STZ 5.31.2013 10Q
Table of Contents                                            

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 2013
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     

Commission File Number 001-08495
CONSTELLATION BRANDS, INC.
(Exact name of registrant as specified in its charter)
Delaware
16-0716709
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
 
207 High Point Drive, Building 100, Victor, New York
14564
 
(Address of principal executive offices)
(Zip Code)
 
 
 
 
(585) 678-7100
 
 
(Registrant’s telephone number, including area code)
 
 
 
 
 
 
 
(Former name, former address and former fiscal year, if changed since last report

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ý    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes ý    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
ý
Accelerated filer
¨
Non-accelerated filer
¨ (Do not check if a smaller reporting company)
Smaller reporting company
¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ¨    No  ý

The number of shares outstanding with respect to each of the classes of common stock of Constellation Brands, Inc., as of June 30, 2013, is set forth below:
Class
 
Number of Shares Outstanding
Class A Common Stock, par value $.01 per share
 
164,988,395
Class B Common Stock, par value $.01 per share
 
23,471,935
Class 1 Common Stock, par value $.01 per share
 
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This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the Companys control, that could cause actual results to differ materially from those set forth in, or implied by, such forward-looking statements. For further information regarding such forward-looking statements, risks and uncertainties, please see “Information Regarding Forward-Looking Statements” under Part I – Item 2 “Managements Discussion and Analysis of Financial Condition and Results of Operations.”


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PART I – FINANCIAL INFORMATION
Item 1.
Financial Statements.
CONSTELLATION BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions, except share and per share data)
(unaudited)
 
May 31, 2013
 
February 28, 2013
ASSETS
 
 
 
CURRENT ASSETS:
 
 
 
Cash and cash investments
$
609.3

 
$
331.5

Accounts receivable, net
453.8

 
471.9

Inventories
1,443.8

 
1,480.9

Prepaid expenses and other
216.4

 
186.9

Total current assets
2,723.3

 
2,471.2

PROPERTY, PLANT AND EQUIPMENT, net
1,207.6

 
1,229.0

GOODWILL
2,714.5

 
2,722.3

INTANGIBLE ASSETS, net
866.2

 
871.4

RESTRICTED CASH
1,550.0

 

OTHER ASSETS, net
390.8

 
344.2

Total assets
$
9,452.4

 
$
7,638.1

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
CURRENT LIABILITIES:
 
 
 
Notes payable to banks
$
221.0

 
$

Current maturities of long-term debt
33.3

 
27.6

Accounts payable
150.0

 
209.0

Accrued excise taxes
17.5

 
18.9

Other accrued expenses and liabilities
375.4

 
422.4

Total current liabilities
797.2

 
677.9

LONG-TERM DEBT, less current maturities
4,817.7

 
3,277.8

DEFERRED INCOME TAXES
631.1

 
599.6

OTHER LIABILITIES
209.0

 
222.5

COMMITMENTS AND CONTINGENCIES (NOTE 11)

 

STOCKHOLDERS’ EQUITY:
 
 
 
Class A Common Stock, $.01 par value- Authorized, 322,000,000 shares; Issued, 245,354,204 shares at May 31, 2013, and 242,064,514 shares at February 28, 2013
2.5

 
2.4

Class B Convertible Common Stock, $.01 par value- Authorized, 30,000,000 shares; Issued, 28,497,835 shares at May 31, 2013, and 28,517,035 shares at February 28, 2013
0.3

 
0.3

Additional paid-in capital
2,004.3

 
1,907.1

Retained earnings
2,548.0

 
2,495.1

Accumulated other comprehensive income
108.6

 
132.1

 
4,663.7

 
4,537.0

Less: Treasury stock –
 
 
 
Class A Common Stock, 80,387,269 shares at May 31, 2013, and 80,799,298 shares at February 28, 2013, at cost
(1,664.1
)
 
(1,674.5
)
Class B Convertible Common Stock, 5,005,800 shares at May 31, 2013, and February 28, 2013, at cost
(2.2
)
 
(2.2
)
 
(1,666.3
)
 
(1,676.7
)
Total stockholders’ equity
2,997.4

 
2,860.3

Total liabilities and stockholders’ equity
$
9,452.4

 
$
7,638.1

The accompanying notes are an integral part of these statements.

