Strong sales across categories drive record results
FAIRPORT, N.Y., April 7 /PRNewswire-FirstCall/ -- Constellation Brands,
Inc. (NYSE: STZ, ASX: CBR), a leading international producer and marketer of
beverage alcohol brands, today reported record net sales for its fiscal year
and fourth quarter ended February 29, 2004.
Chairman and Chief Executive Officer Richard Sands said, "Fiscal 2004 was
a year in which Constellation Brands strengthened its already solid foundation
to ensure long-term growth in sales and earnings. With the acquisition of
Hardy transforming Constellation into the world's largest wine company, and
the restructuring of our global wine business to create more nimble, customer
and consumer focused sales, marketing and production companies, we are well
poised to fully exploit our strengths in product breadth and organizational
scale to continue to deliver profitable growth. In imported beer we continued
to lead the category with double-digit growth and Corona continuing to hold
the positions of #1 import and the #7 beer overall. In spirits we saw a
multitude of successful new product launches all geared to meet changing
consumer consumption patterns. In fiscal 2005 we are focusing investment
behind our brands, particularly imported beer, Australian wine and premium
California wine to drive long-term growth in sales and earnings."
Net sales increased 30 percent for fiscal 2004 to $3.55 billion and 35
percent for the fourth quarter to $881 million. The increase in net sales for
both periods was driven primarily by the addition of wine sales from the Hardy
acquisition and strong sales from imported beer, premium California wine and
the U.K. wholesale business. Currency contributed three percent of the
increase for fiscal 2004 and four percent of the increase for the quarter.
The quarter was also positively impacted one percent due to the relief from
certain excise tax, duty and other costs incurred in prior years (see "Items
Affecting Comparability").
Pro forma net sales for the year, which include $478 million of Hardy
sales for the same prior year eleven month period, increased 11 percent,
including a positive four percent impact from currency. For the quarter,
including $113 million of Hardy sales in the prior year period, pro forma net
sales increased 15 percent, including a positive six percent impact from
currency and one percent due to the relief from certain excise tax, duty and
other costs incurred in prior years.
Net income as reported under generally accepted accounting principles
("reported") for the fiscal year increased eight percent to $220 million and
reported diluted earnings per share declined six percent to $2.06. Fiscal
2004 reported results include restructuring and related charges and net
unusual costs of $46 million after tax and $0.43 per share. Fiscal 2003
reported results were positively impacted by $11 million after tax and $0.12
per share as a result of a gain on derivative instruments, partially offset by
restructuring and related charges. Net income on a comparable basis,
excluding the restructuring and related charges and net unusual costs or
gains, increased 39 percent to $267 million and comparable diluted earnings
per share increased 20 percent to reach a record $2.49 per share.
For the quarter, reported net income increased 21 percent to $63 million
and reported diluted earnings per share declined two percent to $0.55 per
share. Reported results were positively impacted by one million dollars after
tax and $0.01 per share as a result of net unusual gains, partially offset by
restructuring and related charges. The prior year's fourth quarter reported
results were positively impacted by $11 million after tax and $0.12 per share
as a result of a gain on derivative instruments, partially offset by
restructuring and related charges. On a comparable basis, net income
increased 51 percent and diluted earnings per share increased 23 percent to
reach a record $0.54 per share.
Net sales, net income and diluted earnings per share on a comparable basis
exclude restructuring and related charges and net unusual costs or gains. The
Company discusses results on a comparable basis in order to give investors
better insight on underlying business trends from continuing operations. A
table reconciling these measures and other related financial measures to
reported results for the quarter and fiscal year is included in this release.
For a detailed discussion of these items, please see the section "Items
Affecting Comparability" following the financial statements.
The Company's measure of segment sales and profitability excludes
restructuring and related charges and net unusual costs or gains, which is
consistent with the measure used by management to evaluate results.
