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Mar-25-2009Constellation Brands Pares Outlook Due to International Operations(topic overview)
CONTENTS:
- Constellation Brands (STZ 13.26), the world's largest wine company, lowered its outlook for fiscal 2009, saying that weaker-than-expected demand in its European and Australian businesses will impact results. (More...)
- Constellation, based in Victor, N.Y., is the largest wine company in the world. (More...)
- In an effort to continue to weather the financial markets crisis, HSBC Holding (NYSE:HBC), Europe's largest bank measured by market cap, announced plans to cut approximately 1,200 employees in the UK. According to comments made by the bank's spokesman Mark Hemingway, the cuts will take place over a 12-month time period and locations in Leamington, England and Newport, South Wales, will be shuttered. (More...)
- General Electric (NYSE:GE) announced Wednesday, that it was awarded a $300 million contract to work on a new gas pipeline in China. (More...)
- After April 7, 2009, the Projections should be considered historical and not subject to update by the company to reflect subsequent developments. (More...)
- Financial and statistical information discussed in the conference call, and a reconciliation of reported (GAAP) financial measures with comparable or non-GAAP financial measures, will also be available on the company's Web site when the call begins, under Investors and by selecting Financial Information/Financial History. (More...)
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Constellation Brands (STZ 13.26), the world's largest wine company, lowered its outlook for fiscal 2009, saying that weaker-than-expected demand in its European and Australian businesses will impact results. The company also announced the completion of a sale of its value spirits business. Constellation lowered its fiscal 2009 outlook, expecting earnings between $1.60 and $1.62 per share, excluding items. [1] Free cash flow is expected to fall below fiscal 2009 levels due primarily to the expected $65 million tax impact from the sale of the value spirits business and $50 million in favorable hedge transaction settlements that is not expected to reoccur in fiscal 2010. The company will provide further details relating to its fiscal 2010 outlook, including key strategic initiatives, in connection with its fourth quarter fiscal 2009 earnings news release and conference call. "In North America, the wine industry continues to grow and we continue to see consumers trading up albeit at lower rates as compared to its peak.[2]
For fiscal 2010, the company expects the challenging macro-economic operating environment to continue and as a result, is targeting comparable basis diluted EPS growth in the low-to-mid single-digit range versus fiscal 2009. In addition to its updated guidance, Constellation said it completed the sale of its value spirits business to Sazerac Company for $334 million.[1] Constellation Brands Inc. said Wednesday it had completed the $334 million sale of its value spirits business to Sazerac Co. It said it plans to use $210 million of the proceeds to pay down debt in fiscal 2010.[3] VICTOR, N.Y., March 25 /PRNewswire-FirstCall/ -- Constellation Brands, Inc. (NYSE: STZ) (ASX: CBR), the largest wine company in the world, announced today that it has completed the sale of its value spirits business to Sazerac Company, Inc. for $334 million, subject to post-closing adjustments.[2]
Constellation Brands, Inc. (NYSE:STZ) said it sold its value spirits unit to Sazerac Company, Inc. for $334 million. Constellation reduced its fiscal 2009 earnings outlook to $1.60-$1.62 from $1.68-$1.72.[4] Shares of Constellation Brands (STZ) are down nearly 4% after the company cut its 2009 earnings outlook. The company now sees earnings of $1.60 to $1.62 per share, excluding special items, in the current fiscal year, down from its prior estimate of $1.68 to $1.72.[5] Constellation, which employs roughly 700 in the Rochester area, announced today that for fiscal year 2009, the company expects earnings per share of $1.60 to $1.62, down from its previous guidance of $1.68 to $1.72. Constellation shares were trading this morning at $12.52, down nearly 6 percent, on the news. The company said it would have details about its restructuring and job cuts when it announces is latest quarterly earnings on April 8. Constellation said that during the fourth quarter of its fiscal year 2009, it expects to have $430 million in charges against its bottom line, most of it being non-cash charges against its goodwill.[6] As of March 31, 2008, Constellation had 8,200 full-time employees. Constellation said it expected earnings of $1.60 to $1.62 per share, excluding special items, in the current fiscal year, down from its prior estimate of $1.68 to $1.72. On a net basis, Constellation expects to earn $1.26 to $1.28 per share, since it must now record a $430 million goodwill impairment charge for its international businesses.[7]
