Constellation Brands Reports First Quarter Fiscal 2015 Results

• Beer business acquisition drives significant increase in first quarter sales, earnings and free cash flow
   
• Achieves comparable basis diluted EPS of $1.07 and reported basis diluted EPS of $1.03
   
• Increases fiscal 2015 outlook driven by strong beer business performance; expects comparable basis diluted EPS of $4.10 - $4.25 and reported basis diluted EPS of $3.90 - $4.05
   
• Reaffirms free cash flow of $425 - $500 million for fiscal 2015 including operating cash flow target of at least $1 billion and capital expenditure estimate of $575 - $625 million

*Definitions of reported and comparable, as well as reconciliations of non-GAAP financial measures, are contained elsewhere in this news release.
NA=Not Applicable
NM=Not Meaningful

VICTOR, N.Y., JULY 2, 2014 - Constellation Brands, Inc. (NYSE: STZ and STZ.B), a leading beverage alcohol company, reported today its first quarter 2015 results.

"We posted a great quarter reflecting outstanding results for our beer business as well as wine and spirits performance that was generally in-line with our expectations," said Rob Sands, president and chief executive officer, Constellation Brands. "Within our beer business, we continue to capitalize on our industry-leading performance and excellent retail execution across our entire Mexican beer portfolio. These strong results are driving the upward revision to our EPS guidance for fiscal 2015."

Net Sales Commentary

The significant increase in consolidated net sales was driven by $868 million of incremental net sales related to the consolidation of Crown Imports' commercial beer business. For the quarter, net sales for the beer segment increased 14 percent primarily due to volume growth driven by strong consumer demand.

"Our beer business kicked off the summer selling season with strong execution during Cinco de Mayo and Memorial Day with the launch of the '120 Days of Summer' advertising campaign. These activities helped to drive strong marketplace performance during the first quarter as we continue to significantly outperform the industry and the import category, driven by Modelo Especial, Corona Extra and the rollout of Modelo Especial Chelada.  These results are driving a change in our full year beer guidance, as we now expect beer segment net sales growth of approximately 10 percent and beer segment operating income growth in the range of 25 to 30 percent," said Sands. ⁽¹⁾

Wine and spirits net sales on a constant currency basis decreased one percent. This reflects lower shipment volume primarily resulting from planned distributor inventory destocking, partially offset by the recognition of an agreed upon "make whole" distributor payment associated with this destocking activity, as well as favorable mix. "While first quarter depletion trends were impacted by some inventory destocking at retail, we gained market share in IRI channels and experienced excellent performance for a number of our focus brands including Mark West, Black Box, Kim Crawford, Ruffino, Rex Goliath, and Woodbridge by Robert Mondavi. Our wine and spirits business remains on track to meet its goals for the year," said Sands.

⁽¹⁾     In fiscal 2014, beer segment operating income totaled $773 million and included 100 percent of the beer commercial business (Crown) operating income for the entire year and brewery profits from the date of the beer business acquisition in June 2013.

Operating Income and Net Income Commentary

The increase in consolidated comparable basis operating income includes an incremental benefit of $288 million from the consolidation of results for Crown and the Mexican brewery as a result of the beer business acquisition. The increase in wine and spirits operating income primarily reflects favorable mix and lower SG&A costs.

Equity in earnings of equity method investees totaled $1 million compared to $67 million for the prior year first quarter. The decrease was due primarily to the timing of the close of the beer business acquisition.

Interest expense totaled $86 million, an increase of 58 percent. The increase was primarily due to higher average borrowings driven by the financing for the beer business acquisition, partially offset by lower average interest rates.

The effective tax rate for first quarter 2015 was 33 percent which reflected the benefits from integrating the beer business as compared to a 36 percent tax rate for the prior year first quarter.

Free Cash Flow Commentary

Free cash flow for first quarter 2015 totaled $101 million as compared to a use of cash of $19 million for the prior year first quarter. The increase was primarily due to incremental benefits from the beer business acquisition, partially offset by higher capital expenditures related primarily to the expansion of the brewery.

"Our free cash flow generation and planned brewery investments are on track for the year.  We continue to work diligently to finalize our plans for commodity sourcing and longer-term capacity expansion," said Bob Ryder, chief financial officer, Constellation Brands.

