UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 26, 2002
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Constellation Brands, Inc.
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(Exact name of registrant as specified in its charter)
001-08495
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(Commission File Number)
Delaware 16-0716709
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(State or other (IRS Employer
jurisdiction of Identification No.)
incorporation)
300 WillowBrook Office Park, Fairport, New York 14450
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(Address of principal executive offices) (Zip Code)
(585) 218-3600
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name or former address, if changed since last report)
ITEM 5. OTHER EVENTS .
Constellation Brands, Inc. released the following information on June 26, 2002:
.
CONSTELLATION'S FIRST QUARTER EARNINGS PER SHARE INCREASE 21 PERCENT ON 9
PERCENT NET SALES GROWTH
FAIRPORT, NEW YORK, June 26, 2002 - Constellation Brands, Inc. (NYSE: STZ and
STZ.B) today reported net income of $37 million for the first quarter ended May
31, 2002, an increase of 33 percent on a comparable basis (excluding
amortization of goodwill and indefinite lived intangible assets for both
periods) over net income for the first quarter ended May 31, 2001. Diluted
earnings per share for the quarter were $0.40 compared to $0.33 for the same
period a year ago, an increase of 21 percent on a comparable basis. Diluted
earnings per share for the prior year first quarter before adoption of SFAS 142
were $0.28.
Richard Sands, Constellation Chairman, Chief Executive Officer and
President, said, "As investors have confidently come to expect from us, we
delivered excellent results. We achieved 9% sales growth and a strong 21%
earnings per share increase this quarter, demonstrating how we leverage top line
performance into bottom line results." Sands added, "In an uncertain economic
and investment environment, we take pride in producing at the highest level
within a stable industry."
ADOPTION OF SFAS 142 AND EITF NO. 01-09
The financial information in this press release reflects the adoption of
Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and
Other Intangible Assets." In order to help investors better evaluate year over
year performance, the Company has included financial information on a
"comparable" basis, as if the adoption of SFAS 142 had occurred in the prior
year. Unless otherwise noted, discussions in this release were prepared on a
comparable basis.
Also, beginning March 1, 2002, the Company adopted Emerging Issues Task
Force ("EITF") Issue No. 01-09, "Accounting for Consideration Given by a Vendor
to a Customer or a Reseller of a Vendor's Products." As a result, the Company
has reclassified certain promotional expenditures paid to distributors,
retailers or consumers as a reduction of revenue and non-cash consideration as
an increase to cost of product sold. The Company previously reported these
expenses as selling, general and administrative expenses. Prior-period financial
information has been reclassified to comply with this guidance. This
reclassification does not affect operating income or net income. Additional
historical financial information, adjusted to show effect of EITF 01-09, can be
found on the Company's web site: www.cbrands.com.
CONSOLIDATED RESULTS
Net sales reached $649 million for the three months ended May 31, 2002
("First Quarter 2003"), a nine percent increase over the three months ended May
31, 2001 ("First Quarter 2002"). Net sales growth was driven primarily by
increases in imported beer, the U.K. wholesale business and Ravenswood, which
was acquired in July 2001. Excluding Ravenswood, net sales for First Quarter
2003 grew seven percent, in-line with the Company's internal growth targets.
Gross profit for First Quarter 2003 was $175 million compared to $153
million in the prior year period. The improvement in gross profit was primarily
related to increased imported beer sales, though partially offset by higher
average imported beer costs; as well as sales of Ravenswood and a favorable mix
of spirit sales towards higher margin products, particularly tequila.
Selling, general and administrative expenses were $89 million for First
Quarter 2003 versus $76 million for First Quarter 2002. The increase was due
primarily to higher advertising costs for the imported beer portfolio and higher
personnel costs to support the Company's growth. First Quarter 2003 selling,
general and administrative expenses, as a percent of net sales, were 13.8
percent, compared to 12.8 percent for the same period a year ago. The increase
resulted from higher average advertising and promotional costs and higher
general operating expenses.
Operating income increased $10 million to reach $86 million for First
Quarter 2003, an increase of 13 percent.
