FAIRPORT, N.Y., Jan. 4 /PRNewswire/ -- Constellation Brands, Inc. (NYSE: STZ; STZ.B) today reported earnings per share on a fully diluted basis of $1.87 for the three months ended November 30, 2000 ("Third Quarter 2001"), an increase of 17 percent over earnings per share of $1.60 for the three months ended November 30, 1999 ("Third Quarter 2000"). Net income also increased 17 percent to reach $35 million versus net income of $30 million for the same period a year ago.
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Richard Sands, Chairman, Chief Executive Officer and President of Constellation said, "I am very pleased to report the best quarter in the Company's history. We had both record earnings and record sales of our branded and wholesale products, on a currency adjusted basis. Our strategy of meeting today's consumers' diverse needs with the broadest brand portfolio in the industry, while focusing on the distribution channels for each category necessary to reach the consumer, continues to drive demand for our products. Growth in our branded business was driven by imported beer sales, led by Corona, which increased over 20%, UK table wines, led by Stowells of Chelsea, which increased 24%, and spirits, led by vodka, tequila and prepared cocktails, which was up 6%." Sands further stated that, "We expect our favorable earnings results to continue through the fiscal year."
Consolidated Results
Net sales reported for Third Quarter 2001 of $630 million represents a four percent decrease from net sales reported for the comparable period a year ago. After adjusting for an adverse foreign currency impact, net sales would have been $654 million versus $653 million reported for Third Quarter 2000. Sales for our branded and wholesale products increased 2%, offset by significant declines in non-branded businesses. Sales growth was impacted by difficult comparisons against the prior period due to Millennium activities, particularly special occasion items like fine wines and champagnes. Net sales for the nine months ended November 30, 2000 ("Nine Months 2001") reached $1.85 billion, an increase of three percent versus net sales of $1.80 billion reported for the nine months ended November 30, 1999 ("Nine Months 2000"). After adjusting for an unfavorable foreign currency impact, net sales would have been $1.89 billion, an increase of five percent versus a year ago.
As a percent of net sales, gross margin for Third Quarter 2001 improved 93 basis points to 33.0 percent versus the same quarter a year ago. The margin improvements were driven primarily by price increases taken in the Company's fine wine business as well as cost improvements in the Company's United Kingdom division, Matthew Clark. With the gross margin improvement, gross profit remained essentially unchanged at $208 million, compared to gross profit for Third Quarter 2000. Gross profit and gross margin for Nine Months 2001 were $593 million and 32.0 percent, respectively, compared to $555 million and 30.7 percent for Nine Months 2000.
Selling, general and administrative expenses, as a percent of net sales were favorable by 76 basis points compared to the prior period, declining from 20.3% to 19.5%. Selling, general and administrative expenses were $123 million for Third Quarter 2001 compared to $132 million reported for the same period last year. The decrease is primarily attributed to reduced marketing costs associated with Millennium promotions a year ago. For Nine Months 2001, selling, general and administrative expenses, as a percent of net sales, were virtually unchanged. Selling, general and administrative expenses reached $379 million for Nine Months 2001 compared to $368 million reported for the same period a year ago.
Operating income in Third Quarter 2001 reached $85 million versus $77 million for the same period last year, an increase of ten percent. For Nine Months 2001, operating income increased by 14 percent to reach $213 million compared to $187 million reported for the comparable period last year, excluding the pretax impact of nonrecurring charges reported for Nine Months 2000.
Net interest expense for Third Quarter 2001 decreased two percent to $27 million from $28 million reported for same period a year ago, despite higher average borrowing costs. The decline in net interest expense for the quarter is primarily attributed to lower average borrowings when compared to Third Quarter 2000 as the Company continues to use free cash flow to pay down debt. For Nine Months 2001, net interest expense increased five percent to reach $82 million versus $78 million for the same period a year ago. The increase in net interest expense can be primarily attributed to higher debt levels for the full period related to financing the Franciscan and Simi acquisitions.