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CONSTELLATION BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions, except per share data)
(unaudited)

 
For the Three Months
Ended May 31,
 
2013
 
2012
SALES
$
766.2

 
$
725.3

Less – excise taxes
(92.8
)
 
(90.5
)
Net sales
673.4

 
634.8

COST OF PRODUCT SOLD
(417.3
)
 
(384.2
)
Gross profit
256.1

 
250.6

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
(186.5
)
 
(144.0
)
RESTRUCTURING CHARGES
0.9

 
(0.5
)
Operating income
70.5

 
106.1

EQUITY IN EARNINGS OF EQUITY METHOD INVESTEES
66.6

 
60.6

INTEREST EXPENSE, net
(54.8
)
 
(50.7
)
LOSS ON WRITE-OFF OF FINANCING COSTS

 
(2.8
)
Income before income taxes
82.3

 
113.2

PROVISION FOR INCOME TAXES
(29.4
)
 
(41.2
)
NET INCOME
$
52.9

 
$
72.0

 
 
 
 
COMPREHENSIVE INCOME (LOSS)
$
29.4

 
$
(18.6
)
 
 
 
 
SHARE DATA:
 
 
 
Earnings per common share:
 
 
 
Basic – Class A Common Stock
$
0.29

 
$
0.39

Basic – Class B Convertible Common Stock
$
0.26

 
$
0.36

 
 
 
 
Diluted – Class A Common Stock
$
0.27

 
$
0.38

Diluted – Class B Convertible Common Stock
$
0.25

 
$
0.35

 
 
 
 
Weighted average common shares outstanding:
 
 
 
Basic – Class A Common Stock
161.729

 
162.259

Basic – Class B Convertible Common Stock
23.499

 
23.554

 
 
 
 
Diluted – Class A Common Stock
194.884

 
190.261

Diluted – Class B Convertible Common Stock
23.499

 
23.554


The accompanying notes are an integral part of these statements.

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CONSTELLATION BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
 
For the Three Months
Ended May 31,
 
2013
 
2012
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income
$
52.9

 
$
72.0

 
 
 
 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation of property, plant and equipment
27.5

 
26.3

Deferred tax provision
21.0

 
12.3

Stock-based compensation expense
12.8

 
11.6

Amortization of deferred financing costs
1.7

 
1.4

Amortization of intangible assets
1.5

 
1.8

Equity in earnings of equity method investees, net of distributed earnings
(35.7
)
 
(28.0
)
Gain on disposal of long-lived assets, net
(0.3
)
 
(0.9
)
Loss on write-off of financing costs

 
2.8

Change in operating assets and liabilities:
 
 
 
Accounts receivable, net
18.2

 
(27.5
)
Inventories
30.7

 
31.2

Prepaid expenses and other current assets
(6.2
)
 
(0.8
)
Accounts payable
(55.1
)
 
(11.8
)
Accrued excise taxes
(1.3
)
 
(1.2
)
Other accrued expenses and liabilities
(78.7
)
 
(19.9
)
Other, net
14.3

 
27.1

Total adjustments
(49.6
)
 
24.4

Net cash provided by operating activities
3.3

 
96.4

 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Purchases of property, plant and equipment
(22.0
)
 
(19.6
)
Proceeds from sales of assets
1.2

 
7.7

Proceeds from notes receivable

 
1.7

Other investing activities
0.8

 
(0.9
)
Net cash used in investing activities
(20.0
)
 
(11.1
)
 
 
 
 

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CONSTELLATION BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
 
For the Three Months
Ended May 31,
 
2013
 
2012
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Proceeds from issuance of long-term debt
1,550.0

 
1,400.0

Net proceeds from (repayment of) notes payable
221.1

 
(274.4
)
Proceeds from exercises of employee stock options
62.4

 
12.4

Excess tax benefits from stock-based payment awards
47.3

 
2.6

Payment of restricted cash upon issuance of long-term debt
(1,550.0
)
 

Payment of minimum tax withholdings on stock-based payment awards
(17.2
)
 
(0.5
)
Payment of financing costs of long-term debt
(13.2
)
 
(22.8
)
Principal payments of long-term debt
(4.9
)
 
(832.2
)
Purchases of treasury stock

 
(383.0
)
Net cash provided by (used in) financing activities
295.5

 
(97.9
)
 
 
 
 
Effect of exchange rate changes on cash and cash investments
(1.0
)
 
(4.1
)
 
 
 
 
NET INCREASE (DECREASE) IN CASH AND CASH INVESTMENTS
277.8

 
(16.7
)
CASH AND CASH INVESTMENTS, beginning of period
331.5

 
85.8

CASH AND CASH INVESTMENTS, end of period
$
609.3

 
$
69.1

 
 
 
 
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:
 
 
 
Property, plant and equipment acquired under financing arrangements
$
0.1

 
$
2.1


The accompanying notes are an integral part of these statements.

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CONSTELLATION BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2013
(unaudited)
 
1.
BASIS OF PRESENTATION:

The consolidated financial statements included herein have been prepared by Constellation Brands, Inc. and its subsidiaries (the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission applicable to quarterly reporting on Form 10-Q and reflect, in the opinion of the Company, all adjustments necessary to present fairly the financial information for the Company. All such adjustments are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements, prepared in accordance with generally accepted accounting principles, have been condensed or omitted as permitted by such rules and regulations. These consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 28, 2013. Results of operations for interim periods are not necessarily indicative of annual results. During the three months ended May 31, 2013, the Company recorded an immaterial adjustment in selling, general and administrative expenses on the Company’s Consolidated Statements of Comprehensive Income (Loss) of $7.0 million related to prior periods. This adjustment was to correct for previously unrecognized deferred compensation costs associated with certain employment agreements.