Equity income from Pacific Wine Partners, an equally owned joint venture
with BRL Hardy, which commenced operations August 2001, was $3 million for First
Quarter 2003. Led by Australian import Banrock Station and Blackstone from
California, Pacific Wine Partners' shipments improved 57 percent versus the
prior year, which was before Pacific Wine Partner's formation.
Net interest expense for First Quarter 2003 declined $3 million to $27
million as a result of lower average borrowing rates and lower average debt
levels.
As a result of the above factors, net income and diluted earnings per share
for First Quarter 2003 were $37 million and $0.40, compared to net income and
diluted earnings per share of $28 million and $0.33, respectively, reported for
First Quarter 2002.
IMPORTED BEER AND SPIRITS RESULTS
Imported beer and spirits net sales for First Quarter 2003 were $270
million, an increase of 12 percent versus First Quarter 2002. The increase
resulted from 14 percent growth in imported beer sales and five percent growth
in spirits. Imported beer growth resulted from both volume gains and a price
increase on the Company's Mexican brands, which took effect March 1, 2002.
Spirits net sales growth resulted primarily from a favorable mix towards higher
priced products, particularly tequila.
Operating income grew to $54 million in First Quarter 2003, an increase of
18 percent versus the comparable quarter last year. The growth in operating
income was primarily the result of increased beer sales and a favorable mix of
higher margin spirit products partially offset by increased advertising
spending, particularly on imported beer, and general operating expenses.
POPULAR AND PREMIUM WINE RESULTS
Net sales were $163 million for popular and premium wine for First Quarter
2003, a decline of two percent over First Quarter 2002. Branded sales increased
slightly but were more than offset by declines in nonbranded sales,
particularly concentrate and bulk wine sales.
Operating income was down slightly as increased profits from branded sales
were more than offset by lower profits from nonbranded sales.
U.K. BRANDS AND WHOLESALE RESULTS
Net sales for First Quarter 2003 increased to $187 million, an increase of
11 percent compared to net sales reported for First Quarter 2002. Wholesale
sales improved 15 percent as the business continues to gain market share by
adding new accounts and increasing average delivery sizes. Branded sales grew
three percent on strong table wine sales and ready-to-drink brands, K Ice and
fcuk SPIRIT, partially offset by declines in cider sales.
Operating income for First Quarter 2003 was relatively flat at $10 million
as increased profit from the wholesale business was offset by increased
investment behind several key wine and ready-to-drink brands and lower cider
sales.
FINE WINE RESULTS
Fine wine net sales for First Quarter 2003 increased 40 percent to reach
$35 million. The increase was due to the addition of Ravenswood. Excluding
Ravenswood, fine wine sales declined eight percent on lower volume following on
the heels of a robust Fourth Quarter 2002 (+32 percent). Fine wine depletions,
shipments from distributors to retailers, excluding Ravenswood continued to grow
in the mid teens for the quarter.
As a result of the higher net sales, operating income increased 44 percent,
reaching $12 million.
OUTLOOK
The following statements are management's current expectations for the
Company's three months ending August 31, 2002 ("Second Quarter 2003"), and
fiscal year ending February 28, 2003 ("Fiscal 2003"). 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.
- Diluted earnings per share for Second Quarter 2003 are expected to be
within a range of $0.52 to $0.54 versus diluted earnings per share on a
comparable basis of $0.46 for Second Quarter 2002.
- Diluted earnings per share for Fiscal 2003 are expected to be within a
range of $2.00 to $2.04 versus diluted earnings per share before an
extraordinary item on a comparable basis of $1.79 for Fiscal 2002.
All share and per share amounts in this press release, including within the
financial information, reflects the two-for-one stock split of both the
Company's Class A and Class B common stock, which was distributed in the form of
a stock dividend on May 13, 2002.
STATUS OF BUSINESS OUTLOOK
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 August 17, 2002, 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's 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 Thursday,
September 26, 2002.