Net income for Third Quarter 2001 grew 17 percent to reach $35 million versus $30 million reported for the comparable quarter a year ago. Earnings per share on a fully diluted basis were $1.87 versus $1.60, an increase of 17 percent when compared to the comparable period last year. For Nine Months 2001, net income increased 21 percent to reach $79 million versus $65 million for the comparable period a year ago, excluding the after-tax impact of nonrecurring charges reported for Nine Months 2000. Earnings per share on a fully diluted basis were $4.24 for Nine Months 2001, representing an increase of 20 percent when compared to fully diluted earnings per share of $3.52 for the same period last year, excluding the after-tax impact of nonrecurring charges reported for Nine Months 2000.
Barton
Barton's net sales for Third Quarter 2001 grew 13 percent to reach $242 million. Beer sales increased 22 percent for the quarter, primarily driven by volume increases. Increases in branded spirits sales of 6% were offset by lower contract manufacturing sales. Operating income grew 12 percent to reach $46 million versus $41 million reported for the comparable period last year, led by increases in the imported beer portfolio.
Compared to the prior period, net sales and operating income for Nine Months 2001 increased to $763 million and $136 million, respectively, or 15 percent and 18 percent, respectively. On a pro forma basis, net sales and operating income grew 13 percent and 15 percent, respectively.
Canandaigua Wine
Canandaigua Wine's net sales for Third Quarter 2001 decreased to $184 million compared to $207 million reported for the comparable quarter last year. Increases in Arbor Mist and Paul Masson Grande Amber sales were offset by lower champagne sales during Third Quarter 2001 compared to the prior year, which included the impact associated with the Millennium, lower table wine sales and lower bulk wine and grape juice concentrate sales.
Operating income for Third Quarter 2001 was $16 million versus $19 million reported for the same period a year ago due to lower sales. Net sales and operating income for Nine Months 2001 were $514 million and $35 million, respectively. For the comparable period a year ago, net sales and operating income were $541 million and $37 million, respectively, excluding the pretax impact of nonrecurring charges reported for Nine Months 2000.
Matthew Clark
Matthew Clark's net sales for Third Quarter 2001 were $180 million versus $205 million reported for the comparable quarter a year ago, a decrease of 12 percent, due to an adverse foreign currency impact amounting to $25 million. On a currency-adjusted basis, sales increases in branded table wine, packaged cider and sales from Forth Wines, which was acquired on October 27, 2000, were offset by declines in draft cider and private label. Operating income for Third Quarter 2001 reached $18 million, an increase of 21 percent when compared with $15 million reported for the comparable period last year. The growth in operating income is primarily related to the following areas: continued benefits received from depot rationalization and a focus on customer profitability in the wholesale business; realization of the full benefit of the cider mill consolidation which was completed in the spring of 1999; and the shift from private label business to focus on higher margin branded business.
Net sales for Nine Months 2001 were $519 million versus $555 million reported for the same period last year. Net sales were up approximately one percent adjusting for the adverse impact of foreign currency fluctuations, amounting to $42 million. Excluding the pretax nonrecurring charges reported for Nine Months 2000, operating income increased ten percent to reach $41 million versus $37 million reported for the same period last year. Adjusting for foreign currency fluctuations, operating income would have increased 19%.
Franciscan
Franciscan's net sales for Third Quarter 2001 were $28 million versus $27 million reported for the comparable quarter last year. Sales growth this quarter was favorable in view of the prior year's third quarter, which was a particularly strong quarter with sales up 37%.
Driven by increases in pricing, operating income grew to $9 million compared to $6 million reported for the comparable quarter a year ago, an increase of 50 percent.
Net sales and operating income for Nine Months 2001 were $71 million and $19 million, respectively. On a pro forma basis, net sales for Nine Months 2001 increased 12 percent.
Outlook
The following statements are management's current expectations for the Company's three months ending February 28, 2001 ("Fourth Quarter 2001"). These statements are made as of the date of this press release and are forward-looking. Actual results may differ materially from these expectations due to a number of risks and uncertainties.
Fully diluted earnings per share for Fourth Quarter 2001 are expected to be within a range of $0.95 to $0.98.