Full Year Results
Constellation Beers and Spirits Results
Net sales for the fiscal year grew eight percent to reach $1.15 billion as
a result of an 11 percent increase in beer sales and a one percent increase in
spirits sales. The 11 percent increase in beer sales was primarily driven by
volume gains on Corona Extra, Corona Light, Modelo Especial and Pacifico.
Spirit sales grew one percent as a three percent increase in branded spirits
sales was partially offset by lower bulk whisky and contract production sales.
The three percent increase in branded spirits sales was due to higher volume
and a favorable mix toward higher priced spirits brands, including Black
Velvet Canadian Whisky, Montezuma Tequila, Chi-Chi's prepared cocktails and
the 99 Cordials range. The decline in bulk whisky and contract production
sales was due primarily to a large spot bulk whisky sale in the prior year.
Operating income increased 16 percent for the fiscal year to $253 million.
The growth in operating income was primarily the result of higher sales,
favorable spirits mix and lower average spirits costs, particularly tequila,
and favorable beer pricing.
Constellation Wines Results
Net sales for fiscal 2004 increased $723 million, or 43 percent to reach
$2.40 billion. This increase was driven primarily by the addition of sales
from the Hardy acquisition. Pro forma net sales, which include $478 million
of Hardy sales for the same prior year eleven month period, increased
11 percent driven by solid growth in branded wine and wholesale and other, and
a positive six percent impact from currency. Pro forma branded wine sales
grew eight percent, driven by growth of Australian and California wine in the
U.K. and premium wine in the U.S., and a positive six percent impact from
currency.
Driven by increased market share and the addition of new accounts, the
U.K. wholesale business grew 21 percent, including a positive nine percent
impact from currency.
Operating income for the fiscal year was $348 million, an increase of 55
percent. The increase was driven primarily by the additional sales from the
Hardy acquisition.
Corporate Operations and Other Results
Corporate expenses increased 27 percent to $42 million. The increase was
due primarily to an increase in general corporate expenses to support the
Company's growth.
Fourth Quarter Results
Constellation Beers and Spirits Results
Net sales for the quarter grew nine percent to reach $243 million. An 11
percent increase in beer sales and a three percent increase in spirits sales
drove the growth. The increase in beer sales was driven primarily by volume
gains. The Company expects first quarter fiscal 2005 beer volumes to be below
normal trends due to strong wholesaler demand of Mexican beers prior to the
Company's price increase, which began to take effect in January 2004. The
three percent increase in spirits sales was primarily due to higher contract
production sales.
Operating income grew 19 percent to reach $50 million for the fourth
quarter due primarily to higher sales, favorable spirits mix and lower average
spirits costs, particularly tequila, and favorable beer pricing.
Constellation Wines Results
Net sales for fourth quarter 2004 were $629 million compared to $429
million the prior year, an increase of 47 percent. This increase was driven
primarily by the addition of sales from the Hardy acquisition, as well as
premium wine sales in the U.S. and the U.K. wholesale business. Pro forma net
sales for fourth quarter 2004, which include $113 million of Hardy sales in
the prior year period, increased 16 percent driven by increases in branded
wines and the U.K. wholesale business, and a positive eight percent impact
from currency.
On a pro forma basis, including $108 million of Hardy branded wine sales
in the prior year period and excluding a positive six percent impact from
currency, branded wines increased by four percent as a result of:
- 12 percent growth in wine in the United Kingdom, led by Australian
brands Hardys Stamp, Banrock Station and Hardy VR, and California brand
Echo Falls, and
- 19 percent growth in premium wines in the United States from brands such
as Ravenswood, Blackstone, Simi and Franciscan from California, and
Alice White from Australia.
Operating income for the quarter was $90 million, an increase of 55
percent. The increase was driven primarily by the additional sales from the
Hardy acquisition.
Corporate Operations and Other Results
Corporate expenses were $11 million compared to $10 million in the prior
year. The increase was due primarily to an increase in general corporate
expenses to support the Company's growth.