FORWARD-LOOKING STATEMENTS
The statements made under the heading 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. 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 for Second
Quarter 2003, and (ii) the Company's estimated diluted earnings per share for
Fiscal 2003, 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 our competitors; raw material supply, production or shipment
difficulties could adversely affect our ability to supply our customers;
increased competitive activities in the form of pricing, advertising and
promotions could adversely impact consumer demand for our products and/or result
in higher than expected selling, general and administrative expenses; a general
decline in alcohol consumption; increases in federal and state excise taxes on
beverage alcohol products; 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, 2002.
ABOUT CONSTELLATION
Constellation Brands, Inc. is a leader in the production and marketing of
beverage alcohol brands in North America and the United Kingdom and is a leading
independent drinks wholesaler in the United Kingdom. As the second largest
supplier of wine, the second largest importer of beer and the third largest
supplier of distilled spirits, Constellation is the largest single-source
supplier of these products in the United States. In the United Kingdom,
Constellation is a leading marketer of wine and the second largest producer and
marketer of cider. With its broad product portfolio, Constellation believes it
is distinctly positioned to satisfy an array of consumer preferences across all
beverage alcohol categories. Leading brands in Constellation's portfolio
include: Franciscan Oakville Estate, Simi, Estancia, Ravenswood, Corona Extra,
Modelo Especial, St. Pauli Girl, Almaden, Arbor Mist, Talus, Vendange, Alice
White, Black Velvet, Fleischmann's, Schenley, Ten High, Stowells of Chelsea,
Blackthorn and K.
CONFERENCE CALL DETAILS
A conference call to discuss the quarterly results will be hosted by
Richard Sands, Chairman and CEO, and Tom Summer, Executive Vice President and
CFO, on Thursday, June 27, 2002, at 11:00 a.m. (Eastern). The conference call
can be accessed by dialing 412-858-4600. A live listen-only web cast of the
conference call is available on the Internet at Constellation's web site:
www.cbrands.com under "Investor Information." If you are unable to participate
in the conference call, there will be a replay available on Constellation's web
site or by dialing (877) 344-7529 or (412) 858-1440 from approximately 1:30 p.m.
(Eastern) on Thursday, June 27, 2002, through 12:00 a.m. (Eastern) on Friday,
July 12, 2002.
Digital Playback Instructions - Courtesy of ChorusCall
------------------------------------------------------
1. Dial 877-DIG-PLAY (877-344-7529 / toll-free) or 412-858-1440.
2. Enter '749' when prompted for your account number followed by the # sign.
3. Please press '1' to play a recorded conference.
4. Please enter '286386' when prompted to enter the conference number
followed by the # sign.
5. Please clearly state your name and company name when prompted to do so
followed by any key.
6. Please press '1' to begin the conference playback.
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CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOLLOW
CONSTELLATION BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
May 31, 2002 February 28, 2002
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ASSETS
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CURRENT ASSETS:
Cash and cash investments $ 6,564 $ 8,961
Accounts receivable, net 420,853 383,922
Inventories, net 767,722 777,586
Prepaid expenses and other current assets 64,905 60,779
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Total current assets 1,260,044 1,231,248
PROPERTY, PLANT AND EQUIPMENT, net 580,211 578,764
GOODWILL 707,050 668,083
OTHER INTANGIBLE ASSETS, net 379,996 425,987
OTHER ASSETS 169,133 165,303
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Total assets $ 3,096,434 $ 3,069,385
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LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES:
Notes payable $ 32,335 $ 54,775
Current maturities of long-term debt 84,053 81,609
Accounts payable 140,803 153,433
Accrued excise taxes 46,129 60,238