The Company anticipates holding its fourth quarter conference call to discuss its financial results and Fiscal 2002 expectations on April 12, 2001.
Status of Business Outlook and Related Risk Factors Statements
During the quarter Constellation may reiterate the estimates set forth above under the heading Outlook (collectively the "Outlook"). Prior to the start of the Quiet Period (described below), the public can continue to rely on the Outlook as still being Constellation's current expectations on the matters covered, unless Constellation publishes a notice stating otherwise. Beginning February 15, 2001, Constellation will observe a "Quiet Period" during which the Outlook no longer constitutes the Company's current expectations. During the Quiet Period, the Outlook should be considered to be historical, speaking as of prior to the Quiet Period only and not subject to update by the Company. During the Quiet Period, Constellation representatives will not comment concerning the Outlook or Constellation's financial results or expectations. The Quiet Period will extend until the day when Constellation's next quarterly Earnings Release is published, presently scheduled for April 12, 2001.
The statements made under the heading Outlook are forward-looking statements. These forward-looking statements do not take into account the impact of any future acquisition, merger or any other business combination, divestiture or financing that may be completed after the date of this release. Further, these statements are based on management's current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements. For a detailed list of the risk factors that may adversely impact these forward-looking statements, please refer to Attachment A set forth below in this press release; please also refer to our Company's Securities and Exchange Commission filings.
About Constellation
Constellation Brands, Inc., headquartered in Fairport, New York, is a leader in the production, marketing and distribution of beverage alcohol products in North America and the United Kingdom. The Company markets leading brands, including imported beers, wines, spirits, cider and bottled water, and is a leading drinks wholesaler in the United Kingdom. Constellation can be found on the Internet at http://www.cbrands.com.
CONFERENCE CALL DETAILS
A conference call to discuss the quarterly results will be hosted by Richard Sands, CEO, and Tom Summer, CFO, on Thursday, January 4, 2001, at 10:00 a.m. EST. The conference call can be accessed by dialing 800-860-2442. A live listen-only web cast of the conference call is available on the Internet at Constellation's web site: http://www.cbrands.com under: Investor Info.
If you are unable to participate in the conference call, there will be a replay available on Constellation's web site.
November 30, February 29, 2000 2000 (unaudited) (audited) ASSETS CURRENT ASSETS: Cash and cash investments $1,871 $34,308 Accounts receivable, net 386,908 291,108 Inventories, net 699,885 615,700 Prepaid expenses and other current assets 70,140 54,881 Total current assets 1,158,804 995,997 PROPERTY, PLANT AND EQUIPMENT, net 536,300 542,971 OTHER ASSETS 770,686 809,823 Total assets $2,465,790 $2,348,791 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable $121,000 $26,800 Current maturities of long-term debt 37,544 53,987 Accounts payable 163,195 122,213 Accrued excise taxes 44,853 30,446 Other accrued expenses and liabilities 245,538 204,771 Total current liabilities 612,130 438,217 LONG-TERM DEBT, less current maturities 1,123,929 1,237,135 DEFERRED INCOME TAXES 116,523 116,447 OTHER LIABILITIES 30,337 36,152 STOCKHOLDERS' EQUITY 582,871 520,840 Total liabilities and stockholders' equity $2,465,790 $2,348,791 CONSTELLATION BRANDS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data)
