• Achieves comparable basis diluted EPS of $1.23 and reported basis diluted EPS of $1.10
  • Increases fiscal 2015 diluted EPS outlook driven by strong beer business shipment volume; expects comparable basis diluted EPS of $4.25 - $4.35 and reported basis diluted EPS of $3.90 - $4.00
  • Reaffirms free cash flow projection of $275 - $350 million for fiscal 2015 including operating cash flow target of at least $1 billion and total capital expenditure estimate of $725 - $775 million
  • Forms 50-50 joint venture with Owens-Illinois; joint venture completes acquisition of the Nava glass plant
Third Quarter 2015 Financial Highlights*
(in millions, except per share data)
Comparable % Change Reported % Change
Net sales $1,542 7% $1,542 7%
Operating income $415 11% $376 3%
Operating margin 26.9% +90 bps 24.4% -80 bps
Earnings before interest and taxes (EBIT) $437 11% NA NA
Net income $248 14% $222 5%
Diluted earnings per share $1.23 12% $1.10 3%

*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., JAN. 8, 2015 - Constellation Brands, Inc. (NYSE: STZ and STZ.B), a leading beverage alcohol company, reported today its third quarter 2015 results.

"We achieved outstanding results for the third quarter driven by the exceptional on-going momentum for our beer business. This industry leading performance reflects the benefits of our marketing and brand building efforts, distribution growth for key brands, as well as excellent sales and distributor execution. Strong beer shipment volume performance is the primary driver of the upward revision to our EPS outlook for the year," said Rob Sands, president and chief executive officer, Constellation Brands. "I am also pleased that we have finalized and begun implementing our long-term glass sourcing strategy for the beer business. We believe this strategy provides the optimal solution for this essential component of our beer production process. In addition, our wine and spirits business delivered solid earnings growth and our spirits brands gained share during the quarter."

Net Sales Commentary

For the quarter, the company generated consolidated net sales growth of seven percent.

Net sales for the beer segment increased 16 percent primarily due to volume growth. This result includes the expected shift of approximately two million case shipments to wholesalers and approximately $37 million of net sales from the second quarter into the third quarter as a result of the previously announced Corona Extra recall activities. Excluding the impact from the recall, third quarter underlying beer net sales increased 11 percent. Beer depletions grew eight percent, reflecting strong consumer demand for all key brands within the beer portfolio. In addition, distributors increased their inventory during the quarter to be more in-line with historical levels and be better positioned to capture growth opportunities for the beer portfolio going forward.

"Our beer business continued to gain share across all channels during the third quarter driven by Modelo Especial, Corona Extra and Modelo Especial Chelada," said Sands. "Our outstanding beer portfolio is experiencing tremendous momentum and generated the vast majority of total U.S. industry volume growth in IRI channels during the quarter."

Wine and spirits net sales on a constant currency basis were even with the prior year third quarter. This primarily reflects higher spirits shipment volume offset by lower wine volume, higher promotional spend and lower bulk wine net sales. "While we are on track to meet our earnings goal for the year, we do not expect depletions to grow in line with the U.S. wine category," said Sands. "However, during the third quarter, we experienced solid depletion trends for some of our fastest-growing wine brands, including Kim Crawford, Ruffino, Black Box and The Dreaming Tree. Our spirits business generated outstanding growth and gained share in the spirits category driven by new flavor introductions across the portfolio. We also completed the integration of the Casa Noble tequila brand into our marketing and sales organizations and the brand is quickly gaining traction."

Operating Income and Net Income Commentary

The increase in consolidated comparable basis operating income primarily reflects the higher volume for the beer business. The increase in wine and spirits operating income primarily reflects favorable costs of goods sold.

Interest expense for the third quarter totaled $86 million, a decrease of four percent. The decrease was primarily due to lower average interest rates.

The effective tax rate for the third quarter 2015 was 29 percent compared to a 28 percent tax rate for the prior year third quarter.

Free Cash Flow Commentary

Free cash flow for the first nine months of fiscal 2015 totaled $209 million as compared to $543 million for the same period last year. Benefits from the growth of the beer business were more than offset by higher capital expenditures related primarily to the expansion of the Nava brewery in Mexico.

"Our Nava brewery expansion and glass-sourcing initiatives which are designed to support the strong growth of the beer business over the long-term, are progressing as planned from a timing and budget perspective," said Bob Ryder, chief financial officer, Constellation Brands. "For fiscal 2015, we continue to expect free cash flow to be in the range of $275 - $350 million and to generate operating cash flow of at least $1 billion."


