessary regulatory approvals;

  • accuracy of supply projections, including those relating to brewery expansion;

  • timeframe and actual costs associated with the brewery 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;

  • 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;

  • final management determinations and independent appraisals may vary materially from current management estimates of the fair value of assets acquired and liabilities assumed in the beer business acquisition;

  • the exact duration of the share repurchase implementation and the amount and timing of any additional share repurchases;

  • 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, losses, purchase obligations and capital investment requirements;

  • restructuring charges and other one-time costs associated with 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 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, 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, results of operations 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, 2013, which could cause actual future performance to differ from current expectations.

Angela Howland Blackwell: 585-678-7141
Cheryl Gossin: 585-678-7191
Investor Relations
Patty Yahn-Urlaub: 585-678-7483
Bob Czudak: 585-678-7170