2.
RECENTLY ADOPTED ACCOUNTING GUIDANCE:

Disclosures about offsetting assets and liabilities –
Effective March 1, 2013, the Company adopted the Financial Accounting Standards Board (“FASB”) amended guidance creating new disclosure requirements about the nature of an entity’s rights of setoff and related arrangements associated with its financial instruments and derivative instruments. In addition, this amended guidance requires retrospective application. The adoption of this amended guidance on March 1, 2013, did not have a material impact on the Company’s consolidated financial statements.

Intangibles – goodwill and other –
Effective March 1, 2013, the Company adopted the FASB amended guidance for indefinite lived intangible asset impairment testing. The amended guidance allows an entity to assess qualitative factors to determine whether the existence of events and circumstances indicate that it is more likely than not that an indefinite lived intangible asset is impaired. If an entity concludes it is not more likely than not that an indefinite lived intangible asset is impaired, the entity is not required to take further action. If an entity concludes otherwise, then the entity would be required to determine the fair value of the indefinite lived intangible asset and compare the fair value with the carrying amount of the indefinite lived intangible asset. The adoption of this amended guidance on March 1, 2013, did not have a material impact on the Company’s consolidated financial statements.

Comprehensive income –
Effective March 1, 2013, the Company adopted the amended guidance for reporting of amounts reclassified out of AOCI (as defined in Note 14). The amended guidance requires an entity to provide information about the amounts reclassified out of AOCI by component. In addition, an entity is required to present significant amounts reclassified out of AOCI by the respective line items of net income, or, for amounts not required to be reclassified in their entirety to net income under generally accepted accounting principles in the U.S., an entity is required to cross-reference to other disclosures required under generally accepted accounting principles in the U.S. that provide additional detail about those amounts. The adoption of this amended guidance on March 1, 2013, did not have a material impact on the Company’s consolidated financial statements.


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3.
INVENTORIES:

Inventories are stated at the lower of cost (computed in accordance with the first-in, first-out method) or market. Elements of cost include materials, labor and overhead and consist of the following:
 
May 31, 2013
 
February 28, 2013
(in millions)
 
 
 
Raw materials and supplies
$
50.6

 
$
45.5

In-process inventories
1,099.0

 
1,168.1

Finished case goods
294.2

 
267.3

 
$
1,443.8

 
$
1,480.9


4.    DERIVATIVE INSTRUMENTS:

As a multinational company, the Company is exposed to market risk from changes in foreign currency exchange rates, diesel fuel prices and interest rates that could affect the Company’s results of operations and financial condition. The amount of volatility realized will vary based upon the effectiveness and level of derivative instruments outstanding during a particular period of time, as well as the currency, fuel pricing and interest rate market movements during that same period.

The Company enters into derivative instruments, primarily interest rate swaps, foreign currency forward and option contracts, and diesel fuel swaps, to manage interest rate, foreign currency and diesel fuel pricing risks, respectively. In accordance with the FASB guidance for derivatives and hedging, the Company recognizes all derivatives as either assets or liabilities on its Consolidated Balance Sheets and measures those instruments at fair value (see Note 5). The fair values of the Company’s derivative instruments change with fluctuations in interest rates, currency rates and/or fuel prices and are expected to offset changes in the values of the underlying exposures. The Company’s derivative instruments are held solely to hedge economic exposures. The Company follows strict policies to manage interest rate, foreign currency and diesel fuel pricing risks, including prohibitions on derivative market-making or other speculative activities.

To qualify for hedge accounting treatment under the FASB guidance for derivatives and hedging, the details of the hedging relationship must be formally documented at inception of the arrangement, including the risk management objective, hedging strategy, hedged item, specific risk that is being hedged, the derivative instrument, how effectiveness is being assessed and how ineffectiveness will be measured. The derivative must be highly effective in offsetting either changes in the fair value or cash flows, as appropriate, of the risk being hedged. Effectiveness is evaluated on a retrospective and prospective basis based on quantitative measures.

