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): January 2, 2002
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CONSTELLATION BRANDS, INC.
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(Exact name of registrant
as specified in its charter)
Delaware 001-08495 16-0716709
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(State or other (Commission File Number) (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)
Registrant's telephone number, including area code (585) 218-2169
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(Former name or former address, if changed since last report)
ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE.
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Constellation Brands, Inc. released the following information on January 2,
2002, regarding its third quarter 2002 results:
CONSTELLATION REPORTS 19 PERCENT EARNINGS PER SHARE GROWTH
15TH CONSECUTIVE DOUBLE-DIGIT QUARTERLY INCREASE
FAIRPORT, NEW YORK, JANUARY 2, 2002 - Constellation Brands, Inc. (NYSE: STZ and
STZ.B) today reported diluted earnings per share of $1.11 for the quarter ended
November 30, 2001, an increase of 19 percent over earnings per diluted share of
$0.93 for the prior year third quarter.
Richard Sands, Chairman and Chief Executive Officer of Constellation, said,
"Constellation's earnings growth underscores the strength of our balanced growth
strategy, particularly in an uncertain economic environment. We achieved 10
percent organic sales growth this quarter, well ahead of our targets, and with
acquisitions our net income increased 42 percent."
Sands continued, "Highlights of the quarter included: 42 percent
improvement in sales of Ravenswood wine over the prior year period; 11 percent
sales growth in our imported beer business led by Corona Extra; tremendous
success in our U.K. wine business driven by the most popular brand in the U.K.,
Stowells of Chelsea; and 31 percent growth in our U.K. wholesale business."
"The beverage alcohol industry and, in particular, Constellation's
portfolio of brands, are well positioned to weather an uncertain economy. We are
on track to deliver better than 15 percent earnings per share growth in the
fourth quarter and expect to continue our earnings growth into fiscal 2003 and
beyond," Sands concluded.
CONSOLIDATED RESULTS
Net sales reached $764 million for the quarter ended November 30, 2001
("Third Quarter 2002"), a 21 percent increase over the quarter ended November
30, 2000 ("Third Quarter 2001"). Approximately half of the growth resulted from
the inclusion of brands acquired in the Turner Road Vintners and Corus
acquisitions in March 2001, including Vendange, Talus and Alice White, and from
the Ravenswood brand, which was acquired in July 2001 (collectively, the
"Acquisitions"). Excluding the Acquisitions, net sales increased 10 percent;
attributed primarily to growth in imported beer, the U.K. wine business and the
U.K. wholesale business. Net sales for the nine months ended November 30, 2001
("Nine Months 2002"), reached $2.1 billion, a 16 percent increase as compared to
the nine months ended November 30, 2000 ("Nine Months 2001"). There was no
significant foreign currency impact on consolidated net sales for Third Quarter
2002 or Nine Months 2002.
Gross profit reached $258 million for Third Quarter 2002, a 24 percent
increase over Third Quarter 2001. The improvement in gross profit resulted from
increased sales and an 80 basis point improvement in gross profit margin. The
increase in gross profit margin to 33.8 percent resulted primarily from sales of
higher margin brands from the Acquisitions. Gross profit and gross profit margin
for Nine Months 2002 were $698 million and 32.5 percent, respectively, compared
to $593 million and 32.0 percent for Nine Months 2001.
Selling, general and administrative expenses were $150 million for Third
Quarter 2002, a 22 percent increase from $123 million for Third Quarter 2001.
Advertising and promotion costs associated with brands from the Acquisitions and
higher advertising and promotion costs associated with the U.K. branded business
were the primary reasons for the increase in selling, general and administrative
expenses. Third Quarter 2002 selling, general and administrative expenses, as a
percent of net sales, were 19.6 percent, an increase of 10 basis points over the
same period a year ago. Selling, general and administrative expenses as a
percent of net sales for Nine Months 2002 were favorable by 50 basis points
compared to the prior period. Selling, general and administrative expenses were
$430 million for Nine Months 2002 compared to $379 million reported for the same
period last year.
Operating income increased to $109 million for Third Quarter 2002 from $85
million for Third Quarter 2001, an increase of 28 percent. For Nine Months 2002,
operating income was $268 million compared to $213 million for Nine Months 2001.
Equity in earnings of Pacific Wine Partners, an equally owned joint venture
with BRL Hardy, was $1.2 million for Third Quarter 2002. Pacific Wine Partners'
results reflect its first full quarter of operations and includes the results of
operations of the Blackstone Winery assets, which were acquired on October 16,
2001.
Although debt outstanding at the end of Third Quarter 2002 was $216 million
greater than the prior year period, net interest expense was virtually unchanged
at $27 million as a result of a lower average borrowing rate. Net interest
expense for Nine Months 2002 was $86 million, up from $82 million for Nine
Months 2001.
As a result of these factors, net income reached $50 million for Third
Quarter 2002, a 42 percent increase compared to net income of $35 million for
Third Quarter 2001. Earnings per diluted share for Third Quarter 2002 were
$1.11, a 19 percent increase over earnings per diluted share of $0.93 for Third
Quarter 2001. Net income and earnings per diluted share for Nine Months 2002
were $109 million and $2.51, respectively, versus $79 million and $2.12 for Nine
Months 2001.
