Constellation ups fiscal 2012 free cash flow target by $100 million

By Aleesia Forni

Columbus, Ohio, Jan. 5 - Constellation Brands Inc. increased its fiscal 2012 free cash flow target by $100 million to a range of $700 million to $750 million, which is an "all-time high consolation."

The company generated $587 million of free cash for the first nine months of the year, $287 million more than the same period of the previous year.

This improvement in cash flow reflects a reduced use of cash to fund receivables and a cash benefit for taxes, chief financial officer Robert P. Ryder added during the company's third-quarter fiscal 2012 conference call on Thursday.

"The increase is primarily due to the expected realization of additional cash tax benefits from the sale of our U.K. business that were previously targeted for fiscal 2013," he said.

This "strong" cash flow generation has enabled the company to reduce debt and repurchase stock.

As of the end of November, the company's debt totaled $3.1 billion, a $132 million decrease from the debt level at the end of fiscal 2011.

"Our continued strong free cash flow generation and deleveraging efforts over the past several years have enabled us to redeploy a portion of free cash flow to repurchase stock," Ryder said.

During the third quarter of fiscal 2012, the company repurchased roughly 5 million shares at a cost of $94 million.

For the first nine months of the fiscal year, Constellation repurchased 15 million shares for $281 million.

"We expect total repurchases through Q3 to benefit diluted EPS by approximately $0.06 for fiscal 2012," Ryder added.

The company's free cash flow generation and deleveraging efforts have created flexibility in its capital structure management.

"This flexibility has enabled us to buy back a significant number of shares as we have repurchased 281 million of stock through Q3, which is on top of the 300 million we repurchased in the last fiscal year," Ryder said.

"We expect to continue to evaluate share repurchases as an opportunistic basis as part of our ongoing efforts to optimize the capital structure of the business."

The Victor, N.Y.-based company's board has authorized buybacks of up to $500 million, and the company has roughly $200 million left with no additional board authorization at this point.

"But, as usual, we will be looking at the market and general trends to see whether we should be out there buying back more of our shares," Ryder added.

Constellation is a beer, wine and spirits maker.

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