The table below sets forth management's current diluted EPS expectations for fiscal 2015 compared to fiscal 2014 actual results, both on a reported basis and a comparable basis.

Reported Basis Comparable Basis
Fiscal Year Ending Feb. 28 $3.90 - $4.00 $9.83 $4.25 - $4.35 $3.25

Full-year fiscal 2015 guidance includes the following current assumptions:

  • Interest expense: approximately $345 - $355 million
  • Tax rate: approximately 30 percent
  • Weighted average diluted shares outstanding: approximately 201 million
  • Free cash flow: approximately $275 - $350 million
  • Capital expenditures: approximately $725 - $775 million, including $600 - $650 million for the beer business

Conference Call

A conference call to discuss third quarter 2015 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 Thursday, Jan. 8, 2015 at 10:30 a.m. (eastern). The conference call can be accessed by dialing +973-935-8505 beginning 10 minutes prior to the start of the call. A live listen-only webcast of the conference call, together with a copy of this news release (including the attachments), and other financial information that may be discussed during the call will be available on the Internet at the company's website: 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 items that affect comparability ("unusual items"). The company's measure of segment profitability excludes 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.

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 the number three beer company in the U.S. with high-end, iconic imported brands including Corona Extra, Corona Light, Modelo Especial, Negra Modelo and Pacifico. Constellation is also the world's leader in premium wine selling great brands that people love including Robert Mondavi, Clos du Bois, Kim Crawford, Rex Goliath, Mark West, Franciscan Estate, Ruffino and Jackson-Triggs. The company's premium spirits brands include SVEDKA Vodka and Black Velvet Canadian Whisky.

Based in Victor, N.Y., the company believes that industry leadership involves a commitment to brand-building, our trade partners, the environment, our investors and to consumers around the world who choose our products when celebrating big moments or enjoying quiet ones. Founded in 1945, Constellation has grown to become a significant player in the beverage alcohol industry with more than 100 brands in its portfolio, sales in approximately 100 countries, about 40 facilities and approximately 6,300 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, 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 Feb. 27, 2015, the public can continue to rely on the Projections as still being Constellation Brands' current expectations on the matters covered, unless the company publishes a notice stating otherwise. During Constellation Brands' "quiet period," the Projections should not be considered to constitute the company's expectations and should be considered historical, speaking as of prior to the quiet period only and not subject to update by the company.

The Projections are based on management's current expectations and, unless otherwise noted, do not take into account the impact of any future acquisition, merger or any other business combination, divestiture, restructuring or other strategic business realignments, financing or share repurchase that may be completed after the date of this release. The Projections should not be construed in any manner as a guarantee that such results will in fact occur.

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 and joint venture glass plant expansion activities take place with expected scope, on expected terms and timetable, and with receipt of any necessary regulatory approvals;
  • accuracy of supply projections, including those relating to brewery expansion and glass sourcing;
  • timeframe and actual costs associated with brewery expansion and glass sourcing, including joint venture glass plant expansion, may vary from management's current expectations due to market conditions, the company's cash and debt position, and other factors as determined by management;
  • free cash flow, operating cash flow, and capital expenditures to support long-term growth may vary from management's current estimates;
  • timing and volume amount of beer shipments to wholesalers may vary from current expectations due to actual consumer demand;
  • the impact of and the ability to realize the anticipated benefits of acquisitions, including as a result of difficulty in integrating the businesses of the companies involved;
  • the exact duration of the share repurchase implementation and the amount and timing of any additional share repurchases;
  • raw material and water supply, production or shipment difficulties could adversely affect the company's ability to supply its customers;
  • increased competitive activities in the form of pricing, advertising and promotions could adversely impact consumer demand for the company's products and/or result in lower than expected sales or higher than expected expenses;
  • general economic, geo-political and regulatory conditions, instability in world financial markets, or unanticipated environmental liabilities and costs;
  • changes to accounting rules and tax laws, and other factors which could impact the company's reported financial position, results of operations or effective tax rate;
  • changes in interest rates and the inherent unpredictability of currency fluctuations, commodity prices and raw material costs;
  • accuracy of the bases for forecasts relating to joint ventures and associated costs, losses, purchase obligations and capital investment requirements; and
  • other factors and uncertainties disclosed in the company's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended Feb. 28, 2014, which could cause actual future performance to differ from current expectations.

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Investor Relations
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