Other accrued expenses and liabilities 295,577 245,155
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Total current liabilities 598,897 595,210
LONG-TERM DEBT, less current maturities 1,279,183 1,293,183
DEFERRED INCOME TAXES 146,804 163,146
OTHER LIABILITIES 62,459 62,110
STOCKHOLDERS' EQUITY 1,009,091 955,736
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Total liabilities and stockholders' equity $ 3,096,434 $ 3,069,385
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CONSTELLATION BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (a)
(in thousands, except per share data)
Comparable (b)
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Three Months Three Months Three Months
Ended Ended Percent Ended Percent
May 31, 2002 May 31, 2001 Change May 31, 2001 Change
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Gross sales $ 859,011 $ 788,880 9% $ 788,880 9%
Excise taxes (210,070) (193,664) 8% (193,664) 8%
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Net sales 648,941 595,216 9% 595,216 9%
Cost of product sold (473,667) (442,541) 7% (442,541) 7%
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Gross profit 175,274 152,675 15% 152,675 15%
Selling, general and administrative
expenses (89,309) (82,752) 8% (76,398) 17%
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Operating income 85,965 69,923 23% 76,277 13%
Equity in earnings of joint venture 2,739 - n/a - n/a
Interest expense, net (27,141) (30,185) -10% (30,185) -10%
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Income before income taxes 61,563 39,738 55% 46,092 34%
Provision for income taxes (24,194) (15,895) 52% (17,976) 35%
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Net income $ 37,369 $ 23,843 57% $ 28,116 33%
============ ============ ============
Earnings per common share:
Basic $ 0.42 $ 0.29 45% $ 0.34 24%
Diluted $ 0.40 $ 0.28 43% $ 0.33 21%
Weighted average common shares
outstanding:
Basic 88,845 82,508 8% 82,508 8%
Diluted 92,353 85,051 9% 85,051 9%
Segment Information:
Net sales:
Imported Beer and Spirits
Imported beer $ 198,440 $ 173,462 14% $ 173,462 14%
Spirits 72,013 68,271 5% 68,271 5%
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Net sales $ 270,453 $ 241,733 12% $ 241,733 12%
Popular and Premium Wine
Branded $ 149,602 $ 148,819 1% $ 148,819 1%
Other 13,873 17,238 -20% 17,238 -20%
------------ ------------ ------------
Net sales $ 163,475 $ 166,057 -2% $ 166,057 -2%
U.K. Brands and Wholesale
Branded $ 54,662 $ 53,206 3% $ 53,206 3%
Wholesale 132,134 115,006 15% 115,006 15%
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Net sales $ 186,796 $ 168,212 11% $ 168,212 11%
Fine Wine $ 34,756 $ 24,852 40% $ 24,852 40%
Intersegment eliminations $ (6,539) $ (5,638) 16% $ (5,638) 16%
------------ ------------ ------------
Consolidated net sales $ 648,941 $ 595,216 9% $ 595,216 9%
============ ============ ============
Operating income:
Imported Beer and Spirits $ 54,421 $ 44,051 24% $ 46,068 18%
Popular and Premium Wine 16,869 15,395 10% 17,178 -2%
U.K. Brands and Wholesale 10,263 8,853 16% 10,338 -1%
Fine Wine 11,706 7,048 66% 8,117 44%
Corporate Operations (7,294) (5,424) 34% (5,424) 34%
------------ ------------ ------------
Consolidated operating income $ 85,965 $ 69,923 23% $ 76,277 13%
============ ============ ============
(a) Reflects the adoption of EITF Issue No. 01-09. Prior-period has been
reclassified to comply with this guidance.
(b) Adjusted to exclude amortization of goodwill and indefinite lived
intangible assets under SFAS No. 142.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: June 26, 2002 CONSTELLATION BRANDS, INC.
By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Executive Vice
President and Chief Financial
Officer
INDEX TO EXHIBITS
(1) UNDERWRITING AGREEMENT
Not Applicable.
(2) PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR SUCCESSION
Not Applicable.
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES
Not Applicable.
(16) LETTER RE CHANGE IN CERTIFYING ACCOUNTANT
Not Applicable.
(17) LETTER RE DIRECTOR RESIGNATION
Not Applicable.
(20) OTHER DOCUMENTS OR STATEMENTS TO SECURITY HOLDERS
Not Applicable.
(23) CONSENTS OF EXPERTS AND COUNSEL
Not Applicable.
(24) POWER OF ATTORNEY
Not Applicable.
(99) ADDITIONAL EXHIBITS
None