Constellation Brands Inc. (NYSE:STZ) Q4 2020 Earnings Conference Call - Final Transcript

Apr 03, 2020 • 10:30 am ET

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Constellation Brands Inc. (NYSE:STZ) Q4 2020 Earnings Conference Call - Final Transcript

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Presentation
Executive
Garth Hankinson

Q1 Wine & Spirits results assumed a decline of 25% to 30% in sales and operating income due to the following factors: Unfavorable Q1 FY21 comparison due to a very strong quarter last year for the brands to be divested. sales of the Black Velvet brands are not included in this year's Q1 result as a result of the divestiture late last year.

And distributors have ample supply of brands targeted for the Gallo divestiture as they assumed a fiscal '20 year-end close on the transaction. Our retained portfolio of Power Brands in the Wine & Spirits business including Cook's and J. Roget targeted net sales growth of 2% to 4% on a pre-COVID-19 basis for fiscal '21. Other pre-COVID-19 target assumptions include interest expense in the range of $385 million to $395 million, comparable tax rate excluding Canopy equity and earnings of approximately 18%, weighted average diluted shares outstanding targeted at approximately 195 million and operating cash flow in the range of $2.3 billion to $2.5 billion. This is a good spot to discuss a few items around capital management and deployment. As you would expect, we are reviewing in detail all expenses and capital expenditure plans for refinement and flexibility to make sure we prioritize and optimize this spend given the current business conditions and economic environment.

While our Wine & Spirits EBIT is moving down in fiscal '21 due to the planned divestitures, we are maintaining our current quarterly dividend rate. In addition, we remain focused on our goal of returning significant capital to shareholders, balance between dividend payments and share repurchases. However, in the short term, given the uncertainty around the COVID-19 impact on our business, we will be maximizing free cash flow and utilizing that free cash flow to reduce debt and leverage. We believe longer term we retain the full flexibility to fulfill our $4.5 billion commitment over time. In closing, I want to reiterate that Constellation is a strong cash flow generator, has ample liquidity and financial flexibility. We remain focused on prudently navigating through the challenging environment presented by COVID-19 and will look to provide updates, including full year guidance as more factors become known.

With that, Bill and I are happy to take your questions.