Constellation Brands Inc. (STZ, Financial) filed Quarterly Report for the period ended 2009-05-31.
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. The Company is the largest multi-category supplier of beverage alcohol in the United States; a leading producer and exporter of wine from Australia and New Zealand; and both a major producer and independent drinks wholesaler in the United Kingdom. Well-known brands in Constellation's portfolio include: Corona Extra Pacifico St. Pauli Girl Black Velvet and Fleischmann's. Constellation Brands Inc. has a market cap of $2.57 billion; its shares were traded at around $12.68 with a P/E ratio of 7.3 and P/S ratio of 0.8. Constellation Brands Inc. had an annual average earning growth of 12.4% over the past 5 years.
Net sales for First Quarter 2010 decreased to $791.6 million from $931.8 million for First Quarter 2009, a decrease of $140.2 million, or (15%). This decrease resulted primarily from an unfavorable year-over-year foreign currency translation impact of $90.2 million and a decrease in spirits net sales of $52.6 million. The decrease in spirits net sales resulted predominantly from the divestitures of the value spirits business and the Canadian distilling facility.
Net sales for Constellation Wines decreased to $791.6 million for First Quarter 2010 from $931.8 million in First Quarter 2009, a decrease of $140.2 million, or (15%). Branded wine net sales decreased $77.8 million primarily due to an unfavorable year-over-year foreign currency translation impact of $77.9 million. Spirits net sales decreased $45.5 million primarily due to a decrease in net sales of $52.6 million in connection with the divestitures of the value spirits business and the Canadian distilling facility, partially offset by volume growth within the retained spirits brands which was driven largely by SVEDKA Vodka. Other net sales decreased $16.9 million primarily due to an unfavorable year-over-year foreign currency translation impact of $12.3 million.
The Companys gross profit decreased to $268.7 million for First Quarter 2010 from $329.0 million for First Quarter 2009, a decrease of $60.3 million, or (18%). This decrease was primarily due to an unfavorable mix of sales towards lower margin products, an unfavorable year-over-year foreign currency translation impact of $19.6 million and a decrease in gross profit of $15.3 million related to the divestitures of (i) the value spirits business, (ii) the Canadian distilling facility and (iii) the Pacific Northwest Business. In addition, unusual items, which consist of certain costs that are excluded by management in their evaluation of the results of each operating segment, were lower by $2.9 million in First Quarter 2010 versus First Quarter 2009 due largely to decreased flow through of inventory step-up of $3.6 million associated primarily with the BWE Acquisition. Gross profit as a percent of net sales decreased to 33.9% for First Quarter 2010 from 35.3% for First Quarter 2009 primarily due to the factors discussed above.
Selling, general and administrative expenses decreased to $166.6 million for First Quarter 2010 from $233.5 million for First Quarter 2009, a decrease of $66.9 million, or (29%). This decrease is due to a decrease of $55.5 million in the Constellation Wines segment and a decrease in unusual costs which consist of certain items that are excluded by management in their evaluation of the results of each operating segment of $11.7 million, partially offset by a slight increase in the Corporate Operations and Other segment. The decrease in the Constellation Wines segments selling, general and administrative expenses is primarily due to decreases in general and administrative expenses of $27.2 million, advertising expenses of $15.4 million and selling expenses of $13.0 million. These decreases are largely attributable to (i) a favorable year-over-year foreign currency translation impact; (ii) the divestitures of the value spirits business and the Pacific Northwest Business; (iii) gains on foreign currency transactions; (iv) cost savings in connection with the Companys various restructuring activities; and (v) a planned reduction in marketing and advertising spend. The decrease in unusual costs was primarily due to the recognition in First Quarter 2009 of the $23.4 million loss in connection with the June 2008 sale of the Pacific Northwest Business, partially offset by $13.2 million of other costs in connection with the Companys plan to simplify its business, increase efficiencies and reduce its cost structure on a global basis (the Global Initiative). Selling, general and administrative expenses as a percent of net sales decreased to 21.0% for First Quarter 2010 as compared to 25.1% for First Quarter 2009 primarily due to the factors discussed above.
Net sales for Crown Imports decreased to $635.8 million for First Quarter 2010 from $672.5 million for First Quarter 2009, a decrease of $36.7 million, or (5%). This decrease resulted primarily from lower volumes within the Crown Imports Mexican beer portfolio. Crown Imports gross profit decreased $8.6 million, or (4%), primarily due to these lower sales volumes. Selling, general and administrative expenses increased $3.9 million, primarily due to an increase in advertising spend. The combination of these factors were the main contributors to the decrease in operating income of $12.6 million, or (9%).
Read the The complete ReportSTZ is in the portfolios of John Rogers of ARIEL CAPITAL MANAGEMENT LLC, David Dreman of Dreman Value Management.
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. The Company is the largest multi-category supplier of beverage alcohol in the United States; a leading producer and exporter of wine from Australia and New Zealand; and both a major producer and independent drinks wholesaler in the United Kingdom. Well-known brands in Constellation's portfolio include: Corona Extra Pacifico St. Pauli Girl Black Velvet and Fleischmann's. Constellation Brands Inc. has a market cap of $2.57 billion; its shares were traded at around $12.68 with a P/E ratio of 7.3 and P/S ratio of 0.8. Constellation Brands Inc. had an annual average earning growth of 12.4% over the past 5 years.