Three Months Three Months Ended Ended November 30, November 30, 2000 1999 Percent (unaudited) (unaudited) Change Gross sales $833,447 $864,075 -4% Net sales $629,577 $652,969 -4% Cost of product sold (421,524) (443,282) -5% Gross profit 208,053 209,687 -1% Selling, general and administrative expenses (122,815) (132,309) -7% Operating income 85,238 77,378 10% Interest expense, net (26,983) (27,544) -2% Income before income taxes 58,255 49,834 17% Provision for income taxes (23,302) (19,934) 17% Net income $34,953 $29,900 17% Earnings per common share: Basic $1.90 $1.65 15% Diluted $1.87 $1.60 17% Weighted average common shares outstanding: Basic 18,394 18,083 2% Diluted 18,734 18,651 0% Segment Information: Net sales: Barton Beer $163,292 $134,155 22% Spirits 79,096 80,548 -2% Net sales $242,388 $214,703 13% Canandaigua Wine Branded $162,112 $182,190 -11% Other 21,484 24,925 -14% Net sales $183,596 $207,115 -11% Matthew Clark Branded $79,355 $93,157 -15% Wholesale 100,725 112,049 -10% Net sales $180,080 $205,206 -12% Franciscan $27,818 $27,473 1% Corporate Operations and Other $826 $1,233 -33% Intersegment eliminations $(5,131) $(2,761) 86% Consolidated net sales $629,577 $652,969 -4% Operating income: Barton $46,370 $41,380 12% Canandaigua Wine 16,453 18,850 -13% Matthew Clark 18,431 15,193 21% Franciscan 9,001 5,991 50% Corporate Operations and Other (5,017) (4,036) 24% Consolidated operating income $85,238 $77,378 10% CONSTELLATION BRANDS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data)
Nine Months Nine Months Ended Ended November 30, November 30, 2000 1999 Percent (unaudited) (unaudited) Change Gross sales $2,436,637 $2,383,909 2% Net sales $1,852,647 $1,804,718 3% Cost of product sold (1,260,082) (1,249,781) 1% Gross profit 592,565 554,937 7% Selling, general and administrative expenses (379,159) (368,130) 3% Nonrecurring charges -- (5,510) N/A Operating income 213,406 181,297 18% Interest expense, net (81,797) (78,219) 5% Income before income taxes 131,609 103,078 28% Provision for income taxes (52,644) (41,231) 28% Net income $78,965 $61,847 28% Earnings per common share: Basic $4.31 $3.43 26% Diluted $4.24 $3.34 27% Weighted average common shares outstanding: Basic 18,308 18,023 2% Diluted 18,642 18,502 1% Segment Information: Net sales: Barton Beer $538,585 $457,961 18% Spirits 224,203 207,697 8% Net sales $762,788 $665,658 15% Canandaigua Wine Branded $455,950 $477,361 -4% Other 58,082 63,541 -9% Net sales $514,032 $540,902 -5% Matthew Clark Branded $225,338 $248,411 -9% Wholesale 293,958 306,802 -4% Net sales $519,296 $555,213 -6% Franciscan $71,100 $44,610 59% Corporate Operations and Other $2,685 $4,122 -35% Intersegment eliminations $(17,254) $(5,787) 198% Consolidated net sales $1,852,647 $1,804,718 3% Operating income: Barton $135,818 $114,839 18% Canandaigua Wine 34,849 34,869 0% Matthew Clark 41,027 34,503 19% Franciscan 18,659 7,562 147% Corporate Operations and Other (16,947) (10,476) 62% Consolidated operating income $213,406 $181,297 18% Attachment A SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Company makes forward-looking statements from time to time and desires to take advantage of the "safe harbor" which is afforded such statements under the Private Securities Litigation Reform Act of 1995 when they are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statements.
The statements set forth in this press release, which are not historical facts, are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements. Any projections of future results of operations, and in particular, (i) the Company's estimated net sales growth for the quarter ending February 28, 2001, and (ii) the Company's estimated fully diluted earnings per share for the quarter ending February 28, 2001, (which estimates are set forth above under the heading "Outlook"), should not be construed in any manner as a guarantee that such results will in fact occur. There can be no assurance that any forward-looking statement in this press release will be realized or that actual results will not be significantly higher or lower than set forth in such forward-looking statement. In addition to the risks and uncertainties of ordinary business operations, the forward-looking statements of the Company contained in this press release are also subject to the following risks and uncertainties:
Performance of Wholesale Distributors
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In the United States, we sell our products principally to wholesalers
for resale to retail outlets, including grocery stores, package liquor
stores, club and discount stores and restaurants. The replacement or poor
performance of our major wholesalers or our inability to collect accounts
receivable from our major wholesalers could materially and adversely
affect our results of operations and financial condition. Distribution
channels for beverage alcohol products have been characterized in recent
years by rapid change, including consolidations of certain wholesalers.
