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Constellation Brands Reports Fiscal 2008 Results- Generates record free cash flow for fiscal 2008; company expects strong free cash flow for fiscal 2009- Premium wine and spirits portfolios enhanced by acquisitions, sale of value wine brands- Non-cash impairment charges reduce reported fiscal 2008 results- Company provides fiscal 2009 outlook; projects comparable basis diluted EPS of $1.68 - $1.76 versus $1.44 for fiscal 2008
FAIRPORT, N.Y., April 3, 2008 /PRNewswire-FirstCall/ -- Constellation Brands, Inc. NYSE: STZ ASX: CBR, a leading international producer and marketer of beverage alcohol today reported its fiscal 2008 financial results and fiscal 2009 outlook. "For fiscal 2008, we achieved our strategic initiatives and exceeded our key financial goals," stated Rob Sands, Constellation Brands president and chief executive officer. "These include the premiumization of brand portfolios, including the acquisition of SVEDKA Vodka and the Fortune Brands U.S. premium wine portfolio and the sale of the Almaden and Inglenook value wine brands, successful implementation of the Crown Imports transition, reduction of U.S. distributor wine inventory and creation of a strategic joint venture for the company's U.K. wholesale business. (Logo: http://www.newscom.com/cgi-bin/prnh/20040119/STZLOGO ) "We exceeded our comparable earnings per share estimate for the year and generated record free cash flow of $376 million, which also exceeded our forecast," added Sands. "I am confident in our ability to continue to execute our strategy, profitably grow our business and generate strong cash flow." On a reported basis the company incurred a net loss of $610 million, or $2.82 diluted loss per share for the fiscal year ended Feb. 29, 2008 ("fiscal 2008"), compared to net income of $332 million, or $1.38 diluted earnings per share ("EPS") for the prior year. The net loss was driven by an estimated $822 million of impairment charges primarily related to goodwill and intangible assets associated with the company's Australia and U.K. businesses and a $52 million deferred tax asset valuation allowance. "These are non-cash, non-recurring charges to earnings and do not impact the company's free cash flow, debt covenants or future operations," said Bob Ryder, Constellation Brands chief financial officer. Fiscal 2008 net income on a comparable basis, which excludes acquisition- related integration costs, restructuring charges and unusual items, totaled $321 million, or $1.44 diluted EPS versus comparable basis net income of $403 million and diluted EPS of $1.68 for the prior year.
Fiscal 2008 Net Sales Highlights*
(in millions)
Reported Organic
Constant Constant
Net Currency Net Currency
Sales Change Change Sales Change Change
Consolidated $3,773 -28% -30% $3,570 5% 1%
Branded Wine $3,017 9% 6% $2,877 2% -2%
Imported Beers - -100% -100%
Spirits $414 26% 26% $359 9% 9%
Wholesale/other $342 -69% -71% $335 23% 14%
Fiscal 2008 Profit Highlights*
(in millions, except per share data)
Reported Change Comparable Change
Operating (loss)/
income ($352) NM $545 -35%
Equity in earnings of
equity method investees** $258 417% $274 420%
Earnings before interest
and taxes (EBIT) - - $819 -9%
Net (loss)/income ($610) NM $321 -20%
Diluted (loss)/
earnings per share ($2.82) NM $1.44 -14%
* 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."
NM = Not meaningful.
Fiscal 2008 Net Sales Commentary The reported consolidated net sales decrease of 28 percent primarily reflects the impact of reporting the Crown Imports and Matthew Clark wholesale business joint ventures under the equity method and U.S. distributor wine inventory reduction, partially offset by the benefits of the Vincor, SVEDKA and Fortune Brands U.S. premium wine business acquisitions and favorable foreign currency. Organic net sales increased one percent on a constant currency basis. Branded wine net sales decreased two percent on an organic constant currency basis. For North America, branded wine net sales decreased three percent on an organic constant currency basis, reflecting solid growth in Canada, which was more than offset by the company's initiative to reduce U.S. wine distributor inventory levels during the first half of fiscal 2008. "The North American wine market remains healthy, with consumers continuing the trend of trading up to premium wines such as Clos du Bois and Wild Horse, which we added to our leading premium portfolio that includes consumer favorites such as Simi, Ravenswood, Blackstone, Kim Crawford, and Toasted Head in the U.S., and Jackson-Triggs and Inniskillin in Canada," explained Sands. "These brands all delivered positive sales and marketplace growth for the year." Organic net sales for branded wine in Europe increased four percent on a constant currency basis, primarily due to higher sales of popular priced wine in mainland Europe and a slight increase in net sales for the U.K. On a constant currency basis, net sales for Australia/New Zealand branded wine decreased two percent. Total spirits net sales increased 26 percent, primarily due to the March 2007 acquisition of SVEDKA and nine percent growth in organic net sales reflecting higher average selling prices and an increase in production services. "SVEDKA continues delivering phenomenal sales performance and remains the fastest growing major imported premium vodka brand in the U.S.," said Sands. "We are also very pleased with the marketplace growth generated by other premium spirits in our portfolio, including Effen Vodka, the 99 Schnapps line, Ridgemont Reserve 1792 bourbon and Black Velvet Canadian Whisky." Fiscal 2008 Operating Income, Net Income, Diluted EPS Commentary The decrease in comparable operating income and the increase in equity earnings for fiscal 2008 were primarily due to the impact of reporting $255 million of equity earnings from the Crown Imports joint venture under the equity method for the entire 12 months in fiscal 2008, compared to $39 million in equity earnings for the two months of Crown Imports operations in fiscal 2007. Wines segment operating income decreased $72 million versus the prior year. This was primarily due to the lower net sales associated with efforts to