Highlight of Business Operations:
In March 2009, the Company sold its value spirits business for $330.2 million, net of direct costs to sell, subject to post-closing adjustments. The Company received $270.2 million, net of direct costs to sell, in cash proceeds and a note receivable for $60.0 million. The Company retained certain mid-premium spirits brands, including SVEDKA Vodka, Black Velvet Canadian Whisky and Paul Masson Grande Amber Brandy. This transaction is consistent with the Companys strategic focus on premium, higher growth and higher margin brands in its portfolio. In connection with the classification of this business as an asset group held for sale as of February 28, 2009, the Company recorded a loss of $15.6 million in the fourth quarter of fiscal 2009, primarily related to asset impairments. In First Quarter 2010, the Company recognized a net gain of $0.2 million, which included a gain on settlement of a postretirement obligation of $1.0 million, partially offset by an additional loss of $0.8 million. This net gain is included in selling, general and administrative expenses on the Companys Consolidated Statements of Operations.Net sales for First Quarter 2010 decreased to $791.6 million from $931.8 million for First Quarter 2009, a decrease of $140.2 million, or (15%). This decrease resulted primarily from an unfavorable year-over-year foreign currency translation impact of $90.2 million and a decrease in spirits net sales of $52.6 million. The decrease in spirits net sales resulted predominantly from the divestitures of the value spirits business and the Canadian distilling facility.
Net sales for Constellation Wines decreased to $791.6 million for First Quarter 2010 from $931.8 million in First Quarter 2009, a decrease of $140.2 million, or (15%). Branded wine net sales decreased $77.8 million primarily due to an unfavorable year-over-year foreign currency translation impact of $77.9 million. Spirits net sales decreased $45.5 million primarily due to a decrease in net sales of $52.6 million in connection with the divestitures of the value spirits business and the Canadian distilling facility, partially offset by volume growth within the retained spirits brands which was driven largely by SVEDKA Vodka. Other net sales decreased $16.9 million primarily due to an unfavorable year-over-year foreign currency translation impact of $12.3 million.
The Companys gross profit decreased to $268.7 million for First Quarter 2010 from $329.0 million for First Quarter 2009, a decrease of $60.3 million, or (18%). This decrease was primarily due to an unfavorable mix of sales towards lower margin products, an unfavorable year-over-year foreign currency translation impact of $19.6 million and a decrease in gross profit of $15.3 million related to the divestitures of (i) the value spirits business, (ii) the Canadian distilling facility and (iii) the Pacific Northwest Business. In addition, unusual items, which consist of certain costs that are excluded by management in their evaluation of the results of each operating segment, were lower by $2.9 million in First Quarter 2010 versus First Quarter 2009 due largely to decreased flow through of inventory step-up of $3.6 million associated primarily with the BWE Acquisition. Gross profit as a percent of net sales decreased to 33.9% for First Quarter 2010 from 35.3% for First Quarter 2009 primarily due to the factors discussed above.
Selling, general and administrative expenses decreased to $166.6 million for First Quarter 2010 from $233.5 million for First Quarter 2009, a decrease of $66.9 million, or (29%). This decrease is due to a decrease of $55.5 million in the Constellation Wines segment and a decrease in unusual costs which consist of certain items that are excluded by management in their evaluation of the results of each operating segment of $11.7 million, partially offset by a slight increase in the Corporate Operations and Other segment. The decrease in the Constellation Wines segments selling, general and administrative expenses is primarily due to decreases in general and administrative expenses of $27.2 million, advertising expenses of $15.4 million and selling expenses of $13.0 million. These decreases are largely attributable to (i) a favorable year-over-year foreign currency translation impact; (ii) the divestitures of the value spirits business and the Pacific Northwest Business; (iii) gains on foreign currency transactions; (iv) cost savings in connection with the Companys various restructuring activities; and (v) a planned reduction in marketing and advertising spend. The decrease in unusual costs was primarily due to the recognition in First Quarter 2009 of the $23.4 million loss in connection with the June 2008 sale of the Pacific Northwest Business, partially offset by $13.2 million of other costs in connection with the Companys plan to simplify its business, increase efficiencies and reduce its cost structure on a global basis (the Global Initiative). Selling, general and administrative expenses as a percent of net sales decreased to 21.0% for First Quarter 2010 as compared to 25.1% for First Quarter 2009 primarily due to the factors discussed above.
Net sales for Crown Imports decreased to $635.8 million for First Quarter 2010 from $672.5 million for First Quarter 2009, a decrease of $36.7 million, or (5%). This decrease resulted primarily from lower volumes within the Crown Imports Mexican beer portfolio. Crown Imports gross profit decreased $8.6 million, or (4%), primarily due to these lower sales volumes. Selling, general and administrative expenses increased $3.9 million, primarily due to an increase in advertising spend. The combination of these factors were the main contributors to the decrease in operating income of $12.6 million, or (9%).
Read the The complete ReportSTZ is in the portfolios of John Rogers of ARIEL CAPITAL MANAGEMENT LLC, David Dreman of Dreman Value Management.