In addition, wholesalers and retailers of our products offer products,
which compete directly with our products for retail shelf space and
consumer purchases. Accordingly, there is a risk that these wholesalers
or retailers may give higher priority to products of our competitors. In
the future, our wholesalers and retailers may not continue to purchase our
products or provide our products with adequate levels of promotional
support.
Suppliers, Raw Materials and Price Fluctuations
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Our business is heavily dependent upon raw materials, such as grapes,
grape juice concentrate, grains, and alcohol from third-party suppliers
and packaging materials. We could experience raw material supply,
production or shipment difficulties, which could adversely affect our
ability to supply goods to our customers. We are also directly affected
by increases in the costs of such raw materials. Although we believe we
have adequate sources of grape supplies, in the event demand for certain
wine products exceeds expectations, we could experience shortages. In
addition, one or our largest components of cost of goods sold is that of
glass bottles, which have only a small number of producers. The inability
of any of our glass bottle suppliers to satisfy our requirements could
adversely affect our business.
Competition
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We are in a highly competitive industry and the dollar amount, and unit
volume, of our sales could be negatively affected by our inability to
maintain or increase prices, changes in geographic or product mix, a
general decline in beverage alcohol consumption or the decision of our
wholesale customers, retailers or consumers to purchase competitive
products instead of our products. Wholesaler, retailer and consumer
purchasing decisions are influenced by, among other things, the perceived
absolute or relative overall value of our products, including their
quality or pricing, compared to competitive products. Unit volume and
dollar sales could also be affected by pricing, purchasing, financing,
operational, advertising or promotional decisions made by wholesalers and
retailers which could affect their supply of, or consumer demand for, our
products. We could also experience higher than expected selling, general
and administrative expenses if we find it necessary to increase the number
of our personnel or our advertising or promotional expenditures to
maintain our competitive position or for other reasons.
Consumption of Products We Sell
Consumer purchasing patterns and preferences may impact the consumption of the products we sell. There are a variety of factors that may cause consumers to decrease the amount and type of alcohol products purchased, including but not limited to the following:
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concerns about the health consequences of consuming beverage alcohol products and about drinking and driving;
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a trend toward a healthier diet including lighter, lower calorie beverages such as diet soft drinks, juices and sparkling water products; and activities of anti-alcohol consumer groups.
Excise Taxes and Government Restrictions
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In the United States, the federal government and individual states
impose excise taxes on beverage alcohol products in varying amounts, which
have been subject to change. Increases in excise taxes on beverage
alcohol products, if enacted, could materially and adversely affect our
financial condition or results of operations. In addition, the beverage
alcohol products industry is subject to extensive regulation by state and
federal agencies. The federal Bureau of Alcohol, Tobacco and Firearms and
various state liquor authorities regulate such matters as licensing
requirements, trade and pricing practices, permitted and required
labeling, advertising and relations with wholesalers and retailers. In
recent years, federal and state regulators have required warning labels
and signage. In the United Kingdom, Matthew Clark carries on its excise
trade under a Customs and Excise License. Licenses are required for all
premises where wine is produced. Matthew Clark holds a license to act as
an excise warehouse operator and registrations have been secured for the
production of cider and bottled water. New or revised regulations or
increased licensing fees and requirements could have a material adverse
effect on our financial condition or results of operations.
Currency Rate Fluctuations/Foreign Operations
The Company has operations in different countries and, therefore, is subject to the risks associated with currency fluctuations. The Company could experience changes in its ability to obtain or hedge against foreign currency, foreign exchange rates and fluctuations in those rates. The Company could also be affected by nationalizations or unstable governments or legal systems or intergovernmental disputes. These currency, economic and political uncertainties may affect the Company's results, especially to the extent these matters, or the decisions, policies or economic strength of the Company's suppliers, affect the Company's foreign operations or imported beer products. SOURCE Constellation Brands, Inc.
CONTACT: Mark Maring, V.P., Investor Relations of Constellation Brands, Inc., 716-218-2169/