Constellation Reports Swing to Q4 Profit

North America net sales on an organic constant currency basis increased 14 percent due primarily to a combination of U.S. volume growth and favorable U.S. product mix. The fourth quarter fiscal 2010 net sales reflected the impact of inventory reductions at certain U.S. distributors.

4/8/2011 --- Constellation Brands, the world's leading premium wine company, has reported that consolidated net sales increased one percent in Q4 as a 10 percent organic constant currency net sales increase was essentially offset by the divestitures of the Australian and U.K. wine business and the U.K. cider business.

North America net sales on an organic constant currency basis increased 14 percent due primarily to a combination of U.S. volume growth and favorable U.S. product mix. The fourth quarter fiscal 2010 net sales reflected the impact of inventory reductions at certain U.S. distributors.
 
The consolidated comparable basis operating income increase was primarily driven by U.S. volume growth in the North America segment.
 
Constellation's equity earnings from its 50 percent interest in the Crown Imports joint venture totaled $49 million, an increase of 18 percent from the prior year fourth quarter.  For fourth quarter 2011, Crown generated net sales of $480 million, an increase of 15 percent, and operating income of $97 million, an increase of 18 percent.  Net sales and operating income benefited primarily from volume growth.
 
For fourth quarter 2011, pre-tax restructuring charges and unusual items totaled $1 million compared to $125 million for the prior year fourth quarter.
 
Interest expense totaled $47 million, a decrease of 25 percent. The decrease was due to lower average interest rates and borrowings during the quarter.
 
The comparable basis effective tax rate for the quarter was 31 percent compared to negative 11 percent for the prior year fourth quarter. Both periods reflected the favorable outcome of various tax items.
 
Constellation's Board of Directors has authorized the repurchase of up to $500 million of the company's common stock. The repurchase of shares may be accomplished from time to time, subject to market and other conditions.  "While our near-term focus is on debt reduction, we believe it is important to have a share repurchase authorization in place to provide flexibility over a multi-year period as part of our ongoing evaluation of the optimal capital structure for our business," said said Bob Ryder, chief financial officer, Constellation Brands.

"We experienced a strong finish to a year where we invested in our business and began building momentum around our product portfolio to drive future growth. We are well positioned from a strategic, market, and financial perspective for the year ahead," said said Rob Sands, president and chief executive officer. "Our guidance for fiscal 2012 is being tempered by comparison impacts from the U.S. distributor initiative, incremental marketing investment at Crown and the divestiture of the Australian and U.K. business. However, we continue to target healthy underlying depletion and consumer trends for our business."

For 2010 as a whole, reported consolidated net sales decreased one percent due primarily to the divestitures of the U.K. cider and Australian and U.K. wine businesses. Organic net sales on a constant currency basis increased three percent versus the prior year.
 
"Fiscal 2011 marks another year of significant accomplishments as we successfully executed on several of our key strategic goals and business initiatives," said Sands. "We are realizing the benefits from the implementation of our U.S. distributor initiative through improvements in depletion and consumer take-away trends. We generated record free cash flow, executed an accelerated stock buyback transaction and reduced debt by almost $600 million for the second consecutive year. Additionally, we sold our Australian and U.K. business as part of our efforts to further premiumize our portfolio, improve ROIC and generate profitable organic growth."