SOURCE: Constellation Brands, Inc.

October 06, 2010 07:46 ET

Constellation Brands Reports Q2 Fiscal 2011 Results

VICTOR, NY--(Marketwire - October 6, 2010) - Constellation Brands, Inc. (NYSE: STZ) (ASX: CBR), the world's leading wine company, reported today its second quarter fiscal 2011 results.

-- Achieves comparable basis diluted EPS of $0.52 and reported basis
   diluted EPS of $0.43
-- Solid underlying organic performance driven by execution of U.S.
   go-to-market strategy
-- Strong free cash flow results drive upward revision to annual
   guidance; new target range set at record $375-$425 million
-- Utilizes free cash flow to further reduce debt
-- Reaffirms fiscal 2011 comparable basis diluted EPS guidance; updates
   reported basis diluted EPS guidance


Second Quarter 2011 Financial Highlights*
(in millions, except per share data)


                            Comparable   % Change    Reported    % Change
                            ----------  ----------  ----------  ----------
Consolidated net sales      $      863          -2% $      863          -2%

Operating income            $      151         -11% $      133          -5%

Operating margin                  17.4%   -190 bps        15.4%    -60 bps

Equity in earnings of
 equity method investees**  $       67          -9% $       66          -9%

Earnings before interest
 and taxes (EBIT)           $      217         -10%         NA          NA

Net income                  $      109          -9% $       91          -8%

Diluted earnings per share  $     0.52          -4% $     0.43          -4%

"Our second quarter results demonstrate that we are gaining momentum from the successful execution of our U.S. distributor strategy," said Rob Sands, president and chief executive officer, Constellation Brands. "During the quarter, we experienced improving U.S. wine depletion trends and retail execution despite an uncertain consumer and competitive environment. Our brand investments and promotional activities are helping to fuel growth in the marketplace for our core brands including Robert Mondavi, Kim Crawford, Clos du Bois and Blackstone, just to name a few."


Second Quarter 2011 Net Sales Highlights*
(in millions)

                              Reported                    Organic
                      -------------------------  -------------------------
                                        Constant                   Constant
                        Net             Currency   Net             Currency
                       Sales  % Change   Change   Sales  % Change   Change
                      -------- -------  -------  -------- -------  -------
Consolidated          $    863      -2%      -2% $    863       3%       2%
Wine                  $    808      -1%      -1% $    808       4%       4%
North America Wine    $    601       5%       4% $    601       5%       4%
Australia and Europe
 Wine                 $    207     -14%     -12% $    207       1%       4%
Spirits               $     55     -15%     -15% $     55     -15%     -15%

*Definitions of reported, comparable, organic and constant currency, as well as reconciliations of non-GAAP financial measures, are contained elsewhere in this news release.

** Hereafter referred to as "equity earnings."

NA=Not applicable

Net Sales Commentary

Reported consolidated net sales decreased two percent due primarily to the divestiture of the U.K. cider business. Organic net sales on a constant currency basis increased two percent.

Consolidated wine organic net sales on a constant currency basis increased four percent. North America wine net sales on a constant currency basis increased four percent primarily reflecting favorable product mix and an increase in volume, partially offset by higher promotion costs. The increase in shipments resulted in higher distributor inventory levels. "However, Constellation's underlying retail takeaway as measured by SymphonyIRI was strong during the quarter with value growth of seven percent versus five percent for the industry in the 12-week period ending Sept. 5, 2010," said Sands.

Australia and Europe wine net sales on an organic constant currency basis increased four percent versus the prior year second quarter.

Total spirits organic net sales decreased 15 percent for the quarter. "Our second quarter spirits net sales results do not reflect the robust underlying market performance for SVEDKA Vodka with depletions growing double digits through the first half of the year," said Sands. "Last year's second quarter SVEDKA net sales increased approximately 90 percent driven by U.S. distributor transition activities, which created a difficult comparison."

Operating Income and Net Income Commentary

The consolidated comparable basis operating income decline was primarily driven by an increase in corporate expense and a decrease in the Australia and Europe wine segment due in part to the divestiture of the cider business.

Constellation's equity earnings from its 50 percent interest in the Crown Imports joint venture totaled $65 million, a decrease of 10 percent from the prior year second quarter. For second quarter 2011, Crown generated net sales of $679 million, a decrease of 2 percent, and operating income of $131 million, a decrease of 9 percent. Net sales for Crown were impacted primarily by lower volume, higher promotions and unfavorable mix. Operating income for Crown decreased primarily due to promotional investments, a contractual product cost increase and lower volume.

"Throughout the summer selling season, Crown's sales volumes lagged depletions due to temporary wholesaler inventory reductions resulting from disruption related to a brewery strike in Mexico and Hurricane Alex," said Sands. "However, consumer demand for Crown's products remained solid for the second consecutive quarter driven by the 'Win the Beach' and World Cup Soccer promotional initiatives. Crown is targeting to build on this consumer momentum with new advertising programs during the NFL season."

For second quarter 2011, pre-tax restructuring charges and unusual items totaled $17 million compared to $29 million for the prior year second quarter.

Interest expense totaled $50 million, a decrease of 26 percent. The decrease was primarily due to lower average interest rates and borrowings during the quarter.

The comparable basis effective tax rate for the quarter was 35 percent compared to 31 percent for the prior year second quarter. The company continues to anticipate a full year comparable basis effective tax rate of 35 percent.

Common Stock Repurchase

On April 16, 2010, the company entered into a $300 million accelerated stock buyback (ASB) transaction. During the first quarter, the company received 13.8 million shares of Class A Common Stock, representing the minimum number of shares that will be received under the ASB transaction. The company did not receive any additional shares in connection with this transaction during the second quarter. The final number of shares to be received under the ASB transaction will be determined at the close of the transaction, which is scheduled to end no later than Nov. 24, 2010.