Certain of the Company’s derivative instruments do not qualify for hedge accounting treatment under the FASB guidance for derivatives and hedging; for others, the Company chooses not to maintain the required documentation to apply hedge accounting treatment. These undesignated instruments are primarily used to economically hedge the Company’s exposure to fluctuations in the value of foreign currency denominated receivables and payables; foreign currency investments, primarily consisting of loans to subsidiaries, and cash flows related primarily to the repatriation of those loans or investments; and transportation fuel prices in the U.S. Foreign currency contracts, generally less than 12 months in duration, and diesel fuel swap contracts, generally less than 36 months in duration, are used to hedge some of these risks. The Company’s derivative policy permits the use of undesignated derivatives as approved by senior management. For these undesignated instruments, the mark to fair value is reported currently through earnings in selling, general and administrative expenses on the Company’s Consolidated Statements of Comprehensive Income (Loss). The Company had undesignated foreign currency contracts outstanding with an absolute notional value of $240.6 million and $355.1 million as of May 31, 2013, and February 28, 2013, respectively; offsetting undesignated interest rate swap agreements outstanding with an absolute notional value of $1.0 billion as of May 31, 2013, and February 28, 2013 (see Note 10); and undesignated diesel fuel swap contracts outstanding with an absolute notional value of $44.4 million as of May 31, 2013. The Company had no undesignated diesel fuel swap contracts outstanding as of February 28, 2013.


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Furthermore, when the Company determines that a derivative instrument which qualified for hedge accounting treatment has ceased to be highly effective as a hedge, the Company discontinues hedge accounting prospectively. The Company also discontinues hedge accounting prospectively when (i)  a derivative expires or is sold, terminated, or exercised; (ii)  it is no longer probable that the forecasted transaction will occur; or (iii)  management determines that designating the derivative as a hedging instrument is no longer appropriate.

Cash flow hedges:
The Company is exposed to foreign denominated cash flow fluctuations in connection with third party and intercompany sales and purchases and, historically, third party financing arrangements. The Company primarily uses foreign currency forward and option contracts to hedge certain of these risks. In addition, the Company utilizes interest rate swaps to manage its exposure to changes in interest rates and diesel fuel swaps to manage its exposure to changes in diesel fuel prices. Derivatives managing the Company’s cash flow exposures generally mature within three years or less, with a maximum maturity of five years. Throughout the term of the designated cash flow hedge relationship on at least a quarterly basis, a retrospective evaluation and prospective assessment of hedge effectiveness is performed. All components of the Company’s derivative instruments’ gains or losses are included in the assessment of hedge effectiveness. In the event the relationship is no longer effective, the Company recognizes the change in the fair value of the hedging derivative instrument from the date the hedging derivative instrument became no longer effective immediately on the Company’s Consolidated Statements of Comprehensive Income (Loss). In conjunction with its effectiveness testing, the Company also evaluates ineffectiveness associated with the hedge relationship. Resulting ineffectiveness, if any, is recognized immediately on the Company’s Consolidated Statements of Comprehensive Income (Loss) in selling, general and administrative expenses.

The Company records the fair value of its foreign currency contracts, interest rate swap contracts and diesel fuel swap contracts qualifying for cash flow hedge accounting treatment on its Consolidated Balance Sheets with the effective portion of the related gain or loss on those contracts deferred in stockholders’ equity (as a component of AOCI). These deferred gains or losses are recognized on the Company’s Consolidated Statements of Comprehensive Income (Loss) in the same period in which the underlying hedged items are recognized and on the same line item as the underlying hedged items. However, to the extent that any derivative instrument is not considered to be highly effective in offsetting the change in the value of the hedged item, the hedging relationship is terminated and the amount related to the ineffective portion of such derivative instrument is immediately recognized on the Company’s Consolidated Statements of Comprehensive Income (Loss) in selling, general and administrative expenses.

The Company had cash flow designated foreign currency contracts outstanding with an absolute notional value of $239.3 million and $220.3 million as of May 31, 2013, and February 28, 2013, respectively; a cash flow designated interest rate swap agreement outstanding with a notional value of $500.0 million as of May 31, 2013, and February 28, 2013 (see Note 10); and cash flow designated diesel fuel swap contracts outstanding with an absolute notional value of $17.4 million as of February 28, 2013. The Company had no cash flow designated diesel fuel swap contracts outstanding as of May 31, 2013. The Company expects $6.5 million of net losses, net of income tax effect, to be reclassified from AOCI to earnings within the next 12 months.


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Fair values of derivative instruments:
The fair value and location of the Company’s derivative instruments on its Consolidated Balance Sheets are as follows (see Note 5):
Balance Sheet Location
 
May 31, 2013
 
February 28, 2013
(in millions)
 
 
 
 
Derivative instruments designated as hedging instruments
 
 
 
 
Foreign currency contracts:
 
 
 
 
Prepaid expenses and other
 
$
4.0

 
$
6.4

Other accrued expenses and liabilities
 
$
0.4

 
$
0.1

Other assets, net
 
$
1.4

 
$
2.4

Other liabilities
 
$
0.6

 
$
0.1

 
 
 
 
 
Interest rate swap contracts:
 
 
 
 
Other accrued expenses and liabilities
 
$
3.4

 
$
3.2

Other liabilities
 
$
0.4

 
$
3.1

 
 
 
 
 
Diesel fuel swap contracts:
 
 
 
 
Prepaid expenses and other
 
$

 
$
0.5

Other assets, net
 
$

 
$
0.1

Other liabilities
 
$

 
$
0.1

 
 