Outlook
The following statements are management's current diluted earnings per
share expectations both on a reported basis and comparable basis for the first
quarter ending May 31, 2004 and fiscal year ending February 28, 2005:
- Diluted earnings per share on a reported basis for first quarter 2005
are expected to be within a range from $0.39 to $0.42 versus $0.41 for
first quarter 2004.
- Diluted earnings per share on a reported basis for fiscal 2005 are
expected to be within a range from $2.39 to $2.49 versus $2.06 for
fiscal 2004.
- Diluted earnings per share on a comparable basis for first quarter 2005
are expected to be within a range from $0.48 to $0.51 versus $0.49 for
first quarter 2004.
- Diluted earnings per share on a comparable basis for fiscal 2005 are
expected to be within a range from $2.55 to $2.65 versus $2.49 for
fiscal 2004.
A reconciliation of reported estimates to comparable estimates is included
in this media release.
About Constellation
Constellation Brands, Inc. is a leading international producer and
marketer of beverage alcohol brands with a broad portfolio across the wine,
spirits and imported beer categories. Well-known brands in Constellation's
portfolio include: Corona Extra, Pacifico, St. Pauli Girl, Black Velvet,
Fleischmann's, Mr. Boston, Estancia, Simi, Ravenswood, Blackstone, Banrock
Station, Hardys, Nobilo, Alice White, Vendange, Almaden, Arbor Mist, Stowells
and Blackthorn.
Forward-Looking Statements
The statements made under the heading Outlook (collectively, the
"Outlook"), as well as all other 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 or implied by the forward-looking statements.
During the quarter, Constellation may reiterate the estimates set forth
above under the heading Outlook. Prior to the start of the Company's quiet
period, beginning May 17, 2004, 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 May 17, 2004, 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.
The Company's forward-looking statements 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 or financing that may be completed after the date of this release.
Any projections of future results of operations, and in particular, (i) the
Company's estimated diluted earnings per share on a reported basis for first
quarter 2005 and fiscal 2005, and (ii) the Company's estimated diluted
earnings per share on a comparable basis for first quarter 2005 and fiscal
2005, 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 forward-looking statements of the Company contained
in this press release are also subject to the following risks and
uncertainties: the Company achieving certain sales projections and meeting
certain cost targets; wholesalers and retailers may give higher priority to
products of the Company's competitors; raw material 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 higher than expected selling, general and
administrative expenses; a general decline in alcohol consumption; increases
in excise and other taxes on beverage alcohol products; and changes in foreign
exchange rates. For additional information about risks and uncertainties that
could adversely affect the Company's forward-looking statements, please refer
to the Company's filings with the Securities and Exchange Commission,
including its Annual Report on Form 10-K for the fiscal year ended February
28, 2003.
CONFERENCE CALL DETAILS
A conference call to discuss the quarter and full year results will be
hosted by Chairman & CEO Richard Sands and Executive Vice President and Chief
Financial Officer Tom Summer on Wednesday, April 7, 2004 at 5:00 p.m.
(Eastern). The conference call can be accessed by dialing 412-858-4600
beginning 10 minutes prior to the start of the call. A live listen-only web
cast of the conference call, together with a copy of this press release
(including the attachments) and other financial information that may be
discussed in the call are available on the Internet at Constellation's web
site: www.cbrands.com under "Investors."
