USA: Constellation Brands Inc. posts net sales up 5% to $1.2 billion; branded business net sales up 8%

Constellation Brands, Inc., a leading international producer and marketer of beverage alcohol, reported June 29 record first quarter net sales of $1.2 billion for the quarter ended May 31, 2006 ("first quarter 2007"), up five percent over prior year, or seven percent on a constant currency basis. Branded business net sales grew eight percent, or nine percent on a constant currency basis, driven by imported beers and branded wine in North America.

"We sprinted out of the starting gate this year with solid performance in our branded businesses," said Richard Sands, Constellation Brands chairman and chief executive officer. "These results demonstrate the strength of our unsurpassed portfolio breadth, geographic diversity, distribution scale and innovation," continued Sands. "With Vincor joining the Constellation family, Canada becomes our fifth core market and one which complements our existing geographic diversity while providing additional growth potential from a very stable and profitable market."
Net Sales Commentary

The double-digit increase in imported beers net sales is primarily due to volume growth across Constellation's Mexican beer portfolio, reflecting continued robust consumer demand and strong shipments in advance of the key summer selling season. "The import and craft beer businesses continue to be industry growth drivers in the U.S.," stated Sands. "We have the right brands, in the right market, at the right time to maximize future growth potential."

Beers and Spirits segment operating margin declined 80 basis points for the quarter due primarily to higher transportation costs for the company's imported beers, overall product mix within the segment, and the aforementioned stock compensation expense.

As previously announced, Constellation entered into a foreign currency forward contract in connection with the acquisition of Vincor (see discussion below) to fix the U.S. dollar cost of the acquisition and payment of certain outstanding indebtedness. The May 31, 2006 mark-to-market adjustment of the forward contract resulted in a first quarter pre-tax gain of $52.5 million. The company also recorded a pre-tax loss of $14.1 million on the previously announced divestiture of its Strathmore water business. The diluted EPS impacts of the aforementioned items were a gain of $0.14 and a loss of $0.07, respectively.

As previously announced, on June 5, 2006, Constellation completed the acquisition of all of the issued and outstanding common shares of Vincor International Inc. ("Vincor") for C$1.227 billion. The total transaction value was C$1.58 billion (USD $1.44 billion), which included Vincor's net debt of C$344 million and Constellation's estimated transaction fees of approximately C$13 million.

The reported effective tax rate for first quarter 2007 was 41.8 percent compared with 17.7 percent for first quarter 2006. The comparable basis effective tax rate was 36.0 percent for first quarter 2007 versus 35.6 percent for the prior year period.

"We're confident in our ability to deliver solid EPS growth for the year on a comparable basis, despite comparison challenges for stock compensation expense, increased U.K. duty, interest and taxes that we planned at the outset of the year," said Sands. "We are going to continue to build upon our leadership position in beverage alcohol and complement our organic growth with strategic acquisitions, improve our return on invested capital and create value."
About Constellation Brands

Constellation Brands, Inc. is a leading international producer and marketer of beverage alcohol brands with a broad portfolio across the wine, spirits and imported beer categories. Well-known brands in Constellation's portfolio include: Almaden, Arbor Mist, Vendange, Woodbridge by Robert Mondavi, Hardys, Goundrey, Nobilo, Kim Crawford, Alice White, Ruffino, Kumala, Robert Mondavi Private Selection, Rex Goliath, Toasted Head, Blackstone, Ravenswood, Estancia, Franciscan Oakville Estate, Inniskillin, Jackson-Triggs, Simi, Robert Mondavi Winery, Stowells, Blackthorn, Black Velvet, Mr. Boston, Fleischmann's, Paul Masson Grande Amber Brandy, Chi-Chi's, 99 Schnapps, Ridgemont Reserve 1792, Effen Vodka, Corona Extra, Corona Light, Pacifico, Modelo Especial, Negra Modelo, St. Pauli Girl, Tsingtao.

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