E-Malt.com News article: 4629

USA: Constellation Brands, Inc., a leading international producer and marketer of beverage alcohol, reported on April 7 record net sales and net income for its fiscal year ended Feb. 28, 2005. For the first time in the company's 60-year history, reported annual net sales topped $4 billion, up 15 % versus the prior year. The company also announced a two-for-one stock split of both its class A and class B shares, to be distributed on or about May 13, 2005, to stockholders of record on April 29, 2005.

"We had a monumental year in which we continued to gain momentum and generate true growth, which is growth that produces incremental returns above our cost of capital," stated Richard Sands, Constellation Brands chairman and chief executive officer. "Our worldwide team created true growth across our businesses by its adept management of our existing brands, introduction of new products and integration of the key acquisition of Robert Mondavi, as well as the addition of the Ruffino and Effen Vodka brands. Pursuing and capturing true growth is ingrained in our corporate culture and values."

Net sales, as reported under generally accepted accounting principles ("reported"), for fiscal 2005 totaled $4.09 billion, up 15 percent, driven by growth in the company's branded wine, U.K. wholesale and beer businesses, and from the Dec. 22, 2004, acquisition of The Robert Mondavi Corporation ("Robert Mondavi"). Currency contributed four percent of the increase. Both reported net income of $276.5 million and diluted earnings per share of $2.37 set records, and were up 25 percent and 15 percent, respectively, over the prior year.

Fiscal 2005 and fiscal 2004 reported results include acquisition-related integration costs, restructuring and related charges and net unusual costs which totaled $37.6 million after tax or $0.33 per share for fiscal 2005, and $46.1 million after tax or $0.43 per share for fiscal 2004. Excluding these items, net income and diluted earnings per share on a comparable basis increased 18 percent to $314.1 million and eight percent to $2.70, respectively, for fiscal 2005.

For the year, pro forma net sales on a comparable basis increased 13 percent including four percent from currency. The comparable pro forma net sales increase included $31 million of sales from Hardy Wine Company Limited ("Hardy") for March 2003, as well as $43 million from Robert Mondavi for January and February 2004, and excluded $9.2 million of relief from certain excise tax, duty and other costs incurred in prior year periods, which were recorded in the fourth quarter of fiscal 2004.

"Because we are committed to an entrepreneurial business model that fosters decision making close to our customers and markets, we enjoy the best of a disciplined approach to business and the creativity and vision required to continue growing the net sales of our existing business at six to eight percent annually. Combining this with value added acquisitions, our goal is to achieve 15 percent net sales growth annually to meet our stated objective of doubling the size of the company every five years," explained Sands. "Having the right products across the wines, beers and spirits categories, combined with real insight into what consumers want, gives us superlative tools to grow our business and create greater shareholder value over time."

Constellation Beers and Spirits Results

Annual net sales for beers and spirits reached $1.24 billion, an eight percent increase over the prior year. Beer posted a seven percent increase in net sales for the year with the majority of the gain coming from a price increase in the Mexican portfolio, as well as slight volume gains in St. Pauli Girl and Tsingtao. "Our Mexican beer portfolio has maintained market share despite the price increase initiated last year. We believe that the Modelo portfolio has maintained its inherent momentum with the consumer and will continue to grow and gain share," stated Sands. "Our beer business performed in line with expectations following the price increase and we're optimistic about the future growth potential and strength of our imported beer portfolio."

Branded spirits net sales for 2005 grew five percent, while production services grew 58 percent, resulting in total spirits growth of 10 percent. Black Velvet Canadian Whisky, the 99 line, Barton Vodka and the di Amore line were among the brands that contributed to solid branded spirits sales.

"Our spirits business has been buoyed by a general movement back to spirits and mixed drinks," explained Sands. "We continue to innovate and move our overall portfolio toward higher margin premium products such as the 99 family, Ridgemont Reserve 1792 and Effen Vodka brands from our new joint venture." Operating income for Constellation beers and spirits totaled $276.1 million, an increase of nine percent over the prior year, while operating margins increased slightly.