"The company has increased its fiscal 2011 free cash flow target to a record level in the range of $375-$425 million," said Bob Ryder, chief financial officer, Constellation Brands. "Our strong free cash flow generation for the first half of fiscal 2011 reflects our increasing focus on improving the conversion of EBITDA to free cash flow. Our plan for the remainder of the year is to utilize our free cash flow to pay down debt."

Summary

"While some uncertainty remains in global markets, we are focused on building a stronger business for the future," said Sands. "We have demonstrated this during the second quarter by generating strong free cash flow, paying down debt and driving profitable organic growth."

Outlook

The table below sets forth management's current diluted EPS expectations for fiscal year 2011 compared to fiscal year 2010 actual results, both on a reported basis and a comparable basis.


                  Constellation Brands Fiscal Year 2011
                    Diluted Earnings Per Share Outlook


                            Reported Basis           Comparable Basis
                      -------------------------- --------------------------
                      FY11 Estimate  FY10 Actual FY11 Estimate  FY10 Actual
                      -------------  ----------- -------------  -----------
Fiscal Year Ending
 Feb. 28              $1.36 - $1.51     $0.45    $1.63 - $1.78     $1.69

Full-year fiscal 2011 guidance includes the following current assumptions:

-- Interest expense: approximately $200 - $210 million
-- Tax rate: approximately 40 percent on a reported basis, as compared
   to 35 percent on a comparable basis, primarily due to a provision of
   five percentage points associated with the recognition in first quarter
   2011 of a valuation allowance against deferred tax assets in the U.K.
-- Weighted average diluted shares outstanding: approximately 213 million
-- Free cash flow: $375-$425 million

Conference Call

A conference call to discuss second quarter fiscal 2011 results and outlook will be hosted by President and Chief Executive Officer Rob Sands and Executive Vice President and Chief Financial Officer Bob Ryder on Wed. Oct. 6, 2010 at 10:30 a.m. (eastern). The conference call can be accessed by dialing +973-935-8505 beginning 10 minutes prior to the start of the call. A live listen-only webcast of the conference call, together with a copy of this news release (including the attachments) and other financial information that may be discussed in the call will be available on the Internet at Constellation's Web site: www.cbrands.com under "Investors," prior to the call.

Explanations

Reported basis ("reported") operating income, net income and diluted EPS are as reported under generally accepted accounting principles. Operating income, net income and diluted EPS on a comparable basis ("comparable"), exclude restructuring charges and unusual items. The company's measure of segment profitability excludes restructuring charges and unusual items, which is consistent with the measure used by management to evaluate results.

The company discusses additional non-GAAP measures in this news release, including constant currency net sales, organic net sales, comparable basis EBIT and free cash flow.

Tables reconciling non-GAAP measures, together with definitions of these measures and the reasons management uses these measures, are included in this news release.

About Constellation Brands

Constellation Brands is the world's leading wine company that achieves success through an unmatched knowledge of wine consumers, storied brands that suit varied lives and tastes, and talented employees worldwide. With a broad portfolio of widely admired premium products across the wine, beer and spirits categories, Constellation's brand portfolio includes Robert Mondavi, Hardys, Clos du Bois, Blackstone, Arbor Mist, Estancia, Ravenswood, Jackson-Triggs, Kim Crawford, Corona Extra, Black Velvet Canadian Whisky and SVEDKA Vodka.

Constellation Brands (NYSE: STZ) and (NYSE: STZ.B) (ASX: CBR) is an S&P 500 Index and Fortune 1000® company with more than 100 brands in our portfolio, sales in about 150 countries and operations at more than 40 facilities. The company believes that industry leadership involves a commitment to our brands, to the trade, to the land, to investors and to different people around the world who turn to our products when celebrating big moments or enjoying quiet ones. We express this commitment through our vision: to elevate life with every glass raised. To learn more about Constellation, visit the company's web site at www.cbrands.com.

Forward-Looking Statements

The statements made under the heading Outlook, and all statements other than statements of historical facts set forth in this news release regarding Constellation's business strategy, future operations, financial position, estimated revenues, projected costs, prospects, plans and objectives of management, as well as information concerning expected actions of third parties, are forward-looking statements (collectively, the "Projections") that involve risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by the Projections.

During the current quarter, Constellation may reiterate the Projections. Prior to the start of the company's quiet period, which will begin at the close of business on Nov. 30, 2010, the public can continue to rely on the Projections as still being Constellation's current expectations on the matters covered, unless Constellation publishes a notice stating otherwise. During Constellation's "quiet period," the Projections should not be considered to constitute the company's expectations and should be considered historical, speaking as of prior to the quiet period only and not subject to update by the company.

The Projections 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, restructuring or other strategic business realignments, financing or share repurchase that may be completed after the date of this release. The Projections 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 Projections of the company contained in this news release are subject to a number of risks and uncertainties, including:

-- completion of various portfolio actions; implementation of consolidation
   activities and actual U.S. distributor transition experience;
-- fluctuations in the volume weighted average price of the Company's Class
   A Common Stock during the remainder of the calculation period under the
   ASB transaction;
-- actual date of the termination of the calculation period under the ASB
   transaction;
-- final number of shares of Class A Common Stock received as a result of
   the ASB transaction;
-- achievement of all expected cost savings from the company's various
   restructuring plans and realization of expected asset sale proceeds from
   the sale of inventory and other assets;
-- accuracy of the bases for forecasts relating to joint ventures and
   associated costs, losses and capital investment requirements;
-- restructuring charges, acquisition-related integration costs and other
   one-time costs associated with integration and restructuring plans may
   vary materially from management's current estimates due to variations in
   one or more of anticipated headcount reductions, contract terminations,
   costs or timing of plan implementation;
-- raw material supply, production or shipment difficulties could adversely
   affect the company's ability to supply its customers;
-- increased competitive activities in the form of pricing, advertising and
   promotions could adversely impact consumer demand for the company's
   products and/or result in lower than expected sales or higher than
   expected expenses;
-- general economic, geo-political and regulatory conditions, prolonged
   downturn in the economic markets in the U.S. and in the company's major
   markets outside of the U.S., continuing instability in world financial
   markets, or unanticipated environmental liabilities and costs;
-- changes to accounting rules and tax laws, and other factors which could
   impact the company's reported financial position or effective tax rate;
-- changes in interest rates and the inherent unpredictability of currency
   fluctuations, commodity prices and raw material costs; and
-- other factors and uncertainties disclosed in the company's filings with
   the Securities and Exchange Commission, including its Annual Report on
   Form 10-K for the fiscal year ended Feb. 28, 2010,  which could cause
   actual future performance to differ from current expectations.