BARTON RESULTS
Barton's Third Quarter 2002 net sales were $261 million, an eight percent
increase as compared to Third Quarter 2001. Beer sales increased 11 percent, led
by volume increases in Corona Extra, Modelo Especial, Negra Modelo and St. Pauli
Girl. Spirits sales increased one percent due to increases in bulk whiskey sales
partially offset by slightly lower branded spirits sales. Operating income was
$48 million for Third Quarter 2002, an increase of three percent compared to the
prior year.
Barton's net sales and operating income reached $817 million and $143
million, respectively, for Nine Months 2002, increases of seven percent and five
percent, respectively, compared to the prior year.
CANANDAIGUA WINE RESULTS
Net sales for Canandaigua Wine for Third Quarter 2002 increased 33 percent
to $245 million. Most of the increase resulted from the addition of sales from
brands acquired in the Turner Road Vintners and Corus acquisitions. Excluding
the acquired brands, branded net sales grew five percent driven by volume.
Operating income reached $36 million, an increase of $20 million or 123
percent compared to the prior year. The increase was the result of additional
profits from the acquired brands and the positive impact of lower grape prices.
Net sales and operating income for Nine Months 2002 were $648 million and
$76 million, respectively, compared to $517 million and $34 million for Nine
Months 2001.
MATTHEW CLARK RESULTS
Matthew Clark's net sales for Third Quarter 2002 were $220 million versus
$180 million reported for the comparable quarter a year ago, an increase of 22
percent. Wholesale sales increased 31 percent for Third Quarter 2002 driven by
strong sales to national accounts. Branded sales increased 11 percent led by
extremely strong sales in table wine, particularly Stowells of Chelsea and the
California wine portfolio, partially offset by slightly lower cider sales.
Operating income for Third Quarter 2002 reached $18 million, slightly lower when
compared to the prior year.
Net sales for Nine Months 2002 were $600 million versus $519 million
reported for the same period last year, an increase of 15 percent. Net sales
increased 20 percent adjusting for the impact of foreign currency fluctuations.
Operating income for Nine Months 2002 was $40 million compared to $41 million
for the prior year.
FRANCISCAN RESULTS
Franciscan's net sales for Third Quarter 2002 were $44 million versus $28
million reported for the comparable quarter last year, an increase of 57
percent. Most of the increase was due to sales of the Ravenswood brand, which
was acquired during July 2001. Driven by the addition of Ravenswood, operating
income increased 46 percent, reaching $13 million.
Net sales and operating income for Nine Months 2002 were $101 million and
$28 million, respectively, an increase of 42 percent and 52 percent compared to
Nine Months 2001.
OUTLOOK
The following statements are management's current expectations for the
Company's three months ending February 28, 2002 ("Fourth Quarter 2002"), and
fiscal year ending
February 28, 2002 ("Fiscal 2002"). 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 Fourth Quarter 2002 are expected to be
within a range of $0.56 to $0.59 versus $0.48 reported for Fourth Quarter
2001.
- Diluted earnings per share for Fiscal 2002 are expected to be within a
range of $3.05 to $3.08 versus $2.60 reported for Fiscal 2001.
With respect to goodwill and intangible assets acquired prior to July 1,
2001, the Company will adopt Statement of Financial Accounting Standards No. 142
("SFAS 142"), "Goodwill and Other Intangible Assets", beginning March 1, 2002.
Therefore, the Company's earnings expectations do not reflect the impact of SFAS
142 as it relates to the amortization of goodwill and intangible assets acquired
prior to July 1, 2001. The Company's preliminary assessment of the financial
impact of SFAS 142 is that if the standard was adopted as of March 1, 2001, the
Company's operating income for the fiscal year ending February 28, 2002, would
be approximately $24 million higher.
All share and per share amounts in this press release, including within the
financial statements, reflect 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 14, 2001.
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 February 15, 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,
April 11, 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 the
quarter ending February 28, 2002, and (ii) the Company's estimated diluted
earnings per share for the twelve months ending February 28, 2002, 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:
expectations that our recent acquisitions and our joint venture will achieve
certain sales projections and meet certain cost targets; the successful
integration of our recent acquisitions; 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, 2001.
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 fourth 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, January 3, 2002, at 11:00 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:
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.
EST on Thursday, January 3, 2002, through 12:00 a.m. EST on Friday, January 11,
2002.
Digital Playback Instructions - Courtesy of ChorusCall
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1. Dial 877-DIG-PLAY (877-344-7529 / toll-free) or 412-858-1440.
