• Achieves reported basis EPS of $2.00 and comparable basis EPS of $2.34, an increase of 29% and 52%, respectively
  • Generates $382 million of operating cash flow and $165 million of free cash flow
  • Updates fiscal 2018 reported basis EPS outlook to $7.55 - $7.75
  • Increases fiscal 2018 comparable basis EPS outlook to $7.90 - $8.10 driven primarily by strong beer business results
  • Affirms fiscal 2018 operating cash flow target of approximately $2.0 billion and free cash flow projection of $725 - $825 million
  • Declares quarterly cash dividend
  • Acquires Schrader Cellars fine wine portfolio
First Quarter Fiscal 2018 Financial Highlights*
(in millions, except per share data)
Reported % Change Comparable % Change
Net sales $1,936 3% $1,936 3%
Operating income $568 3% $669 22%
Operating margin 29.4% -10 bps 34.6% +530 bps
Earnings before interest and taxes (EBIT) NA NA $669 22%
Net income attributable to CBI $403 27% $471 48%
Diluted net income per share attributable to CBI (EPS) $2.00 29% $2.34 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., June 29, 2017 - Constellation Brands, Inc. (NYSE: STZ and STZ.B), a leading beverage alcohol company, reported today its first quarter fiscal 2018 results.

"We're off to a great start for our new fiscal year as we continue to deliver excellent results that demonstrate our commitment to sustain profitable growth and build shareholder value," said Rob Sands, president and chief executive officer, Constellation Brands. "Across the business, we're driving consumer demand for our exceptional portfolio of premium products while executing strong financial and operational performance."

Net Sales Commentary

The company generated consolidated net sales growth of three percent. This reflects organic net sales growth of seven percent, partially offset by the net impact of the Canadian wine business divestiture less acquisition benefits.

Net sales for beer increased eight percent. This was driven primarily by volume growth and favorable pricing.

"The first quarter results for our beer business are a testament to the ongoing growth opportunities we have for our iconic portfolio of brands, which posted depletions of almost 12% for the quarter. Excellent execution during the Cinco de Mayo and Memorial Day holidays led to significant share gains, as Constellation remains the #1 growth driver in the high-end of the U.S. beer market. In addition, our new Corona Premier and Familiar products are delivering strong performance in test markets and they are well ahead of our expectations," said Sands.

Wine and spirits net sales decreased four percent. This reflects a six percent increase in organic net sales driven primarily by benefits from mix, price and volume growth, which was more than offset by the net impact of the Canadian wine business divestiture less acquisition benefits. U.S. shipment volume outpaced depletion volume for the quarter due primarily to timing.

"Our Wine and Spirits business delivered significant margin improvement in the first quarter, while depletion trends were impacted by the timing of promotional activities. However, we have solid programming in place to drive growth for our key brands throughout the remainder of the year. In addition, our spirits business posted double-digit sales growth driven by the success of our High West Whiskey portfolio, as well as SVEDKA Vodka and Paul Masson Brandy," said Sands.

Operating Income and Income Tax Commentary

Consolidated reported and comparable basis operating income increased three percent and 22 percent, respectively.

Comparable adjustments affecting operating income totaled a net loss of $101 million as compared to a net gain of $4 million for the same period last year. For the first quarter, the company recorded an $87 million non-cash impairment charge to the trademarks associated with the Ballast Point business driven by the performance of the portfolio. The company remains focused on achieving its targeted return on investment for this acquisition.

Beer operating income increased 22 percent, primarily due to lower cost of product sold, volume growth and favorable pricing. The 22 percent increase in wine and spirits operating income primarily reflects favorable mix and pricing, acquisition benefits, and volume growth, partially offset by the Canadian wine business divestiture.

The reported basis effective tax rate for first quarter fiscal 2018 was 15.5 percent versus 31.9 percent for the prior year first quarter. The comparable basis effective tax rate for first quarter fiscal 2018 was 19.4 percent. This compares to a 31.6 percent tax rate for the prior year. The first quarter fiscal 2018 effective tax rates reflect the benefit of reinvesting foreign earnings under APB 23 and the adoption of ASU 2016-09, which requires excess tax benefits from stock-based payment award activity to be recognized in the income statement. In addition, the reported basis effective tax rate includes a tax benefit related to the intangible asset impairment charge.

For fiscal 2018, the company expects the effective tax rate on a reported basis and comparable basis to approximate 22 percent.

Operating Cash Flow and Free Cash Flow Commentary

For first quarter fiscal 2018, operating cash flow totaled $382 million, an increase of 10 percent. Free cash flow for first quarter fiscal 2018 totaled $165 million, as compared to $177 million for the same period last year. This reflects higher operating cash flow, more than offset by higher capital expenditures.

"We continue to deliver impressive financial results, especially for our beer business, which is driving the upward revision to our EPS guidance for the year. During the quarter, we also successfully refinanced debt at attractive, investment grade interest rates, which provides us with greater long-term capital allocation flexibility," said David Klein, executive vice president and chief financial officer, Constellation Brands.

Recent Business Activities

In June 2017, the company announced that it had enhanced its fine wine portfolio with the purchase of Schrader Cellars. The iconic Schrader Cabernet Sauvignon portfolio is sourced from premier Napa Valley vineyards and has become part of the company's admired fine wine portfolio under its newly established fine wine organization, which specializes in servicing luxury wine consumers and customers. Terms of the transaction were not disclosed.

Canadian Wine Business Divestiture

The company completed the sale of its Canadian wine business to Ontario Teachers' Pension Plan in December 2016. For first quarter fiscal 2017, net sales and operating income that are no longer part of the wine and spirits segment results after the sale of the Canadian wine business totaled $90 million and $10 million, respectively. For fiscal 2017, through the date of divestiture, net sales and operating income for the divested business totaled $311 million and $50 million, respectively.