CONSTELLATION BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
February 29, February 28,
2004 2003
ASSETS
CURRENT ASSETS:
Cash and cash investments $ 37,136 $ 13,810
Accounts receivable, net 635,910 399,095
Inventories, net 1,261,378 819,912
Prepaid expenses and other 137,047 97,284
Total current assets 2,071,471 1,330,101
PROPERTY, PLANT AND EQUIPMENT, net 1,097,362 602,469
GOODWILL 1,540,637 722,223
INTANGIBLE ASSETS, net 744,978 382,428
OTHER ASSETS 104,225 159,109
Total assets $5,558,673 $3,196,330
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable to banks $1,792 $2,623
Current maturities of long-term debt 267,245 71,264
Accounts payable 270,291 171,073
Accrued excise taxes 48,465 36,421
Other accrued expenses and liabilities 442,009 303,827
Total current liabilities 1,029,802 585,208
LONG-TERM DEBT, less current maturities 1,778,853 1,191,631
DEFERRED INCOME TAXES 187,410 145,239
OTHER LIABILITIES 184,989 99,268
STOCKHOLDERS' EQUITY 2,377,619 1,174,984
Total liabilities and stockholders' equity $5,558,673 $3,196,330
CONSTELLATION BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
ON A REPORTED BASIS
(in thousands, except per share data)
For the For the
Three Three
Months Months
Ended Ended
February February Percent
29, 2004 28, 2003 Change
Sales $1,114,972 $853,863 31%
Excise taxes (233,657) (200,829) 16%
Net sales 881,315 653,034 35%
Cost of product sold (637,760) (475,801) 34%
Gross profit 243,555 177,233 37%
Selling, general and administrative
expenses (108,849) (87,146) 25%
Restructuring and related charges (3,667) (4,764) -23%
Operating income 131,039 85,323 54%
Gain on change in fair value of
derivative instruments -- 23,129 -100%
Equity in (loss) earnings of joint
ventures (423) 2,143 -120%
Interest expense, net (32,453) (24,893) 30%
Income before income taxes 98,163 85,702 15%
Provision for income taxes (35,342) (33,681) 5%
Net income 62,821 52,021 21%
Dividends on preferred stock (2,452) -- N/A
Income available to common
stockholders $60,369 $52,021 16%
Earnings per common share:
Basic $0.57 $0.57 0%
Diluted $0.55 $0.56 -2%
Weighted average common shares
outstanding:
Basic 106,141 90,586 17%
Diluted 114,657 93,209 23%
Segment Information:
Net sales:
Constellation Beers and Spirits
Imported beers $178,421 $160,908 11%
Spirits 64,677 62,926 3%
Net sales $243,098 $223,834 9%
Constellation Wines
Branded wine $394,580 $250,055 58%
Wholesale and other 234,452 179,145 31%
Net sales $629,032 $429,200 47%
Unusual gains (a) $9,185 $ -- N/A
Consolidated net sales $881,315 $653,034 35%
Operating income:
Constellation Beers and Spirits $50,305 $42,415 19%
Constellation Wines 89,924 58,044 55%
Corporate Operations and Other (10,739) (10,372) 4%
Restructuring and related
charges and unusual gains
(costs) (b) 1,549 (4,764) -133%
Consolidated operating income $131,039 $85,323 54%
(a) Unusual gains included in net sales for the three months ended
February 29, 2004, consist of the relief from certain excise tax,
duty and other costs incurred in prior year periods.
(b) Restructuring and related charges and unusual gains (costs) for the
three months ended February 29, 2004, include the relief from certain
excise tax, duty and other costs incurred in prior year periods of
$10,434, partially offset by the flow through of inventory step-up
associated with the Hardy acquisition of $5,218 and restructuring and
related charges of $3,667. Restructuring and related charges and
unusual gains (costs) for the three months ended February 28, 2003,
include restructuring and related charges of $4,764.
