April 2/Marketing Business Weekly -- Constellation Brands Inc. completed the sale of its value spirits business to Sazerac Company Inc. for $334 million, subject to post-closing adjustments.

The company also announced that it has updated its diluted earnings per share outlook for fiscal 2009. 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.

"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. Previously, we passed through price increases to offset two duty increases that were implemented earlier in the year."

"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 5% of our global workforce." Additional details of the restructuring will be included as part of the company's earnings announcement scheduled for April 8, 2009.

Also, 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. For fiscal 2009, the company now expects a reported basis diluted loss per share in the range of $1.26-1.28.

"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 million to $390 million range for fiscal 2009," said Bob Ryder, chief financial officer of Constellation Brands. "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. Our focus on rapid deleveraging has allowed us to achieve our debt to comparable basis EBITDA goal for the year in the low four times range."

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 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. 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. The company's U.S. spirits business continues to experience strong growth rates driven by sales of SVEDKA Vodka. Increased promotional activities in the Crown imported beer business are expected to offset the impact of the recession in some of our key markets," said Sands. "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."

From the April 13, 2009, Prepared Foods E-dition