 
 
 
Derivative instruments not designated as hedging instruments
 
 
 
 
Foreign currency contracts:
 
 
 
 
Prepaid expenses and other
 
$
1.4

 
$
0.9

Other accrued expenses and liabilities
 
$
2.2

 
$
5.1

 
 
 
 
 
Interest rate swap contracts:
 
 
 
 
Prepaid expenses and other
 
$
4.0

 
$
3.3

Other accrued expenses and liabilities
 
$
16.3

 
$
13.2

Other assets, net
 
$
0.5

 
$
3.3

Other liabilities
 
$
22.4

 
$
27.6

 
 
 
 
 
Diesel fuel swap contracts:
 
 
 
 
Prepaid expenses and other
 
$
0.1

 
$

Other accrued expenses and liabilities
 
$
0.6

 
$

Other liabilities
 
$
0.3

 
$



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The effect of the Company’s derivative instruments designated in cash flow hedging relationships on its Consolidated Statements of Comprehensive Income (Loss), as well as its Other Comprehensive Income (“OCI”), net of income tax effect, is as follows:
Derivative Instruments in
Designated Cash Flow
Hedging Relationships
 
Net
(Loss) Gain
Recognized
in OCI
(Effective
portion)
 
Location of Net Gain (Loss)
Reclassified from AOCI to
Income (Effective portion)
 
Net
Gain (Loss)
Reclassified
from AOCI to
Income
(Effective
portion)
(in millions)
 
 
 
 
 
 
For the Three Months Ended May 31, 2013
 
 
 
 
 
 
Foreign currency contracts
 
$
(0.5
)
 
Sales
 
$
0.9

Foreign currency contracts
 
(1.2
)
 
Cost of product sold
 
0.2

Interest rate swap contracts
 
1.2

 
Interest expense, net
 
(2.1
)
Total
 
$
(0.5
)
 
Total
 
$
(1.0
)
 
 
 
 
 
 
 
For the Three Months Ended May 31, 2012
 
 
 
 
 
 
Foreign currency contracts
 
$
0.4

 
Sales
 
$
1.2

Foreign currency contracts
 
(3.9
)
 
Cost of product sold
 
0.6

Interest rate swap contracts
 
(2.7
)
 
Interest expense, net
 
(2.1
)
Total
 
$
(6.2
)
 
Total
 
$
(0.3
)
Derivative Instruments in
Designated Cash Flow
Hedging Relationships
 
 
 
Location of Net Gain (Loss)
Recognized in Income
(Ineffective portion)
 
Net Gain (Loss)
Recognized
in Income
(Ineffective
portion)
(in millions)
 
 
 
 
 
 
For the Three Months Ended May 31, 2013
 
 
 
 
 
 
Foreign currency contracts
 
 
 
Selling, general and administrative expenses
 
$
0.1

Diesel fuel swap contracts
 
 
 
Selling, general and administrative expenses
 
0.1

 
 
 
 
 
 
$
0.2

 
 
 
 
 
 
 
For the Three Months Ended May 31, 2012
 
 
 
 
 
 
Foreign currency contracts
 
 
 
Selling, general and administrative expenses
 
$
(0.1
)

The effect of the Company’s undesignated derivative instruments on its Consolidated Statements of Comprehensive Income (Loss) is as follows:
Derivative Instruments Not
Designated as Hedging Instruments
 
 
 
Location of Net Loss
Recognized in Income
 
Net Loss
Recognized
in Income
(in millions)
 
 
 
 
 
 
For the Three Months Ended May 31, 2013
 
 
 
 
 
 
Foreign currency contracts
 
 
 
Selling, general and administrative expenses
 
$
(2.0
)
Diesel fuel swap contracts
 
 
 
Selling, general and administrative expenses
 
(1.0
)
 
 
 
 
 
 
$
(3.0
)
 
 
 
 
 
 
 
For the Three Months Ended May 31, 2012
 
 
 
 
 
 
Foreign currency contracts
 
 
 
Selling, general and administrative expenses
 
$
(4.3
)
Interest rate swap contracts
 
 
 
Interest expense, net
 
(0.1
)
 
 
 
 
 
 
$
(4.4
)


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Credit risk:
The Company enters into master agreements with its bank derivative trading counterparties that allow netting of certain derivative positions in order to manage credit risk. The Company’s derivative instruments are not subject to credit rating contingencies or collateral requirements. As of May 31, 2013, the fair value of derivative instruments in a net liability position due to counterparties was $40.3 million. If the Company were required to settle the net liability position under these derivative instruments on May 31, 2013, the Company would have had sufficient availability under its revolving credit facility to satisfy this obligation.

