• Achieves reported basis EPS of $1.75 and comparable basis EPS of $1.77
  • Generates $1.04 billion of operating cash flow and $676 million of free cash flow
  • Increases fiscal 2017 outlook driven primarily by strong beer business results; expects reported basis EPS of $6.25 - $6.40 and comparable basis EPS of $6.30 - $6.45
  • Affirms fiscal 2017 operating cash flow target of at least $1.5 billion and increases free cash flow projection to $375 - $475 million; now expects total capital expenditures to be $1.125 - $1.225 billion for fiscal 2017
  • Agrees to acquire the award-winning High West Distillery, based in Utah
  • Declares quarterly cash dividend
Second Quarter 2017 Financial Highlights*
(in millions, except per share data)
Reported % Change Comparable % Change
Net sales $2,021 17% $2,021 17%
Operating income $611 27% $620 24%
Operating margin 30.2% +250 bps 30.7% +180 bps
Earnings before interest and taxes (EBIT) NA NA $620 24%
Net income attributable to CBI $359 19% $364 15%
Diluted net income per share attributable to CBI (EPS) $1.75 17% $1.77 13%

*Definitions of reported and comparable, as well as reconciliations of non-GAAP financial measures, are contained elsewhere in this news release.
NA=Not Applicable

VICTOR, N.Y., Oct. 5, 2016 - Constellation Brands, Inc. (NYSE: STZ and STZ.B), a leading beverage alcohol company, reported today its second quarter 2017 results.

"The strong consumer demand for our portfolio continues to propel our business. During the quarter, we gained share and improved margins across our business, while continuing to make smart investments designed to fuel growth today and in the future. I am proud of our accomplishments in the first half of the year, which are enabling an increase in our overall guidance for the year," said Rob Sands, president and chief executive officer, Constellation Brands.

Today, the company announced an agreement to purchase the Utah-based High West Distillery for approximately $160 million. This acquisition includes a portfolio of distinctive, award-winning and high-end American straight whiskeys and other spirits brands. With High West, which has experienced double-digit volume growth year over year for the past three years, Constellation Brands enters the dynamic and profitable high-end craft whiskey market segment. "High West will be an excellent addition to our spirits portfolio and we look forward to partnering with the team there to continue to develop distinctive high-quality whiskeys that consumers love," said Sands. The transaction is expected to close by the end of October.

Net Sales Commentary

For the quarter, the company generated consolidated net sales growth of 17 percent. This reflects organic net sales growth on a constant currency basis of 13 percent and acquisition benefits from Ballast Point craft beer, as well as Meiomi and The Prisoner wine brands.

Net sales for beer increased 20 percent. This was due to a 15 percent increase in organic net sales driven primarily by volume growth and favorable pricing, and the acquisition benefit from Ballast Point.

"During the second quarter, our beer business contributed 60% of IRI category dollar growth for the U.S. beer industry and continues to outperform the high end of the market, with accelerating growth trends versus the previous quarter, and overall share gains driven by Corona Extra and Modelo Especial. Strong consumer demand and excellent marketplace execution helped us to win the July 4th holiday. These excellent results are driving the upward revision to our EPS target for the year. In addition, Ballast Point continues to expand distribution and achieved strong, double-digit depletion growth for the quarter," said Sands.

Wine and spirits net sales increased 12 percent. This reflects an eight percent increase in organic net sales on a constant currency basis driven primarily by volume growth and favorable mix, and the acquisition benefit from Meiomi and The Prisoner wine brands. U.S. shipment volume has outpaced depletion volume during the first half of fiscal 2017. This is primarily timing related as we expect U.S. shipment volume to be generally aligned with depletion volume for the year.

"During the quarter, our U.S. wine business improved margins and gained IRI volume and dollar share driven by some of our largest and fastest-growing Focus Brands, including Kim Crawford, Black Box, Clos du Bois, Ruffino, The Dreaming Tree and Woodbridge by Robert Mondavi. We continue to achieve distribution gains for our recently acquired Meiomi and The Prisoner wine brands, both of which posted strong, double-digit depletion growth during the quarter," said Sands.

Operating Income Commentary

For the quarter, consolidated reported and comparable basis operating income increased 27 percent and 24 percent, respectively.

For second quarter 2017, comparable adjustments affecting operating income totaled $9 million as compared to $22 million for the same period last year.

Beer operating income increased 27 percent, primarily due to organic volume growth, favorable pricing and the Ballast Point acquisition, partially offset by higher marketing investment. The 17 percent increase in wine and spirits operating income primarily reflects the benefit from organic volume growth, the Meiomi and Prisoner acquisitions and favorable mix, partially offset by higher investment in SG&A and marketing.