reduce distributor inventories in the U.S., the impact of the U.K. and Australia business performance, and higher stock compensation expense, which was partially offset by an increased contribution from the Canadian wine business. Spirits segment operating income increased $7 million primarily due to the addition of SVEDKA and from the increase in base business net sales, offset somewhat by higher material costs. For fiscal 2008, pre-tax acquisition-related integration costs, restructuring and related charges and unusual items totaled $913 million, compared to $91 million for the prior year. During the fourth quarter of fiscal 2008, the company recorded an estimated $822 million of non-cash impairment charges primarily related to goodwill and intangible asset impairments associated with the company's Australia and U.K. businesses in connection with the company's annual impairment testing and a $52 million deferred tax asset valuation allowance. As previously discussed by the company, operating results for these businesses have been impacted by pricing pressures driven by the strength of large grocery retailers, Australian wine over-supply and U.K. duty increases. Due to these competitive pressures, the company's profitability in the U.K. and Australia businesses has decreased over the past few years. U.S. GAAP has required the company to recognize impairment charges resulting from the impact of these competitive pressures on prospective operating results. "The U.K. is one of the world's largest import wine markets and wine consumption trends remain robust, while Australia is one of the largest and most progressive producers and exporters of high quality New World Wines," stated Sands. "We believe in the long-term value of both of these businesses, and are confident we are taking the right measures to improve operating efficiencies and our competitive position in these strategically important markets. We plan to improve operating results in fiscal 2009 and beyond." Financial results were also impacted by interest expense, which increased 27 percent to $342 million for fiscal 2008, primarily due to the financing of the Vincor, SVEDKA and Fortune Brands U.S. wine business acquisitions, and $500 million of share repurchases. Comparable basis net income for fiscal 2008 reflected an effective tax rate of 32.6 percent versus 35.6 percent for the prior year, primarily due to favorable foreign tax rate changes. The company generated record free cash flow of $376 million versus $121 million in the prior year. The increase in free cash flow was primarily driven by reduced working capital investment, including reduced tax payments, and lower capital spending. The company expects the strong free cash flow generation to continue and is targeting free cash flow in the range of $310 - $340 million for fiscal 2009. "Fiscal 2008 demonstrated our increased focus on free cash flow management and we expect another strong year of cash generation in fiscal 2009," said Ryder.
Fourth Quarter Fiscal 2008 Net Sales Highlights
(in millions)
Reported Organic
Constant Constant
Net Currency Net Currency
Sales Change Change Sales Change Change
Consolidated $884 -23% -25% $856 3% -
Branded Wine $747 6% 2% $733 2% -2%
Imported Beers - -100% -100%
Spirits $95 31% 31% $80 10% 10%
Wholesale/other $43 -84% -85% $43 24% 18%
Fourth Quarter Fiscal 2008 Profit Highlights
(in millions, except per share data)
Reported Change Comparable Change
Operating (loss)/income ($735) NM $137 -15%
Equity earnings $28 -29% $43 9%
Earnings before interest
and taxes (EBIT) - - $180 -10%
Net (loss)/income ($832) NM $74 -13%
Diluted (loss)/earnings
per share ($3.90) NM $0.34 -3%
Fourth Quarter Fiscal 2008 Net Sales Commentary The reported consolidated net sales decrease of 23 percent primarily reflects the impact of reporting the Crown Imports and Matthew Clark wholesale business joint ventures under the equity method. The impact of the joint venture reporting was partially offset by the benefits of favorable foreign currency and the SVEDKA and Fortune Brands U.S. wine business acquisitions. Branded wine net sales decreased two percent on an organic constant currency basis. For North America, branded wine net sales decreased five percent on an organic constant currency basis, as the completion of the reduction in U.S. wine distributor inventories earlier in the year resulted in a timing shift for the company's U.S. wine sales. Under new shipment patterns, and after the peak holiday selling period in the third quarter, the company returned to the lower distributor inventory levels achieved at the end of the second quarter, which negatively impacted growth in the fourth quarter. Branded wine organic net sales on a constant currency basis for Europe and Australia/New Zealand increased four percent and eight percent, respectively. Total spirits net sales increased 31 percent for the quarter, primarily due to the SVEDKA acquisition and 10 percent growth in organic net sales. Fourth Quarter Fiscal 2008 Operating Income, Net Income, Diluted EPS Commentary Wines segment operating income decreased $10 million versus the prior year, while spirits segment operating income increased $1 million. Pre-tax acquisition-related integration costs, restructuring and related charges and unusual items totaled $888 million, which included the non-cash impairment charges discussed earlier, compared to $23 million for the prior year. Interest expense increased 25 percent to $93 million for fourth quarter 2008, primarily due to the financing of the SVEDKA and Fortune Brands U.S. wine business acquisitions and $500 million of share repurchases. Outlook The table below sets forth management's current diluted earnings per share expectations for fiscal year 2009 compared to fiscal year 2008 actual results, both on a reported basis and a comparable basis. "The expected improvement in comparable earnings for fiscal 2009 includes solid underlying growth of our North America branded wine business and the Crown Imports joint venture, the benefit of completing the reduction in U.S. distributor inventories during fiscal 2008 and anticipated performance improvement for the company's U.K. and Australia branded wine businesses," said Sands.