CONSTELLATION BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
ON A REPORTED BASIS
(in thousands, except per share data)
For the Year For the Year
Ended Ended
February 29, February 28, Percent
2004 2003 Change
Sales $4,469,270 $3,583,082 25%
Excise taxes (916,841) (851,470) 8%
Net sales 3,552,429 2,731,612 30%
Cost of product sold (2,576,641) (1,970,897) 31%
Gross profit 975,788 760,715 28%
Selling, general and administrative
expenses (457,277) (350,993) 30%
Restructuring and related charges (31,154) (4,764) 554%
Operating income 487,357 404,958 20%
Gain on change in fair value of
derivative instruments 1,181 23,129 -95%
Equity in earnings of joint ventures 542 12,236 -96%
Interest expense, net (144,683) (105,387) 37%
Income before income taxes 344,397 334,936 3%
Provision for income taxes (123,983) (131,630) -6%
Net income 220,414 203,306 8%
Dividends on preferred stock (5,746) -- N/A
Income available to common
stockholders $214,668 $203,306 6%
Earnings per common share:
Basic $2.13 $2.26 -6%
Diluted $2.06 $2.19 -6%
Weighted average common shares
outstanding:
Basic 100,702 89,856 12%
Diluted 106,948 92,746 15%
Segment Information:
Net sales:
Constellation Beers and Spirits
Imported beers $862,637 $776,006 11%
Spirits 284,551 282,307 1%
Net sales $1,147,188 $1,058,313 8%
Constellation Wines
Branded wine $1,549,750 $983,505 58%
Wholesale and other 846,306 689,794 23%
Net sales $2,396,056 $1,673,299 43%
Unusual gains (a) $9,185 $-- N/A
Consolidated net sales $3,552,429 $2,731,612 30%
Operating income:
Constellation Beers and Spirits $252,533 $217,963 16%
Constellation Wines 348,132 224,556 55%
Corporate Operations and Other (41,717) (32,797) 27%
Restructuring and related
charges and unusual costs (b) (71,591) (4,764) 1403%
Consolidated operating income $487,357 $404,958 20%
(a) Unusual gains included in net sales for the year ended February 29,
2004, consist of the relief from certain excise tax, duty and other
costs incurred in prior year periods.
(b) Restructuring and related charges and unusual costs for the year
ended February 29, 2004, include the flow through of
inventory step-up associated with the Hardy acquisition of
$22,472, financing costs of $11,572, and restructuring and
related charges of $47,981, partially offset by the relief from
certain excise tax, duty and other costs incurred in prior year
periods of $10,434. Restructuring and related charges and unusual
costs for the year ended February 28, 2003, include
restructuring and related charges of $4,764.
CONSTELLATION BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Year For the Year
Ended Ended
February 29, February 28,
2004 2003
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $220,414 $203,306
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation of property, plant
and equipment 80,079 54,147
Deferred tax provision 28,044 21,050
Amortization of intangible and
other assets 21,875 5,942
Loss on sale of assets and
restructuring charges 5,127 7,263
Loss on extinguishment
of debt 800 --
Stock-based compensation expense 233 100
Amortization of discount on long-term
debt 93 60
Gain on change in fair value of
derivative instruments (1,181) (23,129)
Equity in earnings of joint ventures (542) (12,236)
Change in operating assets and
liabilities, net of effects from
purchases of businesses:
Accounts receivable, net (63,036) 6,164
Inventories, net 96,051 (40,676)
Prepaid expenses and other
current assets 2,192 (11,612)
Accounts payable (61,647) 10,135
Accrued excise taxes 7,658 (25,029)
Other accrued expenses and
liabilities 14,771 42,882
Other assets and liabilities,
net (10,624) (2,314)
Total adjustments 119,893 32,747
Net cash provided by
operating activities 340,307 236,053
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of businesses, net of
cash acquired (1,069,470) --
Purchases of property, plant
and equipment (105,094) (71,575)
Payment of accrued earn-out amount (2,035) (1,674)
Proceeds from sale of assets 13,449 1,288
Proceeds from sale of business 3,814 --
Proceeds from sale of
marketable equity securities 849 --
Net cash used in investing
activities (1,158,487) (71,961)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of long-term
debt 1,600,000 10,000
Proceeds from equity offerings, net
of fees 426,086 --
Exercise of employee stock options 36,017 28,706
Proceeds from employee stock
purchases 3,481 2,885
Principal payments of long-term debt (1,282,274) (151,134)
Payment of issuance costs of
long-term debt (33,748) (20)
Payment of dividend (3,295) --
Net repayments of notes payable (1,113) (51,921)
Net cash provided by (used in)
financing activities 745,154 (161,484)
Effect of exchange rate changes on
cash and cash investments 96,352 2,241
NET INCREASE IN CASH AND CASH INVESTMENTS 23,326 4,849
CASH AND CASH INVESTMENTS, beginning of period 13,810 8,961
CASH AND CASH INVESTMENTS, end of period $37,136 $13,810
RECONCILIATION OF REPORTED AND COMPARABLE HISTORICAL INFORMATION
(in thousands, except per share data)
Comparable measures are provided because management uses this information
in evaluating the results of the continuing operations of the Company and
internal goal setting. In addition, the Company believes this
information provides investors better insight on underlying business
trends and results in order to evaluate year over year financial
performance. As such, an increase in cost of goods sold resulting from
the flow through of inventory step-up associated with the Hardy
acquisition, financing costs and the imputed interest charge associated
with the Hardy acquisition, restructuring and related charges (including
exiting the U.S. commodity concentrate product line), gains on changes in
fair value of derivative instruments, and the relief from certain excise
tax, duty and other costs incurred in prior years are excluded from
comparable results. You may also visit the Company's website at
www.cbrands.com under Investors/Financial Information/Financial Reports
for a historical reconciliation between reported and comparable
information.