Operating Cash Flow and Free Cash Flow Commentary

For the first six months of fiscal 2017, operating cash flow totaled $1.04 billion, an increase of 30 percent. Free cash flow for the first half of fiscal 2017 totaled $676 million, as compared to $508 million for the same period last year. This reflects higher operating cash flow, partially offset by higher capital expenditures.

"We are pleased with our strong operating cash flow results for the first half of the year and continue to target at least $1.5 billion for fiscal 2017," said David Klein, executive vice president and chief financial officer, Constellation Brands. "We are now expecting lower capital expenditures for the year due to a shift in the timing of payments related to Nava capital investments, which will drive free cash flow to be in the range of $375 to $475 million for fiscal 2017," added Klein.

Quarterly Dividend

On October 4, 2016, Constellation's board of directors declared a quarterly cash dividend of $0.40 per share of Class A Common Stock and $0.36 per share of Class B Common Stock, payable on November 22, 2016, to stockholders of record as of the close of business on November 8, 2016.


The table below sets forth management's current EPS expectations for fiscal 2017 compared to fiscal 2016 actual results, both on a reported basis and a comparable basis.

Reported Basis Comparable Basis
Fiscal Year Ending Feb. 28/29 $6.25 - $6.40 $5.18 $6.30 - $6.45 $5.43

For fiscal 2017, the beer business now expects net sales growth of 16 - 17 percent and operating income growth at the high teens level. These growth rates include an estimated incremental benefit from the Ballast Point acquisition. For the wine and spirits business, the company continues to expect net sales growth in the mid single-digit range and operating income growth in the mid to high single-digit range. These growth rates include an estimated incremental benefit from the Meiomi and The Prisoner wine brands acquisitions.

Fiscal 2017 guidance also includes the following current assumptions:

  • Interest expense: approximately $325 - $335 million
  • Tax rate: approximately 29 percent
  • Weighted average diluted shares outstanding: approximately 206 million
  • Operating cash flow: approximately $1.5 - $1.7 billion
  • Capital expenditures: approximately $1.125 - $1.225 billion
  • Free cash flow: approximately $375 - $475 million

Conference Call

A conference call to discuss second quarter 2017 results and outlook will be hosted by President and Chief Executive Officer Rob Sands and Executive Vice President and Chief Financial Officer David Klein on Wednesday, Oct. 5, 2016 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 EPS are as reported under generally accepted accounting principles. Operating income, net income and EPS on a comparable basis ("comparable"), exclude items that affect comparability ("comparable adjustments"), as they are not reflective of core operations of the segments. The company's measure of segment profitability excludes comparable adjustments, which is consistent with the measure used by management to evaluate results.

The company discusses additional non-GAAP measures in this news release, including constant currency net sales, organic net sales, comparable basis EBIT 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. Constellation is a Fortune 500® company and one of the top performing stocks in the S&P 500 Consumer Staples Index. 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's 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 Jackson-Triggs. The company's premium spirits brands include SVEDKA Vodka and Casa Noble Tequila.

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 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, financial position, estimated revenues, projected costs, estimated diluted EPS, expected cash flow, prospects, future payments of dividends, plans and objectives of management, as well as information concerning expected actions of third parties, are forward-looking statements (collectively, the "Projections") that involve risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by the Projections.

During the current quarter, Constellation Brands may reiterate the Projections. Prior to the start of the company's quiet period, which will begin at the close of business Nov. 30, 2016, 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.

Any decision whether to pursue a potential initial public offering for a portion of the company's Canadian wine business (the "Canadian IPO") is subject to the determination and discretion of the company. There can be no assurance that the Canadian IPO will occur or will occur on any contemplated timetable. The proposed High West Distillery transaction is subject to regulatory approvals and certain closing conditions. There can be no assurance the High West Distillery transaction will occur or will occur on the timetable contemplated hereby.

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 announced High West Distillery transaction on the expected terms, timetable and costs, and with receipt of any necessary regulatory approvals;
  • Mexicali brewery construction, Nava brewery expansion activities and joint venture 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 Mexicali brewery construction, Nava brewery expansions and glass sourcing;
  • timeframe and actual costs associated with beer supply, Mexicali brewery construction, Nava brewery expansions and glass sourcing, including joint venture glass plant expansions, 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, 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 proposed High West Distillery transaction and the acquisitions of the Meiomi wine brand, Ballast Point, and The Prisoner Wine Company brand portfolio;
  • 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 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 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. 29, 2016, which could cause actual future performance to differ from current expectations.

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Investor Relations
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