Constellation Brands Fiscal Year 2009
Diluted Earnings Per Share Outlook
Reported Basis Comparable Basis
FY09 FY08 FY09 FY08
Estimate Actual Estimate Actual
Fiscal Year Ending
Feb. 28 or Feb. 29 $1.46 - $1.54 ($2.82) $1.68 - $1.76 $1.44
Full-year fiscal 2009 guidance includes the following current assumptions:
-- Net sales: high single-digit growth in organic net sales combined with
the incremental benefit from the Fortune Brands U.S. premium wine
acquisition, impact of reporting the joint venture for the Matthew
Clark wholesale business under the equity method, and divestiture of
the Almaden and Inglenook brands, are expected to result in reported
net sales increasing mid single-digits from net sales for fiscal 2008
-- Interest expense: approximately $340 - $350 million
-- Tax rate: approximately 37 percent
-- Weighted average diluted shares outstanding: approximately 222 million
-- Free cash flow: $310 - $340 million
Conference Call A conference call to discuss fiscal 2008 results and outlook for fiscal 2009 will be hosted by President and Chief Executive Officer Rob Sands and Executive Vice President and Chief Financial Officer Bob Ryder on Thursday, April 3, 2008 at 10:00 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, equity in earnings of equity method investees, net income and diluted earnings per share are as reported under generally accepted accounting principles. Operating income, equity in earnings of equity method investees, net income and diluted earnings per share on a comparable basis ("comparable"), exclude acquisition-related integration costs, restructuring and related charges and unusual items. The company's measure of segment profitability excludes acquisition-related integration costs, restructuring and related 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, Inc. is a leading international producer and marketer of beverage alcohol in the wine, spirits and imported beer categories, with significant market presence in the U.S., Canada, U.K., Australia and New Zealand. Based in Fairport, N.Y., the company has more than 250 brands, sales in about 150 countries, operates approximately 60 facilities worldwide. It is also the largest wine producer in the world and an S&P 500 Index and Fortune 500(R) company. Major brands in the company's portfolio include Corona, Black Velvet, SVEDKA Vodka, Robert Mondavi, Clos du Bois, Ravenswood, Blackstone, Hardys, Banrock Station, Nobilo, Kim Crawford, Inniskillin, Jackson-Triggs and Arbor Mist. To learn more about the company and its products visit Constellation's Web site at www.cbrands.com. Forward-Looking Statements The statements made under the heading Outlook, as well as all other statements set forth in this news release which are not historical facts regarding Constellation's business strategy, future operations, financial position, estimated revenues, projected costs, prospects, plans and objectives of management, or 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 May 23, 2008, 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, 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. 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:
-- successful integration of acquired businesses, realization of expected
synergies and completion of various portfolio actions;
-- achievement of all expected cost savings from the company's various
restructuring plans and realization of expected asset sale proceeds;
-- accuracy of the bases for forecasts relating to joint ventures and
associated costs and capital investment requirements;
-- final management determinations and independent appraisals may vary
materially from current management estimates of the fair value of
assets acquired and liabilities assumed in the company's acquisitions
and from estimates of goodwill and intangible asset impairment charges;
-- restructuring and related charges, acquisition-related integration
costs and purchase accounting adjustments 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 higher than expected expenses;
-- general economic, geo-political and regulatory conditions 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, 2007, which could cause
actual future performance to differ from current expectations.
Constellation Brands, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
February 29, February 28,
2008 2007
Assets
Current Assets:
Cash and cash investments $20.5 $33.5
Accounts receivable, net 731.6 881.0
Inventories 2,179.5 1,948.1
Prepaid expenses and other 217.2 160.7
Total current assets 3,148.8 3,023.3
Property, plant and equipment, net 2,035.0 1,750.2
Goodwill 3,121.0 3,083.9
Intangible assets, net 1,198.0 1,135.4
Other assets, net 504.9 445.4
Total assets $10,007.7 $9,438.2
Liabilities and Stockholders' Equity
Current Liabilities:
Notes payable to banks $379.5 $153.3
Current maturities of long-term debt 229.3 317.3
Accounts payable 349.4 376.1
Accrued excise taxes 62.4 73.7
Other accrued expenses and liabilities 697.7 670.7
Total current liabilities 1,718.3 1,591.1
Long-term debt, less current maturities 4,648.7 3,714.9
Deferred income taxes 538.0 474.1
Other liabilities 333.9 240.6
Total liabilities 7,238.9 6,020.7
Total stockholders' equity 2,768.8 3,417.5
Total liabilities and stockholders'
equity $10,007.7 $9,438.2
Constellation Brands, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data)
Three Months Ended Year Ended
February February February February
29, 2008 28, 2007 29, 2008 28, 2007
Sales $1,135.4 $1,422.5 $4,885.1 $6,401.8
Excise taxes (251.0) (280.3) (1,112.1) (1,185.4)
Net sales 884.4 1,142.2 3,773.0 5,216.4
Cost of product sold (572.7) (796.9) (2,491.5) (3,692.5)
Gross profit 311.7 345.3 1,281.5 1,523.9
Selling, general and
administrative expenses (227.1) (194.0) (807.3) (768.8)