Constellation Brands, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)


                                                   August 31,  February 28,
                                                      2010         2010
                                                  ------------ ------------
 Assets
   Current Assets:
     Cash and cash investments                    $       13.9 $       43.5
     Accounts receivable, net                            720.7        514.7
     Inventories                                       1,722.4      1,879.9
     Prepaid expenses and other                          103.0        151.0
                                                  ------------ ------------
       Total current assets                            2,560.0      2,589.1
   Property, plant and equipment, net                  1,529.0      1,567.2
   Goodwill                                            2,566.1      2,570.6
   Intangible assets, net                                920.1        925.0
   Other assets, net                                     301.9        442.4
                                                  ------------ ------------
     Total assets                                 $    7,877.1 $    8,094.3
                                                  ============ ============
 Liabilities and Stockholders' Equity
   Current Liabilities:
     Notes payable to banks                       $      347.0 $      371.2
     Current maturities of long-term debt                308.7        187.2
     Accounts payable                                    253.5        268.8
     Accrued excise taxes                                 57.7         43.8
     Other accrued expenses and liabilities              482.8        501.6
                                                  ------------ ------------
       Total current liabilities                       1,449.7      1,372.6
   Long-term debt, less current maturities             3,127.7      3,277.1
   Deferred income taxes                                 544.0        536.2
   Other liabilities                                     325.8        332.1
                                                  ------------ ------------
     Total liabilities                                 5,447.2      5,518.0
     Total stockholders' equity                        2,429.9      2,576.3
                                                  ------------ ------------
     Total liabilities and stockholders' equity   $    7,877.1 $    8,094.3
                                                  ============ ============





Constellation Brands, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)


                              Three Months Ended       Six Months Ended
                            ----------------------  ----------------------
                            August 31,  August 31,  August 31,  August 31,
                               2010        2009        2010        2009
                            ----------  ----------  ----------  ----------
 Sales                      $  1,056.9  $  1,090.7  $  2,033.1  $  2,094.5

 Excise taxes                   (194.1)     (213.9)     (382.8)     (426.1)
                            ----------  ----------  ----------  ----------
   Net sales                     862.8       876.8     1,650.3     1,668.4

 Cost of product sold           (548.6)     (567.2)   (1,066.1)   (1,090.1)
                            ----------  ----------  ----------  ----------
   Gross profit                  314.2       309.6       584.2       578.3

 Selling, general and
  administrative expenses       (167.3)     (166.3)     (336.1)     (331.4)

 Restructuring charges           (13.7)       (3.2)      (18.6)      (22.1)
                            ----------  ----------  ----------  ----------
   Operating income              133.2       140.1       229.5       224.8

 Equity in earnings of
  equity method investees         66.4        73.2       120.9       136.0

 Interest expense, net           (50.3)      (68.1)      (98.8)     (136.5)
                            ----------  ----------  ----------  ----------
   Income before income
    taxes                        149.3       145.2       251.6       224.3

 Provision for income taxes      (58.0)      (45.5)     (111.2)     (118.1)
                            ----------  ----------  ----------  ----------
   Net income               $     91.3  $     99.7  $    140.4  $    106.2
                            ==========  ==========  ==========  ==========


 Earnings Per Common Share:
   Basic - Class A Common
    Stock                   $     0.44  $     0.46  $     0.67  $     0.49
   Basic - Class B
    Convertible Common
    Stock                   $     0.40  $     0.42  $     0.61  $     0.44

   Diluted - Class A Common
    Stock                   $     0.43  $     0.45  $     0.65  $     0.48
   Diluted - Class B
    Convertible Common
    Stock                   $     0.40  $     0.41  $     0.60  $     0.44

 Weighted Average Common
  Shares Outstanding:
   Basic - Class A Common
    Stock                      185.455     195.910     189.084     195.571
   Basic - Class B
    Convertible Common
    Stock                       23.712      23.736      23.719      23.740

   Diluted - Class A Common
    Stock                      211.149     220.714     215.136     220.274
   Diluted - Class B
    Convertible Common
    Stock                       23.712      23.736      23.719      23.740





Constellation Brands, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)


                                                       Six Months Ended
                                                    ----------------------
                                                    August 31,  August 31,
                                                       2010        2009
                                                    ----------  ----------
Cash Flows From Operating Activities
  Net income                                        $    140.4  $    106.2
  Adjustments to reconcile net income to net cash
   provided by operating activities:
    Depreciation of property, plant and equipment         61.0        77.1
    Deferred tax provision (benefit)                      50.6       (28.7)
    Equity in earnings of equity method investees,
     net of distributed earnings                          36.5       (12.3)
    Stock-based compensation expense                      25.7        25.4
    Amortization of intangible and other assets            7.3         6.0
    Loss (gain) on disposal or impairment of
     long-lived assets, net                                4.8        (1.4)
    Loss on business sold                                    -         0.8
    Change in operating assets and liabilities, net
     of effects from purchases and sales of
     businesses:
      Accounts receivable, net                          (204.5)     (204.5)
      Inventories                                        157.2        91.3
      Prepaid expenses and other current assets            5.3         1.0
      Accounts payable                                   (10.7)      (11.5)
      Accrued excise taxes                                13.2        17.6
      Other accrued expenses and liabilities              39.7         8.8
    Other, net                                           (20.8)       21.6
                                                    ----------  ----------
        Total adjustments                                165.3        (8.8)
                                                    ----------  ----------
        Net cash provided by operating activities        305.7        97.4
                                                    ----------  ----------