Robert Mondavi, Ruffino and Effen Contribute: "Our acquisition of Robert Mondavi is already generating true growth by exceeding our expectations," said Sands. "We're seeing encouraging interest in the brand throughout Europe, where the Robert Mondavi portfolio will be part of Constellation Europe's fine wine business. We're also seeing renewed momentum in the U.S., although we only owned the portfolio for a portion of the fourth quarter."

Regarding Constellation's 40 percent ownership of Ruffino, which was acquired in early Dec. 2004, IRI data indicates the portfolio experienced healthy growth in the U.S., up three times the Italian wine category during the last 12 months. The trend is encouraging for Constellation, which gained U.S. distribution rights for the brand on Feb. 1, 2005. "We're also pleased by the initial contributions made by Effen Vodka since Constellation completed its investment in late December 2004," said Sands.

Fourth Quarter Results

Reported net sales for the fourth quarter of fiscal 2005 totaled $1.04 billion, an 18 percent increase versus the prior year quarter. Reported net income and diluted earnings per share totaled $47.6 million and $0.40 per share, a decrease of 24 percent and 27 percent, respectively, from the prior year. Fourth quarter results include acquisition-related integration costs, restructuring and related charges and net unusual costs or gains. Net income and diluted earnings per share on a comparable basis, which exclude net costs of $25.5 million after tax, or $0.22 per share for the fourth quarter of fiscal 2005, and a net gain of $1.0 million, or $0.01 per share for the fourth quarter of fiscal 2004, increased 18 percent to $73.2 million and 15 percent to $0.62 per share, respectively, for the fourth quarter of fiscal 2005.

Pro forma net sales on a comparable basis for the fourth quarter increased 13 percent, including two percent from currency. The comparable pro forma net sales included $43 million of sales from Robert Mondavi for January and February 2004, and excluded $9.2 million of relief from certain excise tax, duty and other costs incurred in prior year periods.

Quarterly Constellation Beers and Spirits Results

Net sales for beers and spirits totaled $243 million in the fourth quarter and was essentially even with the prior year period. Beer net sales decreased four percent in the fourth quarter. Shipments and depletions were down in the fourth quarter due to the challenge of overcoming the buy-in by distributors and sell-through from promotional activities at retail preceding the price increase last year for the Mexican imported beer portfolio, which was anticipated and previously communicated. Based on IRI data for the 13-week period ending Feb. 20, 2005, Constellation's total beer portfolio in food stores, in its territories, was up 4.5 percent in volume and maintained market share versus a year ago.

For the quarter, spirits net sales grew 11 percent, reflecting an increase in branded spirits net sales of six percent and 49 percent for production services.

Operating income for beers and spirits totaled $53.1 million, an increase of six percent over the prior year period.

"Our balanced portfolio approach, combined with geographic diversity, helped us to generate consistent growth performance throughout the year," explained Sands. "When branded wine was a little below trend, beer performed well during the first half of the year, and conversely, branded wine performed well in the back half of the year when beer faced difficult comparisons. Spirits, wholesale and production services consistently exceeded expectations. Our portfolio growth, combined with new product introductions and strategic acquisitions, give us the momentum to continue on the growth course we've set for ourselves moving forward, which we are confident will generate incremental true growth and shareholder value in the future."

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, Corona Light, Pacifico, Modelo Especial, Negra Modelo, St. Pauli Girl, Tsingtao, Black Velvet, Fleischmann's, Mr. Boston, Paul Masson Grande Amber Brandy, Chi-Chi's, 99 Schnapps, Ridgemont Reserve 1792, Effen Vodka, Stowells, Blackthorn, Almaden, Arbor Mist, Vendange, Woodbridge by Robert Mondavi, Hardys, Nobilo, Alice White, Ruffino, Robert Mondavi Private Selection, Blackstone, Ravenswood, Estancia, Franciscan Oakville Estate, Simi and brands from Robert Mondavi Winery.


10 April, 2005