For the fiscal year ended in February, the company expects to report profit in a range of $1.60 to $1.62 per share, down from a January estimate for profit between $1.68 and $1.72 per share.[8]
The company's new comparable basis diluted EPS range for fiscal 2009 is targeted to be $1.60 - $1.62 compared to the company's previous estimate of $1.68 - $1.72. The revision is driven primarily by an increasingly challenging global economic environment, particularly the accelerated deterioration in the company's U.K. and Australian businesses during its fourth quarter.[9] During the fourth quarter, the company expects to record an estimated $430 million of after-tax charges, primarily related to the non-cash impairments of certain goodwill, intangible assets and equity method investments associated with the company's international businesses. These one-time charges will drive a reported basis loss for fiscal 2009 and will be excluded from comparable basis results.[9]
For fiscal 2010, the company expects the challenging macro-economic operating environment to continue and as a result, is targeting comparable basis diluted EPS growth in the low-to-mid single digit range versus fiscal 2009.[2]
Reported basis ("reported") diluted earnings (loss) per share are as reported under generally accepted accounting principles in the U.S. Diluted earnings per share on a comparable basis ("comparable"), exclude acquisition-related integration costs, restructuring charges and unusual items. The company discusses additional non-GAAP measures in this news release, including 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.[2] As a result of the company having net income on a comparable basis, the dilutive impact of potential common shares is included in the company's comparable basis diluted earnings per share calculation. (4) May not sum due to rounding as each item is computed independently.[2]
The company also announced that it has updated its diluted earnings per share ("EPS") outlook for fiscal 2009.[9] For fiscal 2009, the company now expects a reported basis diluted loss per share in the range of $1.26 - $1.28.[9] The amounts associated with the impairments of certain goodwill, intangible assets and equity method investments represent the company's current estimates and are subject to change in connection with the completion of the company's annual impairment testing.(4) (3) In accordance with the antidilution provisions of SFAS No. 128, the dilutive impact of potential common shares is excluded from the company's reported basis diluted loss per share calculation.[2]
For fiscal year 2010, which began March 1, 2009, the company is expecting slight growth in earnings per share but a decline in free cash flow.[6] NEW YORK, March 25 (Reuters) - Constellation Brands Inc (STZ.N: Quote, Profile, Research ) said on Wednesday it plans to cut about 5 percent of its global workforce, or roughly 400 jobs, and warned that profit for its just-ended fiscal year would be lower than expected, sending shares down 4 percent. The world's largest wine producer, with brands such as Robert Mondavi and Clos du Bois, cited disappointing demand in Europe and Australia during Christmas and New Year's. "The most significant impact was felt in the U.K., where the economy weakened during this critical selling season, retail competition intensified, and we made the decision to forego participation in significant price discounting offered by multiple grocers," Chief Executive Robert Sands said in a statement.[10] NEW YORK (Reuters) - Constellation Brands Inc ( STZ.N ) cut its fiscal 2009 earnings outlook on Wednesday, citing disappointing demand in Europe and Australia during last year's Christmas and New Year holidays. The world's largest wine producer, with brands including Robert Mondavi and Clos du Bois, also said it plans to eliminate about 5 percent of its global workforce, as it seeks to manage costs in the recession.[7]
The alcoholic-beverages company, which produces Robert Mondavi wines, among other brands, also projected lower earnings for the new fiscal year, not the increase analysts had expected, and plans to cut an undisclosed amount of costs. Those cuts will.[11]
