On Thursday, Oct. 5, Constellation Brands, a leading producer and marketer of wine and alcoholic beverages (NYSE:STZ) (NYSE:STZ-B), released fiscal Q2 2007 earnings for the period ended Aug. 31, 2006. Here are the quick and dirty details for the quarter.

  • Net sales advanced 18.9%; organic growth contributed approximately 8%, while the acquisition of Vincor International accounted for the rest of top-line expansion. Organic growth was in the high single digits across the branded wine, beer, and spirits businesses.
  • Net profit fell 17%, thanks to certain merger and restructuring charges, while earnings fell 18.9% because of more diluted shares outstanding. Excluding the merger and restructuring charges, non-GAAP results improved from last year, as diluted earnings grew approximately 5%, matching analyst projections of $0.43.
  • Management detailed that consumers in the U.S. and Canada continue to migrate to more premium wines, which has benefited Constellations' brands; North American organic sales grew 9%.
  • Management will no longer be offering quarterly guidance, but intends to offer annual projections. For the year, it expects net sales growth in the low teens; GAAP earnings of $1.36-$1.40; and free cash flow of $155 million to $175 million, or $0.64-$0.73 per share, based on 240 million shares outstanding.

(Figures in millions, except per-share data)

Income Statement Highlights

Avg. Est.

Q2 2007

Q2 2006

Change

Sales

$1,410

$1,418

$1,192

18.9%

Net Profit

--

$68

$82

(17.0%)

EPS

$0.43

$0.30

$0.37

(18.9%)

Diluted Shares

240

239

0.5%

*EPS for Class A Common Stock

Get back to basics with a look at the income statement.

Margin Checkup

Q2 2007

Q2 2006

Change*

Gross Margin

29.26%

29.19%

0.07

Operating Margin

12.79%

14.61%

(1.82)

Net Margin

4.83%

6.91%

(2.08)

*Expressed in percentage points.

Margins are the earnings engine. See how they work.

Balance Sheet Highlights

Assets

Q2 2007

Q2 2006

Change

Cash + ST Invest.

$42

$19

126.0%

Accounts Rec.

$1,022

$891

14.8%

Inventory

$1,926

$1,616

19.2%



Liabilities

Q2 2007

Q2 2006

Change

Accounts Payable

$420

$362

16.1%

Long-Term Debt

$3,988

$2,704

47.4%



Learn the ways of the balance sheet.

Cash Flow Highlights

Q2 2007*

Q2 2006*

Change

Cash From Ops.

$85

$174

(51.2%)

Capital Expenditures

$103

$63

63.7%

Free Cash Flow

($18)

$111

N/A
*Six months ended Aug. 31, 2006, and Aug. 31, 2005

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Related Companies:

  • Diageo (NYSE:DEO)
  • Brown-Forman (NYSE:BF-A) (NYSE:BF-B)
  • Vina Concha Y Toro (NYSE:VCO)
  • Fortune Brands (NYSE:FO)

Related Foolishness:

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Fool contributor Ryan Fuhrmann is long shares of Diageo but has no financial interest in any other company mentioned. Feel free to email him with feedback or to further discuss any companies mentioned. The Fool has an ironclad disclosure policy.