Constellation Brands cuts net debt $146 million in fiscal first half

By Paul Deckelman

New York, Oct. 5 – Constellation Brands, Inc. cut its net debt level by $146 million in its fiscal 2017 first half and lowered its leverage ratio of net-debt as a multiple of comparable-basis EBITDA to 3.4 times from 3.8 times, the company’s chief financial officer said Wednesday.

David E. Klein, who also serves as an executive vice president of Constellation, a Victor, N.Y.-based producer, importer and distributor of beer, wine and liquor, told analysts on the company’s conference call following the release of its fiscal second quarter and first half results that the lower leverage ratio does not even yet “reflect the full-year EBITDA benefits from the Ballast Point and Prisoner acquisitions.” Ballast Point is a craft beer brewing company that Constellation bought last November; it acquired the Prisoner Wine Co. in April.

At the end of the fiscal 2017 second quarter and first half on Aug. 31, Constellation’s balance sheet showed net debt of $7.851 billion, down from $7.997 billion at the end of fiscal 2016 on Feb. 29.

For the latest quarter, the balance sheet showed $7.021 billion of long-term debt less current maturities, $893 million of current maturity debt and $114 million of notes payable to banks, versus $6.816 billion of long-term debt, $856 million of current maturity debt and $408 million of notes payable at the end of fiscal 2016.

Cash and equivalents had grown to $177.3 million at the end of the second quarter from $83.1 million at the end of fiscal 2016.

At the end of August, Constellation redeemed its $700 million of outstanding 7¼% senior notes that were scheduled to come due last month, primarily funding the redemption with cash.

Klein said interest expense for the quarter increased by $17 million, primarily due to higher average borrowings.

For the first half of fiscal 2017, Constellation generated $676 million of free cash flow, compared to $508 million for the same period last year.

Klein said that operating cash flow was above the $1 billion mark, up 30%, year-over-year, driven by strong earnings growth, particularly in the company’s booming imported beer business.

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