Impairment of goodwill and
intangible assets (807.1) - (807.1) -
Acquisition-related integration
costs (6.6) (6.0) (11.8) (23.6)
Restructuring and related charges (6.2) (6.4) (6.9) (32.5)
Operating (loss) income (735.3) 138.9 (351.6) 699.0
Equity in earnings of equity
method investees 27.8 39.2 257.9 49.9
Interest expense, net (93.0) (74.4) (341.8) (268.7)
Gain on change in fair value of
derivative instrument - - - 55.1
(Loss) income before income taxes (800.5) 103.7 (435.5) 535.3
Provision for income taxes (31.4) (33.5) (174.9) (203.4)
Net (loss) income (831.9) 70.2 (610.4) 331.9
Dividends on preferred stock - - - (4.9)
(Loss) income available to
common stockholders $(831.9) $70.2 $(610.4) $327.0
(Loss) Earnings Per Common Share:
Basic - Class A Common Stock $(3.90) $0.30 $(2.82) $1.44
Basic - Class B Common Stock $(3.54) $0.27 $(2.56) $1.31
Diluted - Class A Common Stock $(3.90) $0.29 $(2.82) $1.38
Diluted - Class B Common Stock $(3.54) $0.27 $(2.56) $1.27
Weighted Average Common Shares
Outstanding:
Basic - Class A Common Stock 191.946 210.624 195.135 204.966
Basic - Class B Common Stock 23.794 23.828 23.812 23.840
Diluted - Class A Common Stock 191.946 239.566 195.135 239.772
Diluted - Class B Common Stock 23.794 23.828 23.812 23.840
Constellation Brands, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Year Ended
February 29, February 28,
2008 2007
Cash Flows From Operating Activities
Net (loss) income $(610.4) $331.9
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
Impairment of goodwill and
intangible assets 807.1 -
Depreciation of property, plant and
equipment 154.7 131.7
Deferred tax provision 100.2 52.7
Loss on disposal of business 34.6 16.9
Stock-based compensation expense 32.0 16.5
Equity in earnings of equity method
investees, net 20.7 (41.0)
Amortization of intangible and other
assets 11.2 7.6
Loss on disposal or impairment of
long-lived assets, net 1.8 12.5
Noncash portion of loss on
extinguishment of debt - 11.8
Gain on change in fair value of
derivative instruments - (55.1)
Change in operating assets and
liabilities, net of effects
from purchases and sales of
businesses:
Accounts receivable, net 56.2 (6.3)
Inventories (37.8) (85.1)
Prepaid expenses and other current
assets (5.8) 44.3
Accounts payable 16.3 34.3
Accrued excise taxes 2.4 1.0
Other accrued expenses and
liabilities (34.2) (157.2)
Other, net (29.2) (3.3)
Total adjustments 1,130.2 (18.7)
Net cash provided by operating
activities 519.8 313.2
Cash Flows From Investing Activities
Purchases of businesses, net of cash
acquired (1,302.0) (1,093.7)
Purchases of property, plant and
equipment (143.8) (192.0)
Investment in equity method investee (4.6) -
Payment of accrued earn-out amount (4.0) (3.6)
Proceeds from formation of joint venture 185.6 -
Proceeds from sales of businesses 136.5 28.4
Proceeds from sales of assets 19.4 9.8
Proceeds from maturity of derivative
instrument - 55.1
Other investing activities - (1.1)
Net cash used in investing
activities (1,112.9) (1,197.1)
Cash Flows From Financing Activities
Proceeds from issuance of long-term debt 1,212.9 3,705.4
Net proceeds from notes payable 219.4 47.1
Exercise of employee stock options 20.6 63.4
Excess tax benefits from stock-based
payment awards 11.3 21.4
Proceeds from employee stock purchases 6.2 5.9
Purchases of treasury stock (500.0) (100.0)
Principal payments of long-term debt (374.9) (2,786.9)
Payment of financing costs of long-
term debt (10.6) (23.8)
Payment of preferred stock dividends - (7.3)
Net cash provided by financing
activities 584.9 925.2
Effect of exchange rate changes on
cash and cash investments (4.8) (18.7)
Net (decrease) increase in cash and
cash equivalents (13.0) 22.6
Cash and cash investments, beginning
of year 33.5 10.9
Cash and cash investments, end of year $20.5 $33.5
Constellation Brands, Inc. and Subsidiaries
SEGMENT INFORMATION
(in millions)
Three Months Ended Year Ended
February February Percent February February Percent
29, 2008 28, 2007 Change 29, 2008 28, 2007 Change
Segment Net Sales
and Operating
Income
Constellation
Wines
Branded wine net
sales $746.8 $706.1 6% $3,016.9 $2,755.7 9%
Wholesale and
other net sales 42.5 273.3 (84%) 341.9 1,087.7 (69%)
Segment net
sales $789.3 $979.4 (19%) $3,358.8 $3,843.4 (13%)
Operating
income $145.4 $155.6 (7%) $558.4 $629.9 (11%)
% Net sales 18.4% 15.9% 16.6% 16.4%
Equity in
earnings of
equity method
investees $1.7 $0.4 NM $18.8 $13.8 NM
Constellation
Beers
Segment net
sales $- $90.1 (100%) $- $1,043.6 (100%)
Operating income $- $8.9 (100%) $- $208.1 (100%)
% Net sales N/A 9.9% N/A 19.9%
Constellation
Spirits
Segment net
sales $95.1 $72.7 31% $414.2 $329.4 26%
Operating income $13.9 $13.0 7% $72.0 $65.5 10%
% Net sales 14.6% 17.9% 17.4% 19.9%
Crown Imports
Segment net
sales $462.5 $368.8 25% $2,391.0 $368.8 NM
Operating income $82.4 $78.4 5% $509.0 $78.4 NM
% Net sales 17.8% 21.3% 21.3% 21.3%
Consolidation and
Eliminations
Segment net
sales $(462.5) $(368.8) 25% $(2,391.0) $(368.8) NM
Operating income $(82.4) $(78.4) 5% $(509.0) $(78.4) NM
Equity in
earnings of
Crown Imports $41.2 $38.9 6% $255.1 $38.9 NM
Corporate
Operations and
Other
Consolidated net
sales $884.4 $1,142.2 (23%) $3,773.0 $5,216.4 (28%)
Operating income $(22.2) $(16.1) 38% $(85.5) $(60.9) 40%
% Net sales 2.5% 1.4% 2.3% 1.2%
Constellation Brands, Inc. and Subsidiaries
GEOGRAPHIC INFORMATION
(in millions)
Constant
Currency
Three Months Ended Per Percent
February February cent Currency Change
29, 2008 28, 2007 Change Impact (3)
Geographic Net Sales (1)(2)
North America $611.1 $673.0 (9%) 2% (11%)
Branded wine $501.7 $501.4 - 2% (2%)
Imported beers $- $90.1 (100%) - (100%)
Spirits $95.1 $72.7 31% - 31%
Wholesale and other $14.3 $8.8 63% 15% 48%
Europe $173.7 $385.8 (55%) 1% (56%)