Counterparty credit risk:
Counterparty credit risk relates to losses the Company could incur if a counterparty defaults on a derivative contract. The Company manages exposure to counterparty credit risk by requiring specified minimum credit standards and diversification of counterparties. The Company enters into master agreements with its bank derivative trading counterparties that allow netting of certain derivative positions in order to manage counterparty credit risk. As of May 31, 2013, all of the Company’s counterparty exposures are with financial institutions which have investment grade ratings. The Company has procedures to monitor counterparty credit risk for both current and future potential credit exposures. As of May 31, 2013, the fair value of derivative instruments in a net receivable position due from counterparties was $5.1 million.

5.    FAIR VALUE OF FINANCIAL INSTRUMENTS:

The Company calculates the fair value of financial instruments using quoted market prices whenever available. When quoted market prices are not available, the Company uses standard pricing models for various types of financial instruments (such as forwards, options, swaps, etc.) which take into account the present value of estimated future cash flows.

The carrying amount and estimated fair value of the Company’s financial instruments are summarized as follows:
 
May 31, 2013
 
February 28, 2013
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
(in millions)
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Cash and cash investments
$
609.3

 
$
609.3

 
$
331.5

 
$
331.5

Accounts receivable, net
$
453.8

 
$
453.8

 
$
471.9

 
$
471.9

Restricted cash
$
1,550.0

 
$
1,550.0

 
$

 
$

Available-for-sale debt securities
$
34.3

 
$
34.3

 
$
34.2

 
$
34.2

Foreign currency contracts
$
6.8

 
$
6.8

 
$
9.7

 
$
9.7

Interest rate swap contracts
$
4.5

 
$
4.5

 
$
6.6

 
$
6.6

Diesel fuel swap contracts
$
0.1

 
$
0.1

 
$
0.6

 
$
0.6

 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Notes payable to banks
$
221.0

 
$
221.0

 
$

 
$

Accounts payable
$
150.0

 
$
150.0

 
$
209.0

 
$
209.0

Long-term debt, including current portion
$
4,851.0

 
$
5,160.8

 
$
3,305.4

 
$
3,603.6

Foreign currency contracts
$
3.2

 
$
3.2

 
$
5.3

 
$
5.3

Interest rate swap contracts
$
42.5

 
$
42.5

 
$
47.1

 
$
47.1

Diesel fuel swap contracts
$
0.9

 
$
0.9

 
$
0.1

 
$
0.1



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The following methods and assumptions are used to estimate the fair value of each class of financial instruments:

Cash and cash investments, accounts receivable, accounts payable and restricted cash: The carrying amounts approximate fair value due to the short maturity of these instruments (Level 1 fair value measurement).
Available-for-sale (“AFS”) debt securities: The fair value is estimated by discounting cash flows using market-based inputs (see “Fair value measurements” below) (Level 3 fair value measurement).
Foreign currency contracts: The fair value is estimated using market-based inputs, obtained from independent pricing services, into valuation models (see “Fair value measurements” below) (Level 2 fair value measurement).
Interest rate swap contracts: The fair value is estimated based on quoted market prices from respective counterparties (see “Fair value measurements” below) (Level 2 fair value measurement).
Diesel fuel swap contracts: The fair value is estimated based on quoted market prices from respective counterparties (see “Fair value measurements” below) (Level 2 fair value measurement).
Notes payable to banks: The revolving credit facility under the Company’s senior credit facility is a variable interest rate bearing note which includes a fixed margin which is adjustable based upon the Company’s debt ratio (as defined in the Company’s senior credit facility). The fair value of the revolving credit facility is estimated by discounting cash flows using LIBOR plus a margin reflecting current market conditions obtained from participating member financial institutions. The remaining instruments are variable interest rate bearing notes for which the carrying value approximates the fair value (Level 2 fair value measurement).
Long-term debt: The term loans under the Company’s senior credit facility are variable interest rate bearing notes which include a fixed margin which is adjustable based upon the Company’s debt ratio. The fair value of the term loans is estimated by discounting cash flows using LIBOR plus a margin reflecting current market conditions obtained from participating member financial institutions. The fair value of the remaining long-term debt, which is all fixed interest rate, is estimated by discounting cash flows using interest rates currently available for debt with similar terms and maturities (Level 2 fair value measurement).

Fair value measurements –
The FASB guidance on fair value measurements and disclosures defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles, and requires disclosures about fair value measurements. This guidance emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and states that a fair value measurement should be determined based on assumptions that market participants would use in pricing an asset or liability. The fair value measurement guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The hierarchy is broken down into three levels: Level 1 inputs are quoted prices in active markets for identical assets or liabilities; Level 2 inputs include data points that are observable such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) such as interest rates and yield curves that are observable for the asset and liability, either directly or indirectly; and Level 3 inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.


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The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis.
 