Quarterly Dividend

On June 28, 2017, Constellation's board of directors declared a quarterly cash dividend of $0.52 per share of Class A Common Stock and $0.47 per share of Class B Common Stock, payable on August 23, 2017, to stockholders of record as of the close of business on August 9, 2017.


The table below sets forth management's current EPS expectations for fiscal 2018 compared to fiscal 2017 actual results, both on a reported basis and a comparable basis.

Reported Basis Comparable Basis
Fiscal Year Ending Feb. 28 $7.55 - $7.75 $7.52 $7.90 - $8.10 $6.76

For fiscal 2018, the beer business continues to target net sales growth in the range of 9 - 11 percent and operating income growth is now targeted in the range of 13 - 15 percent.

For the wine and spirits business, the company continues to expect net sales to decrease in the range of 4 - 6 percent and operating income to be flat. These projections include the estimated impact of the December 2016 divestiture of the Canadian wine business and the estimated incremental benefits from the High West, Charles Smith and Prisoner acquisitions. Excluding the $311 million of net sales and $50 million of operating income from the fiscal 2017 wine and spirits segment results related to the Canadian wine business divestiture, the company expects net sales growth of 4 - 6 percent and operating income growth of 5 - 7 percent for fiscal 2018.

Full-year fiscal 2018 guidance also includes the following current assumptions:

  • Interest expense: approximately $340 - $350 million
  • Tax rate: approximately 22 percent
  • Weighted average diluted shares outstanding: approximately 201 million
  • Operating cash flow: approximately $1.9 - $2.1 billion
  • Capital expenditures: approximately $1.175 - $1.275 billion, including approximately $1.0 billion targeted for Mexico beer operations expansion activities
  • Free cash flow: approximately $725 - $825 million

Conference Call

A conference call to discuss first quarter fiscal 2018 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 Thursday, June 29, 2017 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, effective tax rate, net income and EPS are as reported under generally accepted accounting principles. Operating income, effective tax rate, 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 organic net sales, comparable basis EBIT and free cash flow.

Supplemental Financial Information

Financial statements, as well as supplemental schedules and 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), a Fortune 500® company, is a leading international producer and marketer of beer, wine and spirits with operations in the U.S., Mexico, New Zealand, Italy and Canada. Constellation is the No. 3 beer company in the U.S. with high-end, iconic imported brands such as Corona Extra, Corona Light, Modelo Especial, Modelo Negra and Pacifico. The company's beer portfolio also includes Ballast Point, one of the most awarded craft brewers in the U.S. In addition, Constellation is the world leader in premium wine, selling great brands that people love, including Robert Mondavi, Clos du Bois, Kim Crawford, Meiomi, Mark West, Franciscan Estate, Ruffino and The Prisoner. The company's premium spirits brands include SVEDKA Vodka, Casa Noble Tequila and High West Whiskey.

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, about 40 facilities and approximately 9,000 talented employees. We express our company vision: to elevate life with every glass raised. To learn more, visit www.cbrands.com.

Forward-Looking Statements

The statements made under the heading Outlook, and all statements other than statements of historical fact set forth in this news release regarding Constellation Brands' business strategy, future operations, future financial position, expected effective tax rates and anticipated tax liabilities, estimated revenues, projected costs, estimated diluted EPS, expected cash flow, future payments of dividends, prospects, plans and objectives of management, including the duration of reinvestment of earnings of certain foreign subsidiaries, and manner and timing of share repurchases, 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 Aug. 31, 2017, 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:

  • beer operations expansion activities, including but not limited to Mexicali brewery construction, Obregon brewery optimization activities, and Nava brewery and glass plant expansion activities, take place with expected scope, on expected terms and timetables, and with receipt of any necessary permits and regulatory approvals;
  • accuracy of supply projections, including those relating to beer operations expansion activities and glass sourcing;
  • timeframe and actual costs associated with beer supply, beer operations expansion activities and glass sourcing may vary from management's current expectations due to market conditions, the company's cash and debt position, and other factors as determined by management;
  • operating cash flow, free cash flow, effective tax rate 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 acquisitions of The Prisoner Wine Company brand portfolio, High West, the Charles Smith Wine Collection, the Obregon brewery, and Schrader Cellars, and the projections associated with the sale of the Canadian wine business;
  • the impact of and the ability to realize the anticipated benefits of acquisitions, including those associated with difficulty in integrating the businesses of the companies involved;
  • the exact duration of the share repurchase implementation and the amount, timing and source of funds of any additional share repurchases;
  • amount and timing of future dividends are subject to the determination and discretion of the Board of Directors;
  • ability to use cash flow to fund dividends and acquisitions could be affected by unanticipated increases in net total debt, inability to generate cash flow at the levels anticipated, and failure to generate expected earnings;
  • raw material and water supply, production or shipment difficulties could adversely affect the company's ability to supply its customers;
  • increased competitive activities in the form of pricing, advertising and promotions could adversely impact consumer demand for the company's products and/or result in lower than expected sales or higher than expected expenses;
  • general economic, geo-political, domestic, international and regulatory conditions, instability in world financial markets, or unanticipated environmental liabilities and costs;
  • changes to international trade agreements and tariffs, accounting standards, elections or assertions, tax laws or other governmental rules and regulations, 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, 2017, which could cause actual future performance to differ from current expectations.

Mike McGrew: 773-251-4934
Amy Martin: 585-678-7141
Investor Relations
Patty Yahn-Urlaub: 585-678-7483
Bob Czudak: 585-678-7170