On June 28, alcoholic beverage distributor Constellation Brands (NYSE:STZ) released first-quarter 2008 earnings for the period ended May 31.

  • It was a rough-and-tumble report this time, but don't be fooled by the raw numbers. Comparability is difficult, as Constellation recently reduced its wine distributions in the U.S., completed the acquisition of SVEDKA premium vodka and Vincor, and formed a joint venture in Crown Imports.
  • Net earnings were hurt by higher interest payments on the larger debt load, leaving the balance sheet a bit precarious by using borrowed funds to grow through acquisition.
  • The increase in cash usage resulted from the timing of payments related to an earlier harvest in Australia and from building working capital for its newly established beer business.
  • Our Motley Fool CAPS players seem to enjoy the fruity tang of Constellation, giving the stock four stars. That's even with larger rival Brown-Forman (NYSE:BF-B) and almost as tasty as Motley Fool Income Investor recommendation Diageo (NYSE:DEO) with its five stars.

(Figures in millions, except per-share data)

Income Statement Highlights

Q1 2008

Q1 2007

Change

Sales

$901

$1,156

(22%)

Net Profit

$29.8

$83.0

(64.1%)

EPS

$0.13

$0.36

(63.9%)

Diluted Shares

233.4

240.1

(2.8%)

Get back to basics with the income statement.

Margin Checkup

Q1 2008

Q1 2007

Change*

Gross Margin

29.8%

27.6%

2.2

Operating Margin

7.6%

12.4%

(4.8)

Net Margin

3.3%

7.2%

(3.9)
*Expressed in percentage points.

Margins are the earnings engine.

Balance Sheet Highlights

Assets

Q1 2008

Q1 2007

Change

Cash + ST Invest.

$33.5

$37.5

(10.7%)

Accounts Rec.

$764

$854

(10.6%)

Inventory

$1,955

$1,751

11.7%

Liabilities

Q1 2008

Q1 2007

Change

Accounts Payable

$271

$365

(25.9%)

Long-Term Debt*

$4,745

$2,860

65.9%
*Including current portion -- $378.6 million in 2006 and $362.8 million in 2007.

The balance sheet reflects the company's health.

Cash Flow Highlights

Q1 2008

Q1 2007

Change

Cash From Ops.

($86.1)

$6.7

N/A

Capital Expenditures

$17.7

$45.1

(60.8%)

Free Cash Flow

($103.8)

($38.4)

(170.3%)

Owner Earnings

$50.8

$14.1

260.3%

Free cash flow is a Fool's best friend.

Related Foolishness:

Diageo is a Motley Fool Income Investor pick. Take a free 30-day trial to find out how to make money on booze without starting your own neighborhood bar.

Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.

At the time of publication, Anders Bylund had no position in any company mentioned. He prefers fruity, blue Polar Bear cocktails, or simple vodka on the rocks. Fool rules are here.