Quoted
Prices in
Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
(in millions)
 
 
 
 
 
 
 
May 31, 2013
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
AFS debt securities
$

 
$

 
$
34.3

 
$
34.3

Foreign currency contracts
$

 
$
6.8

 
$

 
$
6.8

Interest rate swap contracts
$

 
$
4.5

 
$

 
$
4.5

Diesel fuel swap contracts
$

 
$
0.1

 
$

 
$
0.1

Liabilities:
 
 
 
 
 
 
 
Foreign currency contracts
$

 
$
3.2

 
$

 
$
3.2

Interest rate swap contracts
$

 
$
42.5

 
$

 
$
42.5

Diesel fuel swap contracts
$

 
$
0.9

 
$

 
$
0.9

 
 
 
 
 
 
 
 
February 28, 2013
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
AFS debt securities
$

 
$

 
$
34.2

 
$
34.2

Foreign currency contracts
$

 
$
9.7

 
$

 
$
9.7

Interest rate swap contracts
$

 
$
6.6

 
$

 
$
6.6

Diesel fuel swap contracts
$

 
$
0.6

 
$

 
$
0.6

Liabilities:
 
 
 
 
 
 
 
Foreign currency contracts
$

 
$
5.3

 
$

 
$
5.3

Interest rate swap contracts
$

 
$
47.1

 
$

 
$
47.1

Diesel fuel swap contracts
$

 
$
0.1

 
$

 
$
0.1


The Company’s foreign currency contracts consist of foreign currency forward and option contracts which are valued using market-based inputs, obtained from independent pricing services, into valuation models. These valuation models require various inputs, including contractual terms, market foreign exchange prices, interest-rate yield curves and currency volatilities. Interest rate swap fair values are based on quotes from respective counterparties. Quotes are corroborated by the Company using discounted cash flow calculations based upon forward interest-rate yield curves, which are obtained from independent pricing services. Diesel fuel swap fair values are based on quotes from respective counterparties. Quotes are corroborated by the Company using market data. AFS debt securities are valued using market-based inputs into discounted cash flow models.

The following table represents a reconciliation of the changes in fair value of the Company’s financial instruments measured at fair value on a recurring basis using significant unobservable inputs (Level 3):
 
May 31, 2013
 
May 31, 2012
(in millions)
 
 
 
AFS Debt Securities
 
 
 
Balance as of March 1
$
34.2

 
$
28.5

Total net gains:
 
 
 
Included in earnings (interest expense, net)
1.3

 
1.2

Included in other comprehensive income (net unrealized losses on AFS debt securities)
(1.2
)
 
(2.3
)
Total net gains (losses)
0.1

 
(1.1
)
Balance as of the end of the period
$
34.3

 
$
27.4


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The fair value of the Level 3 AFS debt securities is based upon market-based inputs into discounted cash flow models that use both observable and unobservable inputs. The significant observable inputs used in the fair value measurement of the AFS debt securities are the Australian risk-free interest rate and the global high yield “B” rated option adjusted spread. The significant unobservable input used in the fair value measurement of the AFS debt securities is the internally reported results of operations of the underlying investment. A significant change in this unobservable input could result in a change in the fair value measurement of the AFS debt securities.

6.    GOODWILL:

The changes in the carrying amount of goodwill are as follows:
 
Constellation
Wine
and Spirits
 
Crown
Imports
 
Consolidations
and
Eliminations
 
Consolidated
(in millions)
 
 
 
 
 
 
 
Balance, February 29, 2012
 
 
 
 
 
 
 
Goodwill
$
2,632.9

 
$
13.0

 
$
(13.0
)
 
$
2,632.9

Accumulated impairment losses

 

 

 

 
2,632.9

 
13.0

 
(13.0
)
 
2,632.9

Purchase accounting allocations
110.0

 

 

 
110.0

Foreign currency translation adjustments
(20.6
)
 

 

 
(20.6
)
Balance, February 28, 2013
 
 
 
 
 
 
 
Goodwill
2,722.3

 
13.0

 
(13.0
)
 
2,722.3

Accumulated impairment losses

 

 

 

 
2,722.3

 
13.0

 
(13.0
)
 
2,722.3

Foreign currency translation adjustments
(7.8
)
 

 

 
(7.8
)
Balance, May 31, 2013
 
 
 
 
 
 
 
Goodwill
2,714.5

 
13.0

 
(13.0
)
 
2,714.5

Accumulated impairment losses

 

 

 

 
$
2,714.5

 
$
13.0

 
$
(13.0
)
 
$
2,714.5


Mark West –
For the year ended February 28, 2013, purchase accounting allocations of $110.0 million in the Constellation Wine and Spirits segment consist primarily of purchase accounting allocations associated with the acquisition of Mark West (as defined below). In July 2012, the Company acquired Mark West for $159.3 million. The transaction primarily includes the acquisition of the Mark West trademark, related inventories and certain grape supply contracts (“Mark West”). The purchase price was financed with revolver borrowings under the May 2012 Credit Agreement (as defined in Note 10). In accordance with the acquisition method of accounting, the identifiable assets acquired and the liabilities assumed have been measured at their acquisition-date fair values. The acquisition of Mark West was not material for purposes of supplemental disclosure pursuant to the FASB guidance on business combinations. The results of operations of Mark West are reported in the Constellation Wine and Spirits segment and are included in the consolidated results of operations of the Company from the date of acquisition.