Branded wine $148.8 $125.8 18% 1% 17%
Wholesale and other $24.9 $260.0 (90%) - (91%)
Australia/New Zealand $99.6 $83.4 19% 14% 6%
Branded wine $96.3 $78.9 22% 14% 8%
Wholesale and other $3.3 $4.5 (27%) 9% (36%)
Organic
Constant
Currency
Acquis Divest Per
Three Months Ended Per ition iture Curr cent
February February cent Impact Impact ency Change
29, 2008 28, 2007 Change (4) (5) Impact (3)
Branded Wine Geographic
Net Sales (1)(2)
North America $501.7 $501.4 - 3% - 2% (5%)
Europe 148.8 125.8 18% - 12% 1% 4%
Australia/New Zealand 96.3 78.9 22% - - 14% 8%
Consolidated branded
wine net sales $746.8 $706.1 6% 2% 2% 3% (2%)
Constant
Currency
Year Ended Per Percent
February February cent Currency Change
29, 2008 28, 2007 Change Impact (3)
Geographic Net Sales (1)(2)
North America $2,488.2 $3,346.9 (26%) 1% (27%)
Branded wine $2,005.6 $1,933.2 4% 1% 2%
Imported beers $- $1,043.6 (100%) - (100%)
Spirits $414.2 $329.4 26% - 26%
Wholesale and other $68.4 $40.7 68% 7% 61%
Europe $885.9 $1,518.8 (42%) 4% (45%)
Branded wine $637.9 $495.7 29% 8% 21%
Wholesale and other $248.0 $1,023.1 (76%) 2% (78%)
Australia/New Zealand $398.9 $350.7 14% 13% 1%
Branded wine $373.4 $326.8 14% 13% 1%
Wholesale and other $25.5 $23.9 7% 12% (5%)
Organic
Constant
Currency
Acquis Divest Per
Year Ended Per ition iture Curr cent
February February cent Impact Impact ency Change
29, 2008 28, 2007 Change (4) (5) Impact (3)
Branded Wine Geographic
Net Sales (1)(2)
North America $2,005.6 $1,933.2 4% 5% - 1% (3%)
Europe 637.9 495.7 29% 5% 11% 8% 4%
Australia/New Zealand 373.4 326.8 14% 3% - 13% (2%)
Consolidated branded
wine net sales $3,016.9 $2,755.7 9% 5% 2% 4% (2%)
(1) Refer to discussion under "Reconciliation of Reported, Organic and
Constant Currency Net Sales" on following page for definition of
constant currency net sales and organic constant currency net sales
and reasons for use.
(2) Net sales are attributed to countries based on the location of the
selling company.
(3) May not sum due to rounding as each item is computed independently.
(4) Acquisition impact includes net sales of branded wine acquired in the
acquisition of Vincor International Inc. ("Vincor") for the period
March 1, 2007, through May 31, 2007, included in the year ended
February 29, 2008, and net sales of branded wine acquired in the
acquisition of Fortune Brands U.S. wine business ("BWE") for the
period December 17, 2007, through February 29, 2008, included in the
three months and year ended February 29, 2008.
(5) Divestiture impact includes the add-back of U.K. branded wine net
sales previously sold through the U.K. wholesale business for the
three months and year ended February 28, 2007.
Constellation Brands, Inc. and Subsidiaries
RECONCILIATION OF REPORTED, ORGANIC AND CONSTANT CURRENCY NET SALES
(in millions)
As the Company acquired Vincor on June 5, 2006, formed its imported beer joint venture on January 2, 2007, acquired Svedka on March 19, 2007, formed its U.K. wholesale joint venture on April 17, 2007, and acquired BWE on December 17, 2007, organic net sales for the respective periods are defined by the Company as reported net sales less net sales of Vincor products, net sales of imported beers, net sales of Svedka products, net sales of U.K. wholesale, plus net sales of U.K. branded wine, or net sales of BWE products, 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.
Constant
Currency
Three Months Ended Per Curr Percent
February February cent ency Change
29, 2008 28, 2007 Change Impact (1)
Consolidated Net Sales
Branded wine $746.8 $706.1 6% 3% 2%
Wholesale and other 42.5 273.3 (84%) 1% (85%)
Imported beers - 90.1 (100%) - (100%)
Spirits 95.1 72.7 31% - 31%
Consolidated reported net sales 884.4 1,142.2 (23%) 2% (25%)
Less: Vincor (2) - -
Less: Imported beers (3) - (90.1)
Less: Svedka (4) (14.8) -
Less: U.K. wholesale, net of
U.K. branded wine (5) - (223.7)
Less: BWE (6) (13.9) -
Consolidated organic net sales $855.7 $828.4 3% 3% -
Branded Wine Net Sales
Branded wine reported net sales $746.8 $706.1 6% 3% 2%
Less: Vincor (2) - -
Plus: U.K. branded wine (5) - 15.3
Less: BWE (6) (13.9) -
Branded wine organic net sales $732.9 $721.4 2% 3% (2%)
Spirits Net Sales
Spirits reported net sales $95.1 $72.7 31% - 31%
Less: Svedka (4) (14.8) -
Spirits organic net sales $80.3 $72.7 10% - 10%
Wholesale and Other Net Sales
Wholesale and other reported net
sales $42.5 $273.3 (84%) 1% (85%)
Less: Vincor (2) - -
Less: U.K. wholesale (5) - (239.0)
Wholesale and other organic
net sales $42.5 $34.3 24% 6% 18%
Constant
Currency
Year Ended Per Curr Percent
February February cent ency Change
29, 2008 28, 2007 Change Impact (1)
Consolidated Net Sales
Branded wine $3,016.9 $2,755.7 9% 4% 6%
Wholesale and other 341.9 1,087.7 (69%) 2% (71%)
Imported beers - 1,043.6 (100%) - (100%)
Spirits 414.2 329.4 26% - 26%
Consolidated reported
net sales 3,773.0 5,216.4 (28%) 3% (30%)
Less: Vincor (2) (133.7) -
Less: Imported beers (3) - (1,043.6)
Less: Svedka (4) (55.1) -
Less: U.K. wholesale, net of
U.K. branded wine (5) - (759.8)
Less: BWE (6) (13.9) -
Consolidated organic
net sales $3,570.3 $3,413.0 5% 4% 1%
Branded Wine Net Sales
Branded wine reported
net sales $3,016.9 $2,755.7 9% 4% 6%
Less: Vincor (2) (126.3) -
Plus: U.K. branded wine (5) - 55.7
Less: BWE (6) (13.9) -
Branded wine organic
net sales $2,876.7 $2,811.4 2% 4% (2%)
Spirits Net Sales
Spirits reported net sales $414.2 $329.4 26% - 26%
Less: Svedka (4) (55.1) -
Spirits organic net sales $359.1 $329.4 9% - 9%
Wholesale and Other Net Sales
Wholesale and other reported
net sales $341.9 $1,087.7 (69%) 2% (71%)
Less: Vincor (2) (7.4) -
Less: U.K. wholesale (5) - (815.5)
Wholesale and other organic
net sales $334.5 $272.2 23% 9% 14%
(1) May not sum due to rounding as each item is computed independently.