 Cash Flows From Investing Activities
  Purchases of property, plant and equipment             (43.2)      (65.1)
  Investment in equity method investee                   (29.7)       (0.5)
  (Repayments related to) proceeds from sale of
   business                                               (1.6)      276.4
  Proceeds from note receivable                           60.0           -
  Proceeds from sales of assets                            3.1        14.5
  Other investing activities                               0.5         1.2
                                                    ----------  ----------
        Net cash (used in) provided by investing
         activities                                      (10.9)      226.5
                                                    ----------  ----------

 Cash Flows From Financing Activities
  Purchases of treasury stock                           (300.0)          -
  Principal payments of long-term debt                   (24.5)     (271.4)
  Net repayment of notes payable                         (24.1)      (60.2)
  Payment of financing costs of long-term debt            (0.2)          -
  Exercise of employee stock options                      18.0         9.0
  Excess tax benefits from stock-based payment
   awards                                                  4.7         2.2
  Proceeds from employee stock purchases                   2.1         2.3
                                                    ----------  ----------
        Net cash used in financing activities           (324.0)     (318.1)
                                                    ----------  ----------

 Effect of exchange rate changes on cash and cash
  investments                                             (0.4)        0.8
                                                    ----------  ----------

 Net (decrease) increase in cash and cash
  investments                                            (29.6)        6.6
 Cash and cash investments, beginning of period           43.5        13.1
                                                    ----------  ----------
 Cash and cash investments, end of period           $     13.9  $     19.7
                                                    ==========  ==========





Constellation Brands, Inc. and Subsidiaries
SUMMARIZED SEGMENT AND EQUITY EARNINGS INFORMATION
(in millions)


                                         Three Months Ended
                                       ----------------------
                                       August 31,  August 31,   Percent
                                          2010        2009       Change
                                       ----------  ----------
Constellation Wines North America (1)
  Wine net sales                       $    600.6  $    570.2           5%
  Spirits net sales                          55.0        64.7         (15%)
                                       ----------  ----------
    Segment net sales                  $    655.6  $    634.9           3%
    Segment operating income           $    181.2  $    183.8          (1%)
    % Net sales                              27.6%       28.9%
    Equity in losses of equity method
     investees                         $     (0.3) $     (0.1)         NM

Constellation Wines Australia and
 Europe (1)
  Wine net sales                       $    207.2  $    241.9         (14%)
                                       ----------  ----------
    Segment net sales                  $    207.2  $    241.9         (14%)
    Segment operating (loss) income    $     (3.2) $      4.1          NM
    % Net sales                              (1.5%)       1.7%
    Equity in earnings of equity
     method investees                  $      1.5  $      1.1          36%

Corporate Operations and Other segment
 operating loss                        $    (27.5) $    (18.9)         46%

Equity in earnings of Crown Imports
 (2)                                   $     65.3  $     72.2         (10%)

Reportable Segment Operating Income
 (A)                                   $    150.5  $    169.0
    Restructuring Charges and Unusual
     Items                                  (17.3)      (28.9)
                                       ----------  ----------
Consolidated Operating Income (GAAP)   $    133.2  $    140.1
                                       ==========  ==========

Reportable Segment Equity in Earnings
 of Equity Method Investees (B)        $     66.5  $     73.2
    Restructuring Charges and Unusual
     Items                                   (0.1)          -
                                       ----------  ----------
Consolidated Equity in Earnings of
 Equity Method Investees (GAAP)        $     66.4  $     73.2
                                       ==========  ==========

Consolidated Earnings Before Interest
 and Taxes (Non-GAAP) (A+B)            $    217.0  $    242.2
                                       ==========  ==========



                                          Six Months Ended
                                       ----------------------
                                       August 31,  August 31,   Percent
                                          2010        2009       Change
                                       ----------  ----------
Constellation Wines North America (1)
  Wine net sales                       $  1,132.3  $  1,094.4           3%
  Spirits net sales                         113.2       124.8          (9%)
                                       ----------  ----------
    Segment net sales                  $  1,245.5  $  1,219.2           2%
    Segment operating income           $    313.7  $    331.3          (5%)
    % Net sales                              25.2%       27.2%
    Equity in losses of equity method
     investees                         $     (0.2) $     (1.3)         NM

Constellation Wines Australia and
 Europe (1)
  Wine net sales                       $    404.8  $    449.2         (10%)
                                       ----------  ----------
    Segment net sales                  $    404.8  $    449.2         (10%)
    Segment operating (loss) income    $     (6.0) $      4.2          NM
    % Net sales                              (1.5%)       0.9%
    Equity in earnings of equity
     method investees                  $      2.1  $      2.2          (5%)

Corporate Operations and Other segment
 operating loss                        $    (54.0) $    (41.6)         30%

Equity in earnings of Crown Imports
 (2)                                   $    119.6  $    135.1         (11%)

Reportable Segment Operating Income
 (A)                                   $    253.7  $    293.9
    Restructuring Charges and Unusual
     Items                                  (24.2)      (69.1)
                                       ----------  ----------
Consolidated Operating Income (GAAP)   $    229.5  $    224.8
                                       ==========  ==========

Reportable Segment Equity in Earnings
 of Equity Method Investees (B)        $    121.5  $    136.0
    Restructuring Charges and Unusual
     Items                                   (0.6)          -
                                       ----------  ----------
Consolidated Equity in Earnings of
 Equity Method Investees (GAAP)        $    120.9  $    136.0
                                       ==========  ==========

Consolidated Earnings Before Interest
 and Taxes (Non-GAAP) (A+B)            $    375.2  $    429.9
                                       ==========  ==========

NM Not Meaningful

(1) In connection with the Company's change in its internal management
    structure for its U.K. and Australia businesses and the revised
    strategy within these markets, the Company changed its internal
    management financial reporting on May 1, 2010, to consist of five
    operating segments:  Constellation Wines North America, Constellation
    Wines Australia and Europe, Constellation Wines New Zealand, Crown
    Imports and Corporate Operations and Other. For reporting purposes, the
    Constellation Wines New Zealand operating segment is aggregated with
    the Constellation Wines North America operating segment due to, among
    other factors, the vast majority of the wine produced by the
    Constellation Wines New Zealand operating segment is sold in the U.S.
    and Canada.  Prior period results have been restated to conform with
    the new segment presentation.