Victor-based alcoholic beverage giant Constellation Brands Inc. is lowering expectations on how it will do in its current fiscal year, as the company says the recession is hurting sales particularly in the United Kingdom and Australia. Constellation said it also expects to cut about 5 percent of its workforce worldwide.[6]
The updated guidance is below the $1.69 First Call consensus and lower than the company's prior guidance of $1.68 to $1.72. "The most significant impact was felt in the U.K.," said CEO Rob Sands, "where the economy weakened during this critical selling season, retail competition intensified, and we made the decision to forego participation in significant price discounting offered by multiple grocers." Constellation said it has taken actions in the U.K. to align its cost structure to the realities of the marketplace, but the company will now extend those actions to its global businesses. Part of the company's restructuring will result in the elimination of 5% of its workforce, but Constellation said further details wouldn't be released until the company's April 8 earnings announcement.[1] "We experienced weaker than expected demand in our European and Australian businesses during the Christmas and New Year holiday," said Rob Sands, president and chief executive officer of Constellation Brands. "The most significant impact was felt in the U.K., where the economy weakened during this critical selling season, retail competition intensified, and we made the decision to forego participation in significant price discounting offered by multiple grocers.[9]
Constellation Brands Inc. lowered its fiscal-year earnings outlook, citing deterioration in U.K. and Australian businesses, which will bare the brunt of an estimated $430 million in impairment and other charges for the just-ended fiscal fourth quarter.[11] "Although we are experiencing the effects of the global recession, we are pleased that Constellation's free cash flow generation continues to be strong and is anticipated to be within our previously guided $360 - $390 million range for fiscal 2009," said Bob Ryder, chief financial officer of Constellation Brands.[9] Constellation Brands Inc. on Wednesday lowered its estimate for fiscal 2009 profit, citing the global economic slowdown and a deterioration in its U.K. and Australian business.[8]
Constellation, based in Victor, N.Y., is the largest wine company in the world. It sells Robert Mondavi, Clos du Bois and Ravenswood wines as well as Svedka vodka. Wednesday, it lowered its 2009 profit projection and said it had experienced a downturn in its U.K. and Australian businesses. It plans to cut costs companywide and has already started to do so in the U.K. [3] Sands said the Victor, N.Y. -based company would cut costs across the board and has already started to do so in the U.K.[8]
In an effort to continue to weather the financial markets crisis, HSBC Holding (NYSE:HBC), Europe's largest bank measured by market cap, announced plans to cut approximately 1,200 employees in the UK. According to comments made by the bank's spokesman Mark Hemingway, the cuts will take place over a 12-month time period and locations in Leamington, England and Newport, South Wales, will be shuttered. HSBC is raising $18.4 billion (USD) in its largest rights offering ever, in order to boost its capital position. [4] Should stock prices continue to decline and Berkshire prove unable to raise sufficient capital, S&P; said it may cut the company's credit rating by one notch.[4] Standard & Poor's affirmed its credit rating on Berkshire Hathaway (NYSE:BRK.A) as well as several of its units, but lowered its outlook to negative from stable, citing the company's portfolio as having taken a tremendous blow and the toll it has taken on the company's capital position. S&P; maintained its 'AAA/A-1+' counterparty credit rating for Warren Buffett's company, but added that after a decline in stock values, "a preliminary analysis of the group's capital adequacy indicates that the group's capital is no longer redundant at the 'AAA' level."[4]
In connection with the sale of the value spirits business, the company has received $274 million in cash proceeds and a note receivable for $60 million.[2] The entire net after-tax cash proceeds of approximately $210 million will be used to further reduce Constellation's borrowings. To achieve synergies and operating efficiencies, the company will consolidate the retained premium spirits business into its North American wine operations.[2]