(2) For the period March 1, 2007, through May 31, 2007, included in the
year ended February 29, 2008.
(3) For the three months and year ended February 28, 2007.
(4) For the three months ended February 29, 2008, and for the period March
19, 2007, through February 29, 2008, included in the year ended
February 29, 2008.
(5) Amount includes net sales of U.K. wholesale business, net of U.K.
branded wine net sales previously sold through the U.K. wholesale
business, for the three months ended February 28, 2007, and for the
period April 17, 2006, through February 28, 2007, included in the year
ended February 28, 2007.
(6) For the period December 17, 2007, through February 29, 2008, included
in the three months and year ended February 29, 2008.
Constellation Brands, Inc. and Subsidiaries
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES(1)
(in millions, except per share data)
Three Months Ended February 29, 2008
Strategic
Inven Business Comparable
Reported tory Realign Basis
Basis Step ment Other (Non
(GAAP) -up (2) (3) -GAAP)
Net Sales $884.4 $884.4
Cost of product sold (572.7) 3.3 15.3 (554.1)
Gross Profit 311.7 3.3 15.3 330.3
Selling, general and
administrative expenses ("SG&A") (227.1) 28.6 5.3 (193.2)
Impairment of goodwill and
intangible assets (807.1) 7.4 799.7 -
Acquisition-related integration
costs (6.6) 6.6 -
Restructuring and related charges (6.2) 6.2 -
Operating (Loss) Income (735.3) 3.3 64.1 805.0 137.1
Equity in earnings of equity
method investees 27.8 15.1 42.9
EBIT 180.0
Interest expense, net (93.0) (93.0)
Gain on change in fair value of
derivative instrument - -
(Loss) Income Before Income Taxes (800.5) 3.3 64.1 820.1 87.0
(Provision for) benefit from
income taxes (31.4) (1.2) (14.5) 34.1 (13.0)
Net (Loss) Income $(831.9) $2.1 $49.6 $854.2 $74.0
Diluted (Loss) Earnings Per Common
Share $(3.90) $0.34
Weighted Average Common Shares
Outstanding - Diluted(4) 191.946 219.199
Gross Margin 35.2% 37.3%
SG&A as a percent of net sales 25.7% 21.8%
Operating Margin NM 15.5%
Effective Tax Rate NM 14.9%
Three Months Ended February 28, 2007
Strategic
Inven Business Comparable
Reported tory Realign Basis
Basis Step ment Other (Non
(GAAP) -up (2) (3) -GAAP)
Net Sales $1,142.2 $1,142.2
Cost of product sold (796.9) 5.9 2.5 0.1 (788.4)
Gross Profit 345.3 5.9 2.5 0.1 353.8
Selling, general and
administrative expenses ("SG&A") (194.0) 1.5 0.1 (192.4)
Impairment of goodwill and
intangible assets - -
Acquisition-related integration
costs (6.0) 6.0 -
Restructuring and related charges (6.4) 6.4 -
Operating (Loss) Income 138.9 5.9 16.4 0.2 161.4
Equity in earnings of equity
method investees 39.2 0.1 39.3
EBIT 200.7
Interest expense, net (74.4) (74.4)
Gain on change in fair value of
derivative instrument - -
(Loss) Income Before Income Taxes 103.7 6.0 16.4 0.2 126.3
(Provision for) benefit from
income taxes (33.5) (2.1) (5.7) (0.2) (41.5)
Net (Loss) Income $70.2 $3.9 $10.7 $- $84.8
Diluted (Loss) Earnings Per
Common Share $0.29 $0.35
Weighted Average Common Shares
Outstanding - Diluted(4) 239.566 239.566
Gross Margin 30.2% 31.0%
SG&A as a percent of net sales 17.0% 16.8%
Operating Margin 12.2% 14.1%
Effective Tax Rate 32.3% 32.9%
Percent Percent
Change - Change -
Reported Comparable
Basis Basis
(GAAP) (Non-GAAP)
Net Sales (23%) (23%)
Cost of product sold (28%) (30%)
Gross Profit (10%) (7%)
Selling, general and administrative
expenses ("SG&A") 17% 0%
Impairment of goodwill and
intangible assets N/A N/A
Acquisition-related integration costs 10% N/A
Restructuring and related charges (3%) N/A
Operating (Loss) Income NM (15%)
Equity in earnings of equity method
investees (29%) 9%
EBIT N/A (10%)
Interest expense, net 25% 25%
Gain on change in fair value of
derivative instrument N/A N/A
(Loss) Income Before Income Taxes NM (31%)
(Provision for) benefit from income taxes (6%) (69%)
Net (Loss) Income NM (13%)
Diluted (Loss) Earnings Per Common Share NM (3%)
Weighted Average Common Shares
Outstanding - Diluted(4)
Gross Margin
SG&A as a percent of net sales
Operating Margin
Effective Tax Rate
Constellation Brands, Inc. and Subsidiaries
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES (continued)(1)
(in millions, except per share data)
Year Ended February 29, 2008
Strategic
Inven Business Comparable
Reported tory Realign Basis
Basis Step ment Other (Non
(GAAP) -up (5) (6) -GAAP)
Net Sales $3,773.0 $3,773.0
Cost of product sold (2,491.5) 11.4 22.1 0.1 (2,457.9)
Gross Profit 1,281.5 11.4 22.1 0.1 1,315.1
Selling, general and
administrative expenses (807.3) 31.8 5.3 (770.2)
Impairment of goodwill and
intangible assets (807.1) 7.4 799.7 -
Acquisition-related integration
costs (11.8) 11.8 -
Restructuring and related
charges (6.9) 6.9 -
Operating (Loss) Income (351.6) 11.4 80.0 805.1 544.9
Equity in earnings of equity