Beer Business Acquisition

The company completed its acquisition of Grupo Modelo's U.S. beer business from Anheuser-Busch InBev on June 7, 2013 for approximately $5.3 billion, including $558 million that was paid as a post-closing purchase price adjustment in June 2014. The transaction includes full ownership of Crown, which provides Constellation with complete, independent control of the U.S. commercial business; a state-of-the-art brewery in Nava, Mexico; and an exclusive perpetual brand license in the U.S. to import, market and sell Corona and the other Modelo brands Crown currently sells in the U.S. market. The perpetual brand license also includes certain brands and brand extensions not currently marketed in the U.S. by Crown and the freedom to develop new brand extensions and innovations.

Outlook
The table below sets forth management's current diluted EPS expectations for fiscal 2015 compared to fiscal 2014 actual results, both on a reported basis and a comparable basis.

Full-year fiscal 2015 guidance includes the following current assumptions:

• Interest expense: approximately $345 - $355 million
• Tax rate: approximately 30 percent
• Weighted average diluted shares outstanding: approximately 201 million
• Free cash flow: approximately $425 - $500 million
• Capital expenditures: approximately $575 - $625 million, including $450 - $500 million for the beer business

Conference Call

A conference call to discuss first quarter 2015 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 Wednesday, July 2, 2014 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 during the call will be available on the Internet at the company's website: 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 items that affect comparability ("unusual items"). The company's measure of segment profitability excludes 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, comparable basis effective tax rate and free cash flow.

Supplemental Financial Information

Tables reconciling non-GAAP measures, together with definitions of these measures and the reasons management uses these measures, are attached to and are part of this news release.
(Please see the link below.)

About Constellation Brands
Constellation Brands (NYSE: STZ and STZ.B) is a leading international producer and marketer of beer, wine and spirits with operations in the U.S., Canada, Mexico, New Zealand and Italy. In 2013, Constellation was one of the best performing stocks in the S&P 500. Constellation is the number three beer company in the U.S. with high-end, iconic imported brands including Corona Extra, Corona Light, Modelo Especial, Negra Modelo and Pacifico. Constellation is also the world's leader in premium wine selling great brands that people love including Robert Mondavi, Clos du Bois, Kim Crawford, Rex Goliath, Mark West, Franciscan Estate, Ruffino and Jackson-Triggs. The company's premium spirits brands include SVEDKA Vodka and Black Velvet Canadian Whisky.

Based in Victor, N.Y., the company believes that industry leadership involves a commitment to brand-building, our trade partners, the environment, our investors and to consumers around the world who choose our products when celebrating big moments or enjoying quiet ones. Founded in 1945, Constellation has grown to become a significant player in the beverage alcohol industry with more than 100 brands in its portfolio, sales in approximately 100 countries, about 40 facilities and approximately 6,300 talented employees. We express our company vision: to elevate life with every glass raised. To learn more, visit www.cbrands.com.

Forward-Looking Statements

The statements made under the heading Outlook, and all statements other than statements of historical fact set forth in this news release regarding Constellation Brands' 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 Brands may reiterate the Projections. Prior to the start of the company's quiet period, which will begin at the close of business Aug. 29, 2014, the public can continue to rely on the Projections as still being Constellation Brands' current expectations on the matters covered, unless the company publishes a notice stating otherwise. During Constellation Brands' "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:

• brewery expansion activities take place with expected scope, on expected terms and timetable, and with receipt of any necessary regulatory approvals;
• accuracy of supply projections, including those relating to brewery expansion;
• timeframe and actual costs associated with the brewery expansion may vary from management's current expectations due to market conditions, the company's cash and debt position, and other factors as determined by management;
• the impact of and the ability to realize the anticipated benefits of acquisitions, including as a result of difficulty in integrating the businesses of the companies involved;
• the exact duration of the share repurchase implementation and the amount and timing of any additional share repurchases;
• raw material and water 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, 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, results of operations or effective tax rate;
• changes in interest rates and the inherent unpredictability of currency fluctuations, commodity prices and raw material costs;
• accuracy of the bases for forecasts relating to joint ventures and associated costs, losses, purchase obligations and capital investment requirements; 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, 2014, which could cause actual future performance to differ from current expectations.

CONTACTS
Media
Cheryl Gossin: 585-678-7191

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