Constellation Brands, Inc. is the largest wine company in the world with a strong portfolio of consumer-preferred premium wine brands complemented by spirits, imported beer and other select beverage alcohol products.[2] The company has significant market presence in the U.S., Canada, U.K., Australia and New Zealand. Based in Victor, N.Y., the company has more than 200 brands in its portfolio, sales in about 150 countries and operates approximately 50 facilities. It is the largest premium wine company in the U.S.; the largest wine company in the U.K., Australia and Canada; the second largest wine company in New Zealand; and the largest beer importer and marketer in the U.S. through its Crown Imports joint venture with Mexico's Grupo Modelo.[2]
The company's U.S. spirits business continues to experience strong growth rates driven by sales of SVEDKA Vodka.[2] JP Morgan (NYSE:JPM) filed a lawsuit Tuesday with the U.S. bankruptcy court in Delaware, against Washington Mutual (OTC:WAMUQ.PK). The lawsuit comes three days after Washington Mutual said it was suing the FDIC for undervaluing the thrift's banking operations, awarding the company only $1.9 billion for its sale, which the regulator arranged last September. JP Morgan (NYSE:JPM) said it was suing WaMu to be sure that it wasn't losing any of its interests in the company's banking operations.[4] The year-over-year median sales price of new homes fell a record 18.1% in February to $200,900.[4] The Commerce Department reported Wednesday that new home sales rose 4.7% month-over-month in February to a seasonally adjusted annual rate of 337,000 from a revised reading of 322,000 in January. Both readings were better than expected with analysts' anticipating 300,000 new home sales and a month-over-month decline of 2.9%.[4]
Consensus estimates are for EPS of 50 cents on revenues of $98.0 million. Lazard Capital cited positive remarks from management on demand, positive channel checks and customer pipeline as reasons for its forecast adjustment. They added that recent checks confirm speculation that Digital River will win contracts for powering downloads for Research in Motion's (NASDAQ:RIMM) upcoming Blackberry application store. Lazard says that their recent checks indicate increased demand environment during Q1 as a number of software developers, who had held off on releasing their new apps during Q4 due to broader economic uncertainties, are expected to release these applications during Q1.[4] Lazard Capital (NYSE:LAZ) raised its Q1 revenue and pro-forma EPS estimates for Digital River (NASDAQ:DRIV) to 51 cents per share on revenues of $100.1 million, up from its previously estimated 47 cents per share on revenues of $97.1 million.[4]
A 5GB data limit costs $59.99 per month. With these steep prices T-Mobile may have trouble competing with smartphones with wider 3G reach like Apple's (NASDAQ:AAPL) iPhone, which continues to advance on the mobile Web traffic market share.[4]
"We continue to be in a strong liquidity position, as total debt has decreased by more than $800 million from year end fiscal 2008, primarily through a combination of strong free cash flow and proceeds from asset dispositions.[9] "We are taking decisive action to ensure we are adaptive and responsive to the rapidly-changing global economy by remaining focused on creating efficiencies, generating cash flow and paying down debt. The continuation of this strategy in combination with worldwide cost reductions positions us well for the future as we work through the current challenging macro economic environment and take advantage of the recovery when it occurs."[2] "While we have already begun to take actions in the U.K. to align the cost structure with the realities of the marketplace, we believe it is appropriate to implement additional cost reductions not only in the U.K., but across our global businesses," Sands continued. "Although not finalized, these initiatives are currently expected to result in the elimination of approximately five percent of our global workforce."[9]
For 2010 the company is targeting low-to-mid single digits EPS growth and expects to implement many cost reducing initiatives.[4]