(2) Crown Imports Joint Venture Summarized Financial Information



                                         Three Months Ended
                                       ----------------------
                                       August 31,  August 31,   Percent
                                          2010        2009       Change
                                       ----------  ----------

    Net sales                          $    679.4  $    696.4          (2%)
    Operating income                   $    131.2  $    144.7          (9%)
    % Net sales                              19.3%       20.8%


                                          Six Months Ended
                                       ----------------------
                                       August 31,  August 31,   Percent
                                          2010        2009       Change
                                       ----------  ----------

    Net sales                          $  1,300.9  $  1,335.5          (3%)
    Operating income                   $    240.1  $    270.7         (11%)
    % Net sales                              18.5%       20.3%





Constellation Brands, Inc. and Subsidiaries
RECONCILIATION OF REPORTED, ORGANIC AND CONSTANT CURRENCY NET SALES
(in millions)


As the company sold certain spirits value brands and contract production
services on March 24, 2009, and sold its U.K. cider business on January 15,
2010, organic net sales for the respective periods are defined by the
company as reported net sales less net sales of certain spirits value
brands and contract production services and/or net sales of cider, as
appropriate.  Organic net sales and percentage increase (decrease) in
constant currency net sales (which excludes the impact of year over year
currency exchange rate fluctuations) are provided because management uses
this information in monitoring and evaluating the underlying business
trends of the continuing operations of the company.  In addition, the
company believes this information provides investors better insight on
underlying business trends and results in order to evaluate year over year
financial performance.


                         Three Months Ended                      Constant
                         ------------------                      Currency
                          August    August                        Percent
                           31,       31,     Percent   Currency   Change
                           2010      2009     Change    Impact     (1)
                         --------- --------
Consolidated Net Sales
     Wine                $   807.8 $  812.1        (1%)       -        (1%)
     Spirits                  55.0     64.7       (15%)       -       (15%)
                         --------- --------
       Consolidated
        reported net
        sales                862.8    876.8        (2%)       -        (2%)
     Less:  Spirits net
      sales (2)                  -        -
     Less:  Cider net
      sales (3)                  -    (37.1)
                         --------- --------
       Consolidated
        organic net
        sales            $   862.8 $  839.7         3%        -         2%
                         ========= ========

Consolidated Wine Net
 Sales
     Wine                $   807.8 $  812.1        (1%)       -        (1%)
     Less:  Cider net
      sales (3)                  -    (37.1)
                         --------- --------
       Consolidated wine
        organic net
        sales            $   807.8 $  775.0         4%        -         4%
                         ========= ========

Constellation Wines
 North America Net Sales
     Wine reported net
      sales              $   600.6 $  570.2         5%        1%        4%
                         ========= ========

     Spirits reported
      net sales          $    55.0 $   64.7       (15%)       -       (15%)
     Less:  Spirits net
      sales (2)                  -        -
                         --------- --------
       Spirits organic
        net sales        $    55.0 $   64.7       (15%)       -       (15%)
                         ========= ========

Constellation Wines
 Australia and Europe
 Net Sales
     Wine reported net
      sales              $   207.2 $  241.9       (14%)      (2%)     (12%)
     Less:  Cider net
      sales (3)                  -    (37.1)
                         --------- --------
       Wine organic net
        sales            $   207.2 $  204.8         1%       (2%)       4%
                         ========= ========



                          Six Months Ended                       Constant
                         ------------------                      Currency
                          August    August                        Percent
                           31,       31,     Percent   Currency   Change
                           2010      2009     Change    Impact     (1)
                         --------- --------
Consolidated Net Sales
     Wine                $ 1,537.1 $1,543.6         -         2%       (3%)
     Spirits                 113.2    124.8        (9%)       -        (9%)
                         --------- --------
       Consolidated
        reported net
        sales              1,650.3  1,668.4        (1%)       2%       (3%)
     Less:  Spirits net
      sales (2)                  -    (14.8)
     Less:  Cider net
      sales (3)                  -    (64.8)
                         --------- --------
       Consolidated
        organic net
        sales            $ 1,650.3 $1,588.8         4%        2%        1%
                         ========= ========

Consolidated Wine Net
 Sales
     Wine                $ 1,537.1 $1,543.6         -         2%       (3%)
     Less:  Cider net
      sales (3)                  -    (64.8)
                         --------- --------
       Consolidated wine
        organic net
        sales            $ 1,537.1 $1,478.8         4%        3%        1%
                         ========= ========

Constellation Wines
 North America Net Sales
     Wine reported net
      sales              $ 1,132.3 $1,094.4         3%        2%        1%
                         ========= ========

     Spirits reported
      net sales          $   113.2 $  124.8        (9%)       -        (9%)
     Less:  Spirits net
      sales (2)                  -    (14.8)
                         --------- --------
       Spirits organic
        net sales        $   113.2 $  110.0         3%        -         3%
                         ========= ========

Constellation Wines
 Australia and Europe
 Net Sales
     Wine reported net
      sales              $   404.8 $  449.2       (10%)       3%      (12%)
     Less:  Cider net
      sales (3)                  -    (64.8)
                         --------- --------
       Wine organic net
        sales            $   404.8 $  384.4         5%        3%        2%
                         ========= ========

(1) May not sum due to rounding as each item is computed independently.
(2) For the period March 1, 2009, through March 24, 2009, included in the
    six months ended August 31, 2009.
(3) For the period June 1, 2009, through August 31, 2009, included in the
    three months ended August 31, 2009, and the period March 1, 2009,
    through August 31, 2009, included in the six months ended August 31,
    2009.