For the Three For the Three
Months Ended Months Ended
February 29, February 28,
2004 Margin 2003 Margin
Reported net sales $ 881,315 $ 653,034
Excise tax, duty
& other costs (9,185) --
Comparable net sales $ 872,130 $ 653,034
Reported gross profit $ 243,555 27.6% $ 177,233 27.1%
Excise tax, duty &
other costs (11,527) --
Inventory step-up 5,218 --
Concentrate inventory
write-down -- --
Comparable gross
profit $ 237,246 27.2% $ 177,233 27.1%
Reported operating
income $ 131,039 14.9% $ 85,323 13.1%
Excise tax, duty &
other costs (10,434) --
Inventory step-up 5,218 --
Concentrate inventory
write-down -- --
Financing costs -- --
Restructuring and related
charges 3,667 4,764
Comparable operating
income $ 129,490 14.8% $ 90,087 13.8%
Reported net income $ 62,821 7.1% $ 52,021 8.0%
Excise tax, duty &
other costs (6,678) --
Inventory step-up 3,340 --
Concentrate inventory
write-down -- --
Financing costs -- --
Restructuring and related
charges 2,347 2,892
Imputed interest charge -- --
Gain on derivative
instruments -- (14,039)
Comparable net income $ 61,830 7.1% $ 40,874 6.3%
Reported diluted
earnings per share $ 0.55 $ 0.56
Excise tax, duty &
other costs (0.06) --
Inventory step-up 0.03 --
Concentrate inventory
write-down -- --
Financing costs -- --
Restructuring and related
charges 0.02 0.03
Imputed interest charge -- --
Gain on derivative
instruments -- (0.15)
Comparable diluted earnings
per share $ 0.54 $ 0.44
For the Year For the Year
Ended Ended
February 29, February 28,
2004 Margin 2003 Margin
Reported net sales $ 3,552,429 $ 2,731,612
Excise tax, duty &
other costs (9,185) --
Comparable net sales $ 3,543,244 $ 2,731,612
Reported gross profit $ 975,788 27.5% $ 760,715 27.8%
Excise tax, duty &
other costs (11,527) --
Inventory step-up 22,472 --
Concentrate inventory
write-down 16,827 --
Comparable gross
profit $ 1,003,560 28.3% $ 760,715 27.8%
Reported operating
income $ 487,357 13.7% $ 404,958 14.8%
Excise tax, duty & other
costs (10,434) --
Inventory step-up 22,472 --
Concentrate inventory
write-down 16,827 --
Financing costs 11,572 --
Restructuring and related
charges 31,154 4,764
Comparable operating
income $ 558,948 15.8% $ 409,722 15.0%
Reported net income $ 220,414 6.2% $ 203,306 7.4%
Excise tax, duty &
other costs (6,678) --
Inventory step-up 14,382 --
Concentrate inventory
write-down 10,769 --
Financing costs 7,406 --
Restructuring and related
charges 19,939 2,892
Imputed interest charge 1,061
Gain on derivative
instruments (756) (14,039)
Comparable net income $ 266,537 7.5% $ 192,159 7.0%
Reported diluted
earnings per share $ 2.06 $ 2.19
Excise tax, duty &
other costs (0.06) --
Inventory step-up 0.13 --
Concentrate inventory
write-down 0.10 --
Financing costs 0.07 --
Restructuring and
related charges 0.19 0.03
Imputed interest charge 0.01 --
Gain on derivative
instruments (0.01) (0.15)
Comparable diluted earnings
per share $ 2.49 $ 2.07
RECONCILIATION OF REPORTED AND PRO FORMA NET SALES
(in thousands)
Pro forma net sales are provided because management believes this
information provides investors better insight on underlying business
trends and results in order to evaluate year over year financial
performance. As such, pro forma net sales present net sales after giving
effect to the Hardy acquisition as if the Company had owned Hardy in the
periods presented. You may also visit the Company's website at
www.cbrands.com under Investors/Financial Information/Financial Reports
for a reconciliation of reported net sales to pro forma net sales.