The statements and estimates in this news release update the statements and estimates set forth under the heading Outlook in the company's news release dated Jan. 7, 2009, and the statements and estimates set forth in the company's news release dated Jan. 12, 2009.[2] In an effort to expand its reach beyond its physical store locations, Blockbuster (NYSE:BBI) plans to rent and sell its movies and TV series through TiVo's (NASDAQ:TIVO) digital video recorders, scheduled for release during the latter half of 2009. Blockbuster is trying to gain some of Netflix's (NASDAQ:NFLX) market share after the rival movie company revolutionized the movie renting industry when it starting offering free instant streaming of its movies and TV series through its "Watch Instantly" service. Unlike Netflix, Blockbuster will offer a fee-based TiVo offering that includes new releases two to four weeks before they become available at other stores.[4] With the battle over market share for servers and storage units growing more intense by the day, Dell Inc (NASDAQ:DELL) has initiated a new line of products, focusing on value rather than stressing proprietary benefits.[4]
If the shares can stabilize and begin to move up, the first area of overhead resistance would come at the $16-17 levels. We do not currently rate this non-dividend paying stock, but we would look elsewhere for better investment opportunities.[5]
Keefe Bruyette & Woods (NYSE:KBW) lowered UBS (NYSE:UBS) to underperform from market perform. KBW cuts its 2009 earnings forecast by 90%, sees continuous outflows from its wealth management business, and $2 billion of write-downs linked to bond insurer exposure.[4] Atmel (NASDAQ:ATML) cut to Market Perform at FBR (NYSE:FBR). Berkshire (NYSE:BRK.A)(NYSE:BRK.B) unit's outlook revised to negative at S & P. Blackstone (NYSE:BX) cut to Market Perform at KBW (NYSE:KBW) with price target of $7.50.[4] Williams-Sonoma (NYSE:WSM) cut to Underweight at Barclays (NYSE:BCS) with price target of $8.[4]
General Electric (NYSE:GE) announced Wednesday, that it was awarded a $300 million contract to work on a new gas pipeline in China. [4] Voyage revenues in the quarter tumbled 47.6% year-over-year to $117.1 million. Chairman and Chief Executive Officer George Economou offered this statement, "Since the collapse of the world economy in the latter part of 2008 we have taken a pro-active approach implementing innovative steps to address the current market environment. DryShips has dramatically reduced its capital expenditures while minimizing the use of cash.[4]
After April 7, 2009, the Projections should be considered historical and not subject to update by the company to reflect subsequent developments. 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, or financing 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. [2] Non-GAAP financial measures, as defined in the reconciliations below, are provided because management uses this information in evaluating the results of the continuing operations of the company and/or internal goal setting. The company believes this information provides investors better insight on underlying business trends and results in order to evaluate year over year financial performance.[2] The company will report financial results for its fiscal fourth quarter and full year ended Feb. 28, 2009, on Wednesday, April 8, 2009, before the open of U.S. markets.[2]
Financial and statistical information discussed in the conference call, and a reconciliation of reported (GAAP) financial measures with comparable or non-GAAP financial measures, will also be available on the company's Web site when the call begins, under Investors and by selecting Financial Information/Financial History. [2]
To learn more about Constellation Brands and its product portfolio visit the company's Web site at www.cbrands.com.[2] Constellation said it will use proceeds from the sale to reduce borrowings in fiscal 2010.[1]
SOURCES
1. Briefing.com: Constellation Brands Outlook Dims
2. Constellation Brands, Inc. :: Constellation Brands Completes Sale of Value Spirits Business; Updates Fiscal 2009 Guidance
3. Constellation completes sale of value spirits unit - Forbes.com
4. News Briefs - Comtex SmarTrend Alert
5. Dividend Stocks - The Dividend Daily » Blog Archive » Constellation Brands Cuts 2009 Forecast, Plans Job Cuts (STZ)
6. Constellation lowers earnings expectations, anticipates cuts | democratandchronicle.com | Democrat and Chronicle
7. Constellation Brands to cut jobs, trims view | Reuters
8. Constellation Brands lowers fiscal 2009 outlook - Forbes.com
9. Constellation Brands Completes Sale of Value Spirits Business; Updates Fiscal 2009 Guidance - Press Releases: PR Newswire - SunHerald.com
10. UPDATE 3-Constellation Brands to cut jobs, trims view | Deals | Regulatory News | Reuters
11. Constellation Brands Pares Outlook Due to International Operations - WSJ.com
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