Constellation Brands, Inc. and Subsidiaries
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES (1)
(in millions, except per share data)


                             Three Months Ended August 31, 2010
                   ------------------------------------------------------
                                          Strategic
                   Reported               Business               Comparable
                     Basis    Inventory  Realignment               Basis
                    (GAAP)     Step-up       (2)      Other (3)  (Non-GAAP)
                   ---------  ---------  -----------  ---------  ---------
Net Sales          $   862.8                                     $   862.8
  Cost of product
   sold               (548.6)       0.6          0.1                (547.9)
                   ---------  ---------  -----------  ---------  ---------
Gross Profit           314.2        0.6          0.1          -      314.9
  Selling, general
   and
   administrative
   expenses ("SG&A")  (167.3)                    2.9                (164.4)
  Restructuring
   charges             (13.7)                   13.7                     -
                   ---------  ---------  -----------  ---------  ---------
Operating Income       133.2        0.6         16.7          -      150.5
  Equity in
   earnings of
   equity method
   investees            66.4                                0.1       66.5
                                                                 ---------
EBIT                                                                 217.0
  Interest
   expense, net        (50.3)                                        (50.3)
                   ---------  ---------  -----------  ---------  ---------
Income Before
 Income Taxes          149.3        0.6         16.7        0.1      166.7
  (Provision for)
   benefit from
   income taxes        (58.0)      (0.3)        (1.3)       2.0      (57.6)
                   ---------  ---------  -----------  ---------  ---------
Net Income         $    91.3  $     0.3  $      15.4  $     2.1  $   109.1
                   =========  =========  ===========  =========  =========
Diluted Earnings
 Per Common Share  $    0.43  $       -  $      0.07  $    0.01  $    0.52
                   =========  =========  ===========  =========  =========
Weighted Average
 Common Shares
 Outstanding
 - Diluted           211.149    211.149      211.149    211.149    211.149
                   =========  =========  ===========  =========  =========
Gross Margin            36.4%                                         36.5%
SG&A as a percent
 of net sales           19.4%                                         19.1%
Operating Margin        15.4%                                         17.4%
Effective Tax Rate      38.8%                                         34.6%



                             Three Months Ended August 31, 2009
                   ------------------------------------------------------
                                          Strategic
                   Reported               Business               Comparable
                     Basis    Inventory  Realignment               Basis
                    (GAAP)     Step-up       (2)        Other    (Non-GAAP)
                   ---------  ---------  -----------  ---------  ---------
Net Sales          $   876.8                                     $   876.8
  Cost of product
   sold               (567.2)       2.5         13.0                (551.7)
                   ---------  ---------  -----------  ---------  ---------
Gross Profit           309.6        2.5         13.0          -      325.1
  Selling, general
   and
   administrative
   expenses           (166.3)                   10.2                (156.1)
  Restructuring
   charges              (3.2)                    3.2                     -
                   ---------  ---------  -----------  ---------  ---------
Operating Income       140.1        2.5         26.4          -      169.0
  Equity in
   earnings of
   equity method
   investees            73.2                                          73.2
                                                                 ---------
EBIT                                                                 242.2
  Interest
   expense, net        (68.1)                                        (68.1)
                   ---------  ---------  -----------  ---------  ---------
Income Before
 Income Taxes          145.2        2.5         26.4          -      174.1
  (Provision for)
   benefit from
   income taxes        (45.5)      (0.9)        (7.7)         -      (54.1)
                   ---------  ---------  -----------  ---------  ---------
Net Income         $    99.7  $     1.6  $      18.7  $       -  $   120.0
                   =========  =========  ===========  =========  =========
Diluted Earnings
 Per Common Share  $    0.45  $    0.01  $      0.08  $       -  $    0.54
                   =========  =========  ===========  =========  =========
Weighted Average
 Common Shares
 Outstanding
 - Diluted           220.714    220.714      220.714    220.714    220.714
                   =========  =========  ===========  =========  =========
Gross Margin            35.3%                                         37.1%
SG&A as a percent
 of net sales           19.0%                                         17.8%
Operating Margin        16.0%                                         19.3%
Effective Tax Rate      31.3%                                         31.1%



                   Percent     Percent
                   Change -    Change -
                   Reported   Comparable
                     Basis      Basis
                    (GAAP)    (Non-GAAP)
                   ---------  ---------
Net Sales                 (2%)       (2%)
  Cost of product
   sold                   (3%)       (1%)
Gross Profit               1%        (3%)
  Selling, general
   and
   administrative
   expenses ("SG&A")       1%         5%
  Restructuring
   charges                NM        N/A
Operating Income          (5%)      (11%)
  Equity in
   earnings of
   equity method
   investees              (9%)       (9%)
EBIT                     N/A        (10%)
  Interest
   expense, net          (26%)      (26%)
Income Before
 Income Taxes              3%        (4%)
  (Provision for)
   benefit from
   income taxes           27%         6%
Net Income                (8%)       (9%)
Diluted Earnings
 Per Common Share         (4%)       (4%)





Constellation Brands, Inc. and Subsidiaries
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES (1)
(in millions, except per share data)