method investees 257.9 0.9 15.1 273.9
EBIT 818.8
Interest expense, net (341.8) (341.8)
Gain on change in fair value of
derivative instrument - -
(Loss) Income Before Income
Taxes (435.5) 12.3 80.0 820.2 477.0
(Provision for) benefit from
income taxes (174.9) (4.4) (10.5) 34.1 (155.7)
Net (Loss) Income $(610.4) $7.9 $69.5 $854.3 $321.3
Diluted (Loss) Earnings Per
Common Share $(2.82) $1.44
Weighted Average Common Shares
Outstanding - Diluted(4) 195.135 222.925
Gross Margin 34.0% 34.9%
SG&A as a percent of net sales 21.4% 20.4%
Operating Margin NM 14.4%
Effective Tax Rate NM 32.6%
Year Ended February 28, 2007
Strategic
Inven Business Comparable
Reported tory Realign Basis
Basis Step ment Other (Non
(GAAP) -up (5) (6) -GAAP)
Net Sales $5,216.4 $5,216.4
Cost of product sold (3,692.5) 30.2 7.2 3.1 (3,652.0)
Gross Profit 1,523.9 30.2 7.2 3.1 1,564.4
Selling, general and
administrative expenses (768.8) 29.7 17.3 (721.8)
Impairment of goodwill and
intangible assets - -
Acquisition-related integration
costs (23.6) 23.6 -
Restructuring and related
charges (32.5) 32.5 -
Operating (Loss) Income 699.0 30.2 93.0 20.4 842.6
Equity in earnings of equity
method investees 49.9 2.8 52.7
EBIT 895.3
Interest expense, net (268.7) (268.7)
Gain on change in fair value of
derivative instrument 55.1 (55.1) -
(Loss) Income Before Income Taxes 535.3 33.0 93.0 (34.7) 626.6
(Provision for) benefit from
income taxes (203.4) (11.8) (20.5) 12.4 (223.3)
Net (Loss) Income $331.9 $21.2 $72.5 $(22.3) $403.3
Diluted (Loss) Earnings Per
Common Share $1.38 $1.68
Weighted Average Common Shares
Outstanding - Diluted(4) 239.772 239.772
Gross Margin 29.2% 30.0%
SG&A as a percent of net sales 14.7% 13.8%
Operating Margin 13.4% 16.2%
Effective Tax Rate 38.0% 35.6%
Percent Percent
Change - Change -
Reported Comparable
Basis Basis
(GAAP) (Non-GAAP)
Net Sales (28%) (28%)
Cost of product sold (33%) (33%)
Gross Profit (16%) (16%)
Selling, general and administrative
expenses 5% 7%
Impairment of goodwill and
intangible assets N/A N/A
Acquisition-related integration costs (50%) N/A
Restructuring and related charges (79%) N/A
Operating (Loss) Income NM (35%)
Equity in earnings of equity method
investees 417% 420%
EBIT N/A (9%)
Interest expense, net 27% 27%
Gain on change in fair value of
derivative instrument (100%) N/A
(Loss) Income Before Income Taxes NM (24%)
(Provision for) benefit from income taxes (14%) (30%)
Net (Loss) Income NM (20%)
Diluted (Loss) Earnings Per Common Share NM (14%)
Weighted Average Common Shares
Outstanding - Diluted(4)
Gross Margin
SG&A as a percent of net sales
Operating Margin
Effective Tax Rate
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 years ended February
29, 2008, and February 28, 2007. 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 February 29, 2008, strategic business
realignment items primarily include a loss on the sale of the Almaden
and Inglenook wine brands of $27.6 million, net of a tax benefit of
$0.2 million, and costs recognized by the company primarily in
connection with its plan to streamline certain of its international
operations, primarily in Australia, and its plan to streamline certain
of its operations in the U.S., primarily in connection with the
restructuring and integration of the operations of the acquired
Fortune Brands U.S. wine portfolio (collectively, the "Fiscal 2008
Plan") of $22.6 million, net of a tax benefit of $12.4 million. For
the three months ended February 28, 2007, strategic business
realignment items primarily include costs recognized by the company in
connection with (i) its plan 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") of $5.4
million, net of a tax benefit of $2.6 million, (ii) the restructuring
and integration of the operations of Vincor (the "Vincor Plan") of
$4.7 million, net of a tax benefit of $2.7 million, and (iii) its
worldwide wine reorganization, including its program to consolidate
certain west coast production processes in the U.S. (collectively, the
"Fiscal 2006 Plan") of $0.5 million, net of a tax benefit of $0.3
million.
(3) For the three months ended February 29, 2008, other primarily includes
an impairment of goodwill and intangible assets of $793.7 million, net
of a tax benefit of $6.0 million, an impairment of equity method
investment of $15.1 million, net of a tax benefit of $0.0 million, and
a valuation allowance against net operating loss carryforwards in
Australia of $51.7 million, partially offset by a tax benefit related
to prior period stock option exercises of $10.0 million. For the
three months ended February 28, 2007, other includes the write-off of
deferred financing fees in connection with the company's amendment of
its senior credit facility and adverse grape costs recognized in
connection with the acquisition of The Robert Mondavi Corporation.