For the For the
Three Three For the For the
Months Months Year Year
Ended Ended Ended Ended
February February Growth February February Growth
29, 2004 28, 2003 29, 2004 28, 2003
CONSOLIDATED NET
SALES
Reported net
sales $ 881,315 $ 653,034 35% $ 3,552,429 $2,731,612 30%
Prior year
Hardy sales (1) -- 113,000 -- 478,000
Pro forma net
sales $ 881,315 $ 766,034 15% $ 3,552,429 $3,209,612 11%
CONSTELLATION WINES
NET SALES
Reported net
sales $ 629,032 $ 429,200 47% $ 2,396,056 $1,673,299 43%
Prior year
Hardy
sales (1) -- 113,000 -- 478,000
Pro forma net
sales $ 629,032 $ 542,200 16% $ 2,396,056 $2,151,299 11%
BRANDED WINE NET SALES
Reported net
sales $ 394,580 $ 250,055 58% $ 1,549,750 $ 983,505 58%
Prior year Hardy
sales (1) -- 107,600 -- 456,600
Pro forma net
sales $ 394,580 $ 357,655 10% $ 1,549,750 $1,440,105 8%
(1) For the three months and 11 months ended February 28, 2003.
RECONCILIATION OF REPORTED AND COMPARABLE DILUTED EARNINGS PER SHARE
GUIDANCE
Range for the Quarter Range for the Year
Ending May 31, 2004 Ending February 28, 2005
Forecasted reported
diluted earnings
per share $ 0.39 $ 0.42 $ 2.39 $ 2.49
Inventory step-up 0.01 0.01 0.03 0.03
Financing costs -
Call of senior notes 0.06 0.06 0.06 0.06
Restructuring and
related charges 0.02 0.02 0.07 0.07
Forecasted comparable
diluted earnings per
share $ 0.48 $ 0.51 $ 2.55 $ 2.65
Actual Actual
For the Three For the Year
Months Ended Ended
May 31, 2003 February 29, 2004
Reported diluted earnings per share $ 0.41 $ 2.06
Excise tax, duty & other costs -- (0.06)
Inventory step-up 0.04 0.13
Concentrate inventory write-down -- 0.10
Financing costs 0.03 0.07
Restructuring and related charges 0.01 0.19
Imputed interest charge 0.01 0.01
Gain on derivative instruments (0.01) (0.01)
Comparable diluted earnings per share $ 0.49 $ 2.49
Items Affecting Comparability for Fiscal 2005
Financing costs - Call (Redemption) of senior notes - On February 10,
2004, the Company called its $200,000,000 8.5% senior subordinated notes due
2009. In connection with this redemption, the Company expects to incur an
unusual charge in the first quarter of fiscal 2005 related to the call premium
and the remaining unamortized financing fees associated with the original
issuance of the bonds. The Company expects this charge to be approximately
$0.06 per share for fiscal 2005.