                              Six Months Ended August 31, 2010
                   ------------------------------------------------------
                                          Strategic
                   Reported               Business               Comparable
                     Basis    Inventory  Realignment               Basis
                    (GAAP)     Step-up       (4)      Other (5)  (Non-GAAP)
                   ---------  ---------  -----------  ---------  ---------
Net Sales          $ 1,650.3                                     $ 1,650.3
  Cost of product
   sold             (1,066.1)       1.6          1.1              (1,063.4)
                   ---------  ---------  -----------  ---------  ---------
Gross Profit           584.2        1.6          1.1          -      586.9
  Selling, general
   and
   administrative
   expenses           (336.1)                    2.9                (333.2)
  Restructuring
   charges             (18.6)                   18.6                     -
                   ---------  ---------  -----------  ---------  ---------
Operating Income       229.5        1.6         22.6          -      253.7
  Equity in
   earnings of
   equity method
   investees           120.9                                0.6      121.5
                                                                 ---------
EBIT                                                                 375.2
  Interest
   expense, net        (98.8)                                        (98.8)
                   ---------  ---------  -----------  ---------  ---------
Income Before
 Income Taxes          251.6        1.6         22.6        0.6      276.4
  (Provision for)
   benefit from
   income taxes       (111.2)      (0.7)        (2.6)      30.1      (84.4)
                   ---------  ---------  -----------  ---------  ---------
Net Income         $   140.4  $     0.9  $      20.0  $    30.7  $   192.0
                   =========  =========  ===========  =========  =========
Diluted Earnings
 Per Common Share  $    0.65  $       -  $      0.09  $    0.14  $    0.89
                   =========  =========  ===========  =========  =========
Weighted Average
 Common Shares
 Outstanding
 - Diluted           215.136    215.136      215.136    215.136    215.136
                   =========  =========  ===========  =========  =========
Gross Margin            35.4%                                         35.6%
SG&A as a percent
 of net sales           20.4%                                         20.2%
Operating Margin        13.9%                                         15.4%
Effective Tax Rate      44.2%                                         30.5%



                              Six Months Ended August 31, 2009
                   ------------------------------------------------------
                                          Strategic
                   Reported               Business               Comparable
                     Basis    Inventory  Realignment               Basis
                    (GAAP)     Step-up       (4)        Other    (Non-GAAP)
                   ---------  ---------  -----------  ---------  ---------
Net Sales          $ 1,668.4                                     $ 1,668.4
  Cost of product
   sold             (1,090.1)       5.2         17.8              (1,067.1)
                   ---------  ---------  -----------  ---------  ---------
Gross Profit           578.3        5.2         17.8          -      601.3
  Selling, general
   and
   administrative
   expenses           (331.4)                   24.0                (307.4)
  Restructuring
   charges             (22.1)                   22.1                     -
                   ---------  ---------  -----------  ---------  ---------
Operating Income       224.8        5.2         63.9          -      293.9
  Equity in
   earnings of
   equity method
   investees           136.0                                         136.0
                                                                 ---------
EBIT                                                                 429.9
  Interest
   expense, net       (136.5)                                       (136.5)
                   ---------  ---------  -----------  ---------  ---------
Income Before
 Income Taxes          224.3        5.2         63.9          -      293.4
  (Provision for)
   benefit from
   income taxes       (118.1)      (2.0)        19.4          -     (100.7)
                   ---------  ---------  -----------  ---------  ---------
Net Income         $   106.2  $     3.2  $      83.3  $       -  $   192.7
                   =========  =========  ===========  =========  =========
Diluted Earnings
 Per Common Share  $    0.48  $    0.01  $      0.38  $       -  $    0.87
                   =========  =========  ===========  =========  =========
Weighted Average
 Common Shares
 Outstanding
 - Diluted           220.274    220.274      220.274    220.274    220.274
                   =========  =========  ===========  =========  =========
Gross Margin            34.7%                                         36.0%
SG&A as a percent
 of net sales           19.9%                                         18.4%
Operating Margin        13.5%                                         17.6%
Effective Tax Rate      52.7%                                         34.3%



                   Percent     Percent
                   Change -    Change -
                   Reported   Comparable
                     Basis      Basis
                    (GAAP)    (Non-GAAP)
                   ---------  ---------
Net Sales                 (1%)       (1%)
  Cost of product
   sold                   (2%)        -
Gross Profit               1%        (2%)
  Selling, general
   and
   administrative
   expenses                1%         8%
  Restructuring
   charges               (16%)      N/A
Operating Income           2%       (14%)
  Equity in
   earnings of
   equity method
   investees             (11%)      (11%)
EBIT                     N/A        (13%)
  Interest
   expense, net          (28%)      (28%)
Income Before
 Income Taxes             12%        (6%)
  (Provision for)
   benefit from
   income taxes           (6%)      (16%)
Net Income                32%         -
Diluted Earnings
 Per Common Share         35%         2%





Constellation Brands, Inc. and Subsidiaries
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES (continued)
NOTES

(1) The company reports its financial results in accordance with generally
    accepted accounting principles in the U.S. ("GAAP"). However, non-GAAP
    financial measures, as defined in the reconciliation tables above, are
    provided because management uses this information in evaluating the
    results of the continuing operations of the company and/or internal
    goal setting. In addition, the company believes this information
    provides investors better insight on underlying business trends and
    results in order to evaluate year over year financial performance. See
    the tables above for supplemental financial data and corresponding
    reconciliations of these non-GAAP financial measures to GAAP financial
    measures for the three months and six months ended August 31, 2010, and
    August 31, 2009. Non-GAAP financial measures should be viewed in
    addition to, and not as an alternative for, the company's reported
    results prepared in accordance with GAAP. Please refer to the company's
    Web site at http://www.cbrands.com/CBI/investors.htm for more detailed
    description and further discussion of these non-GAAP financial
    measures.

(2) For the three months ended August 31, 2010, strategic business
    realignment items primarily include costs recognized by the company in
    connection with the Global Initiative of $8.2 million, net of a tax
    benefit of $1.1 million, and the Australian Initiative of $6.3 million,
    net of a tax benefit of $0.0 million. For the three months ended
    August 31, 2009, strategic business realignment items primarily include
    costs recognized by the company in connection with the Global
    Initiative of $12.5 million, net of a tax benefit of $6.3 million, and
    the Fiscal 2007 Wine Plan of $4.7 million, net of a tax benefit of
    $1.1 million.