2. Enter '246' when prompted for your account number followed by the # sign.
3. Please press '1' to play a recorded conference.
4. Please enter '264708' 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)
November 30, 2001 February 28, 2001
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ASSETS
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CURRENT ASSETS:
Cash and cash investments $ 9,454 $ 145,672
Accounts receivable, net 473,835 314,262
Inventories, net 831,889 670,018
Prepaid expenses and other current assets 72,175 61,037
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Total current assets 1,387,353 1,190,989
PROPERTY, PLANT AND EQUIPMENT, net 561,667 548,614
OTHER ASSETS 1,178,471 772,566
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Total assets $ 3,127,491 $ 2,512,169
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LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES:
Notes payable $ 159,493 $ 4,184
Current maturities of long-term debt 80,039 54,176
Accounts payable 217,550 114,793
Accrued excise taxes 49,977 55,954
Other accrued expenses and liabilities 290,482 198,053
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Total current liabilities 797,541 427,160
LONG-TERM DEBT, less current maturities 1,259,088 1,307,437
DEFERRED INCOME TAXES 131,953 131,974
OTHER LIABILITIES 33,628 29,330
STOCKHOLDERS' EQUITY 905,281 616,268
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Total liabilities and stockholders' equity $ 3,127,491 $ 2,512,169
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CONSTELLATION BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Three Months Three Months
Ended Ended Percent
November 30, 2001 November 30, 2000 Change
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Gross sales $ 987,776 $ 833,447 19%
Net sales $ 764,074 $ 629,577 21%
Cost of product sold (505,666) (421,524) 20%
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Gross profit 258,408 208,053 24%
Selling, general and
administrative expenses (149,585) (122,815) 22%
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Operating income 108,823 85,238 28%
Equity in earnings of joint venture 1,165 - n/a
Interest expense, net (27,249) (26,983) 1%
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Income before income taxes 82,739 58,255 42%
Provision for income taxes (33,096) (23,302) 42%
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Net income $ 49,643 $ 34,953 42%
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Earnings per common share:
Basic $ 1.14 $ 0.95 20%
Diluted $ 1.11 $ 0.93 19%
Weighted average common shares
outstanding:
Basic 43,429 36,788 18%
Diluted 44,739 37,469 19%
Segment Information:
Net sales:
Barton
Beer $ 181,264 $ 163,292 11%
Spirits 79,826 79,096 1%
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Net sales $ 261,090 $ 242,388 8%
Canandaigua Wine
Branded $ 223,558 $ 162,112 38%
Other 21,414 22,310 -4%
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Net sales $ 244,972 $ 184,422 33%
Matthew Clark
Branded $ 88,205 $ 79,355 11%
Wholesale 131,842 100,725 31%
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Net sales $ 220,047 $ 180,080 22%
Franciscan $ 43,672 $ 27,818 57%
Intersegment eliminations $ (5,707) $ (5,131) 11%
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Consolidated net sales $ 764,074 $ 629,577 21%
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Operating income:
Barton $ 47,822 $ 46,370 3%
Canandaigua Wine 36,377 16,281 123%
Matthew Clark 17,872 18,431 -3%
Franciscan 13,169 9,001 46%
Corporate Operations and Other (6,417) (4,845) 32%
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Consolidated operating income $ 108,823 $ 85,238 28%
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CONSTELLATION BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Nine Months Nine Months
Ended Ended Percent
November 30, 2001 November 30, 2000 Change
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Gross sales $ 2,774,023 $ 2,436,637 14%
Net sales $ 2,146,959 $ 1,852,647 16%
Cost of product sold (1,448,925) (1,260,082) 15%
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Gross profit 698,034 592,565 18%
Selling, general and
administrative expenses (430,287) (379,159) 13%
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Operating income 267,747 213,406 25%
Equity in earnings of joint venture 1,028 - n/a
Interest expense, net (86,408) (81,797) 6%
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Income before income taxes 182,367 131,609 39%
Provision for income taxes (72,947) (52,644) 39%
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Net income $ 109,420 $ 78,965 39%
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Earnings per common share:
Basic $ 2.58 $ 2.16 19%
Diluted $ 2.51 $ 2.12 18%
Weighted average common shares
outstanding:
Basic 42,362 36,615 16%
Diluted 43,570 37,283 17%
Segment Information:
Net sales:
Barton
Beer $ 593,435 $ 538,585 10%
Spirits 223,657 224,203 0%
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Net sales $ 817,092 $ 762,788 7%
Canandaigua Wine
Branded $ 591,232 $ 455,950 30%
Other 56,653 60,767 -7%
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Net sales $ 647,885 $ 516,717 25%
Matthew Clark
Branded $ 233,349 $ 225,338 4%
Wholesale 366,317 293,958 25%
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Net sales $ 599,666 $ 519,296 15%
Franciscan $ 101,258 $ 71,100 42%
Intersegment eliminations $ (18,942) $ (17,254) 10%
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Consolidated net sales $ 2,146,959 $ 1,852,647 16%
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Operating income:
Barton $ 143,234 $ 135,818 5%
Canandaigua Wine 75,706 34,481 120%
Matthew Clark 40,157 41,027 -2%
Franciscan 28,315 18,659 52%
Corporate Operations and Other (19,665) (16,579) 19%
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Consolidated operating income $ 267,747 $ 213,406 25%
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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.
CONSTELLATION BRANDS, INC.
Dated: January 3, 2002 By: /s/ Thomas S. Summer
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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