Restructuring and related charges - In connection with the further
realignment of business operations within the Company's wine division and, as
previously announced in fiscal 2004, exiting the commodity concentrate product
line, the Company expects restructuring and related charges of approximately
$0.07 per share for fiscal 2005 ($0.03 for exiting the commodity concentrate
product line and $0.04 for further realignment of business operations).
Inventory step-up - The Hardy acquisition resulted in an allocation of
purchase price in excess of book value to certain inventory on hand at the
date of purchase. This allocation of purchase price in excess of book value
is referred to as inventory step-up. The inventory step-up represents an
assumed manufacturing profit attributable to Hardy preacquisition. For
inventory produced and sold after the acquisition date, the related
manufacturer's profit accrues to the Company. As a result of final
appraisals, the Company expects the flow through of inventory step-up to have
a negative impact of approximately $0.03 per share for fiscal 2005.
Items Affecting Comparability for Fiscal 2004
Excise tax, duty and other costs - The Company recognized a net benefit of
$10.4 million related to relief from certain excise taxes, duty and other
costs incurred in prior years. The net $10.4 million is comprised of a $9.2
million increase in net sales, a $2.3 million reduction in cost of product
sold and a $1.1 million increase in SG&A. This had a positive impact of
approximately $0.06 per share for fiscal 2004.
Inventory step-up - The flow through of inventory step-up had an impact of
approximately $0.13 per share for fiscal 2004.
Concentrate inventory write-down - The Company made a decision to exit the
U.S. commodity concentrate product line - located in Madera, California. The
commodity concentrate product line was facing declining sales and profits and
was not part of the Company's core business, beverage alcohol. The Company
continues to produce and sell value-added, proprietary products such as
MegaColors. The charge for the write-down of concentrate inventory was $0.10
per share for fiscal 2004. In addition, and related to exiting this product
line, the Company expects to record restructuring and related charges of
approximately $0.17 per share, of which $0.14 was recorded in fiscal 2004 and
$0.03 will be recorded in fiscal 2005.
Financing costs - Hardy acquisition - In connection with the Hardy
acquisition, the Company recorded amortization expense for deferred financing
costs associated with noncontinuing financing, primarily related to the bridge
loan agreement. This charge was $0.07 per share for fiscal 2004.
Restructuring and related charges - Restructuring and related charges
resulted from the realignment of business operations in the Company's wine
division, as previously announced in the fourth quarter of fiscal 2003, and
exiting the commodity concentrate product line. The Company incurred total
charges of approximately $0.19 per share for fiscal 2004 ($0.05 for
realignment of businesses and $0.14 for exiting the commodity concentrate
product line).
Imputed interest charge - In connection with the Hardy acquisition and in
accordance with purchase accounting, the Company was required to take a one-
time imputed interest charge for the time period between when the Company
obtained control of Hardy and the date it paid Hardy shareholders. The
Company incurred a charge of $0.01 per share for fiscal 2004.
Gain on change in fair value of derivative instruments - In connection
with the Hardy acquisition, the Company entered into derivative instruments to
cap the cost of the acquisition in U.S. dollars. The Company recorded a gain
in the first quarter, which represented the net change in value of the
derivative instruments from the beginning of the first quarter until the date
Hardy shareholders were paid. The Company incurred a gain of $0.01 per share
for fiscal 2004.
Items Affecting Comparability for Fiscal 2003
Restructuring and related charges - Restructuring and related charges
resulted from the realignment of business operations in the Company's wine
division. The Company incurred total charges of approximately $0.03 per share
for fourth quarter 2003.
Gain on change in fair value of derivative instruments - In connection
with the Hardy acquisition, the Company entered into derivative instruments to
cap the cost of the acquisition in U.S. dollars. In accordance with GAAP, the
Company recorded a gain of $0.15 per share in fourth quarter 2003 based on the
net change in fair value of the derivative instruments on February 28, 2003.
CONTACT:
Media Relations:
Philippa Dworkin
585-218-3733
Investor Relations:
Mark Maring
585-218-3668
Both for Constellation Brands, Inc.