(3) For the three months ended August 31, 2010, other consists primarily of
    an additional valuation allowance against deferred tax assets in the
    U.K. of $2.0 million.

(4) For the six months ended August 31, 2010, strategic business
    realignment items primarily include costs recognized by the company in
    connection with the Global Initiative of $13.7 million, net of a tax
    benefit of $2.3 million, and the Australian Initiative of $6.3 million,
    net of a tax benefit of $0.0 million. For the six months ended
    August 31, 2009, strategic business realignment items primarily include
    tax expense associated with the March 2009 divestiture of the value
    spirits business of $37.5 million and costs recognized by the company
    in connection with the Global Initiative of $33.6 million, net of a tax
    benefit of $16.4 million.

(5) For the six months ended August 31, 2010, other consists primarily of a
    valuation allowance against deferred tax assets in the U.K. of
    $30.1 million.

DEFINITIONS

Global Initiative

The company's plan announced in April 2009 to simplify its business, increase efficiencies and reduce its cost structure on a global basis (the "Global Initiative").

Australian Initiative

The company's plan announced in August 2008 to sell certain assets and implement operational changes designed to improve the efficiencies and returns associated with its Australian business (the "Australian Initiative").

Fiscal 2008 Plan

The company's plan announced in November 2007 to streamline certain of its international operations, primarily in Australia; certain other restructuring charges incurred during the third quarter of fiscal 2008 in connection with the consolidation of certain spirits production processes in the U.S.; and its plan announced in January 2008 to streamline certain of its operations in the U.S., primarily in connection with the restructuring and integration of the operations of Beam Wine Estates, Inc. (collectively, the "Fiscal 2008 Plan").

Fiscal 2007 Wine Plan

The company's plan announced in August 2006 to invest in new distribution and bottling facilities in the U.K. and to streamline certain Australian wine operations (collectively, the "Fiscal 2007 Wine Plan").


Constellation Brands, Inc. and Subsidiaries
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES (continued)
GUIDANCE - DILUTED EARNINGS PER SHARE AND FREE CASH FLOW
(in millions, except per share data)


                                                Range for the Year
Diluted Earnings Per Share Guidance          Ending February 28, 2011
                                       ------------------------------------
Forecasted diluted earnings per share
 - reported basis (GAAP)               $            1.36  $            1.51
   Strategic business realignment (1)               0.12               0.12
   Other (2)                                        0.15               0.15
                                       -----------------  -----------------
Forecasted diluted earnings per share
 - comparable basis (Non-GAAP) (3)     $            1.63  $            1.78
                                       =================  =================


                                                           Actual for the
                                                             Year Ended
                                                          February 28, 2010
                                                          -----------------
Diluted earnings per share - reported basis (GAAP)        $            0.45
   Inventory step-up                                                   0.02
   Strategic business realignment (1)                                  0.50
   Other (2)                                                           0.71
                                                          -----------------
Diluted earnings per share - comparable basis (Non-GAAP)
 (3)                                                      $            1.69
                                                          =================


(1) Includes $0.09, $0.03, $0.01 and ($0.01) diluted earnings per share for
    the year ending February 28, 2011, associated with the Global
    Initiative; the Australian Initiative; the Fiscal 2008 Plan; and an
    expected gain on the sale of nonstrategic assets, respectively.
    Includes $0.23, $0.17, $0.10, $0.05, $0.01 and ($0.06) diluted
    earnings per share for the year ended February 28, 2010, associated
    with the Global Initiative; tax expense associated with the March 2009
    divestiture of the value spirits business; the Australian Initiative;
    the Fiscal 2007 Wine Plan; other previously announced restructuring
    plans; and a gain recognized by the company in connection with the sale
    of its U.K. cider business, respectively. (3)

(2) Includes $0.14 diluted earnings per share for the year ending
    February 28, 2011, associated with a valuation allowance against
    deferred tax assets in the U.K. Includes $0.44, $0.16 and $0.11 diluted
    earnings per share for the year ended February 28, 2010, associated
    with impairment of certain intangible assets; loss on the contractual
    obligation created by the notification by the 9.9% shareholder of
    Ruffino S.r.l. ("Ruffino") to exercise the option to put its entire
    equity interest in Ruffino to the Company for a specified minimum
    value; and the impairment of the Company's investment in Ruffino,
    respectively. (3)

(3) May not sum due to rounding as each item is computed independently.

Free Cash Flow Guidance

Free cash flow, as defined in the reconciliation below, is considered a liquidity measure and is considered to provide useful information to investors about the amount of cash generated, which can then be used, after required debt service and dividend payments, for other general corporate purposes. A limitation of free cash flow is that it does not represent the total increase or decrease in the cash balance for the period. Free cash flow should be considered in addition to, not as a substitute for, or superior to, cash flow from operating activities prepared in accordance with GAAP.


                                                Range for the Year
                                             Ending February 28, 2011
                                       -----------------------------------
Net cash provided by operating
 activities (GAAP)                     $          485.0   $          555.0
   Purchases of property, plant
    and equipment                                (110.0)            (130.0)
                                       ----------------   ----------------
Free cash flow (Non-GAAP)              $          375.0   $          425.0
                                       ================   ================

                                        Actual for the     Actual for the
                                       Six Months Ended   Six Months Ended
                                        August 31, 2010    August 31, 2009
                                       ----------------   ----------------
Net cash provided by operating
 activities (GAAP)                     $          305.7   $           97.4
   Purchases of property, plant
    and equipment                                 (43.2)             (65.1)
                                       ----------------   ----------------
Free cash flow (Non-GAAP)              $          262.5   $           32.3
                                       ================   ================

Contact Information

  • CONTACTS

    Media
    Angie Blackwell
    585-678-7141
    Cheryl Gossin
    585-678-7191

    Investor Relations
    Patty Yahn-Urlaub
    585-678-7483
    Bob Czudak
    585-678-7170