Constellation Brands (STZ) Cuts FY09 Adj-EPS Guidance; Completes Sale of Value Spirits Business

March 25, 2009 8:22 AM EDT

Constellation Brands, Inc. (NYSE: STZ) lowers its FY09 non-GAAP EPS guidance from $1.68-$1.72 to $1.60-$1.62, versus the consensus of $1. 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 Q4.

Also, during Q4, 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 FY09 and will be excluded from comparable basis results. For fiscal 2009, the company now expects a reported basis diluted loss per share in the range of $1.26-$1.28.

Also, the company announced that it has completed the sale of its value spirits business to Sazerac Company, Inc. for $334 million, subject to post-closing adjustments.

In addition, 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. 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.

For FY10, 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. 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.

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