(4) In accordance with the antidilution provisions of Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS
No. 128"), the dilutive impact of potential common shares is excluded
from the company's reported diluted weighted average common shares
outstanding. 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 diluted weighted average common
shares outstanding.
(5) For the year ended February 29, 2008, strategic business realignment
items primarily include a loss on the sale of the Almaden and
Inglenook wine brands of $27.6 million, net of a tax benefit of $0.2
million, a loss on disposal in connection with the company's
contribution of its U.K. wholesale business of $13.8 million,
including $7.2 million additional tax expense, and costs recognized by
the company primarily in connection with (i) the Fiscal 2008 Plan of
$23.8 million, net of a tax benefit of $13.0 million, (ii) the Fiscal
2007 Wine Plan of $5.3 million, net of a tax benefit of $2.1 million
and (iii) the Fiscal 2006 Plan of $2.3 million, net of a tax benefit
of $1.5 million, partially offset by a realized gain on a prior
non-strategic asset sale of $4.8 million, net of additional tax
expense of $0.0 million. For the year ended February 28, 2007,
strategic business realignment items consist primarily of costs
recognized by the company in connection with (i) the Fiscal 2007 Wine
Plan of $31.8 million, net of a tax benefit of $10.4 million, (ii) the
Vincor Plan of $16.3 million, net of a tax benefit of $9.4 million and
(iii) the Fiscal 2006 Plan of $6.7 million, net of a tax benefit of
$3.8 million and a loss on the sale of the company's branded bottled
water business of $16.9 million, including $3.5 million of additional
tax expense.
(6) For the year ended February 29, 2008, other primarily includes an
impairment of goodwill and intangible assets of $793.7 million, net of
a tax benefit of $6.0 million, an impairment of equity method
investment of $15.1 million, net of a tax benefit of $0.0 million, and
a valuation allowance against net operating loss carryforwards in
Australia of $51.7 million, partially offset by a tax benefit related
to prior period stock option exercises of $10.0 million. For the year
ended February 28, 2007, other includes (i) a gain of $35.1 million,
net of tax expense of $20.0 million, on the mark-to-market adjustment
of the foreign currency forward contract entered into by the company
in connection with the acquisition of Vincor to fix the U.S. dollar
cost of the acquisition and payment of certain outstanding
indebtedness, (ii) the write-off of deferred financing fees of $7.4
million, net of a tax benefit of $4.5 million, in connection with the
company's repayment of its prior senior credit facility and amendment
of its senior credit facility, (iii) foreign currency losses of $3.4
million, net of a tax benefit of $2.0 million, on foreign denominated
intercompany loan balances associated with the acquisition of Vincor
and (iv) $2.0 million, net of a tax benefit of $1.1 million, of
adverse grape costs recognized in connection with the acquisition of
The Robert Mondavi Corporation.
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
Ending February 28, 2009
Diluted Earnings Per Share Guidance
Forecasted diluted earnings per share
- reported basis (GAAP) $1.46 $1.54
Inventory step-up 0.06 0.06
Strategic business realignment(1) 0.16 0.16
Forecasted diluted earnings per share
- comparable basis (Non-GAAP)(2) $1.68 $1.76
Actual for the Year
Ended February 29, 2008
Diluted earnings per share - reported
basis (GAAP) $(2.82)
Inventory step-up 0.04
Strategic business realignment(1) 0.31
Other(3) 3.83
Impact of anti-dilutive potential
common shares(4) (0.08)
Diluted earnings per share -
comparable basis (Non-GAAP)(2) $1.44
(1) Includes $0.10, $0.04, $0.02 and $0.01 diluted earnings per share for
the year ending February 28, 2009, associated with the Fiscal 2008
Plan, the Fiscal 2007 Wine Plan, the Fiscal 2006 Plan and the Vincor
Plan, respectively. Includes $0.12, $0.11, $0.06, $0.02, $0.01, $0.01
and ($0.02) diluted earnings per share for the year ended February 29,
2008, associated with the loss on disposal of the Almaden and
Inglenook wine brands, the Fiscal 2008 Plan, the loss on disposal in
connection with the company's contribution of its U.K. wholesale
business to the Matthew Clark joint venture and the company's
provision for income taxes in connection with the repatriation of
proceeds associated with this transaction, the Fiscal 2007 Wine Plan,
the Vincor Plan, the Fiscal 2006 Plan, and the realized gain on a
prior asset sale, respectively.(2)
(2) May not sum due to rounding as each item is computed independently.
(3) Includes $3.56, $0.23, $0.07, $0.02 and ($0.05) diluted earnings per
share for the year ended February 29, 2008, associated with an
impairment of goodwill and intangible assets, a valuation allowance
against net operating loss carryforwards in Australia, an impairment
of an equity method investment, a loss on write-off of certain
property, plant and equipment, and a tax benefit related to prior
period stock option exercises.(2)
(4) In accordance with the antidilution provisions of SFAS No. 128, the
dilutive impact of potential common shares is excluded from the
company's reported diluted earnings per share calculation. 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 diluted earnings per share calculation.
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, 2009
Net cash provided by operating
activities (GAAP) $460.0 $510.0
Purchases of property, plant and
equipment (150.0) (170.0)
Free cash flow (Non-GAAP) $310.0 $340.0
Actual for Actual for
the Year the Year
Ended Ended
February 29, February 28,
2008 2007
Net cash provided by operating
activities (GAAP) $519.8 $313.2
Purchases of property, plant and
equipment (143.8) (192.0)
Free cash flow (Non-GAAP) $376.0 $121.2
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