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7.    INTANGIBLE ASSETS:

The major components of intangible assets are as follows:
 
May 31, 2013
 
February 28, 2013
 
Gross
Carrying
Amount
 
Net
Carrying
Amount
 
Gross
Carrying
Amount
 
Net
Carrying
Amount
(in millions)
 
 
 
 
 
 
 
Amortizable intangible assets:
 
 
 
 
 
 
 
Customer relationships
$
82.7

 
$
53.4

 
$
82.9

 
$
54.7

Other
7.9

 
1.9

 
7.9

 
2.2

Total
$
90.6

 
55.3

 
$
90.8

 
56.9

 
 
 
 
 
 
 
 
Nonamortizable intangible assets:
 
 
 
 
 
 
 
Trademarks
 
 
805.6

 
 
 
809.1

Other
 
 
5.3

 
 
 
5.4

Total
 
 
810.9

 
 
 
814.5

Total intangible assets, net
 
 
$
866.2

 
 
 
$
871.4


The Company did not incur costs to renew or extend the term of acquired intangible assets during the three months ended May 31, 2013, and May 31, 2012. The difference between the gross carrying amount and net carrying amount for each item presented is attributable to accumulated amortization. Amortization expense for intangible assets was $1.5 million and $1.8 million for the three months ended May 31, 2013, and May 31, 2012, respectively. Estimated amortization expense for the remaining nine months of fiscal 2014 and for each of the five succeeding fiscal years and thereafter is as follows:
(in millions)
 
2014
$
4.6

2015
$
5.0

2016
$
5.1

2017
$
4.8

2018
$
4.6

2019
$
4.7

Thereafter
$
26.5


8.    RESTRICTED CASH:

In connection with the issuance of the May 2013 Senior Notes (as defined in Note 10), on May 14, 2013, the Company and Manufacturers and Traders Trust Company, as Trustee, escrow agent, and securities intermediary, entered into an agreement (the “Escrow Agreement”), pursuant to which an amount equal to 100% of the principal amount of the May 2013 Senior Notes (collectively, with any other property from time to time held by the escrow agent, the “Escrowed Property”) was placed into an escrow account to be released to the Company upon the closing of the Beer Business Acquisition (as defined in Note 19). The restricted cash consists of highly liquid investments with an original maturity when purchased of 30 days or less. Income from these investments is paid into the escrow account and is subject to the terms of the Escrow Agreement. As of May 31, 2013, the Company had $1,550.0 million of restricted cash – noncurrent on its Consolidated Balance Sheets. The Company had no restricted cash as of February 28, 2013. In accordance with the terms of the Escrow Agreement, subsequent to May 31, 2013, in connection with the closing of the Beer Business Acquisition, the Escrowed Property was released to the Company and used to fund a portion of the purchase price for the Beer Business Acquisition.


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9.    INVESTMENTS:

Investments in equity method investees
Crown Imports:
Prior to June 7, 2013 (see Note 19), Constellation Beers Ltd. (“Constellation Beers”), an indirect wholly-owned subsidiary of the Company, and Diblo, S.A. de C.V. (“Diblo”), an entity owned 76.75% by Grupo Modelo, S.A.B. de C.V. (“Modelo”) and 23.25% by Anheuser-Busch Companies, Inc., each had, directly or indirectly, equal interests in a joint venture, Crown Imports LLC (“Crown Imports”). Crown Imports had the exclusive right to import, market and sell primarily Modelo’s Mexican beer portfolio (the “Modelo Brands”) in the U.S. and Guam.

In addition, prior to June 7, 2013, the Company accounted for its investment in Crown Imports under the equity method. Accordingly, the results of operations of Crown Imports are included in equity in earnings of equity method investees on the Company’s Consolidated Statements of Comprehensive Income (Loss) for the three months ended May 31, 2013, and May 31, 2012. As of May 31, 2013, and February 28, 2013, the Company’s investment in Crown Imports was $205.7 million and $169.3 million, respectively. As of May 31, 2013, and February 28, 2013, the carrying amount of the investment is greater than the Company’s equity in the underlying assets of Crown Imports by $13.6 million due to the difference in the carrying amounts of the indefinite lived intangible assets contributed to Crown Imports by each party. The Company received $30.3 million and $32.7 million of cash distributions from Crown Imports for the three months ended May 31, 2013, and May 31, 2012, respectively, all of which represent distributions of earnings.

The following table presents summarized financial information for the Company’s Crown Imports equity method investment. The amounts shown represent 100% of this equity method investment’s results of operations.
 
For the Three Months
Ended May 31,
 
2013
 
2012
(in millions)
 
 
 
Net sales
$
761.6

 
$
724.1

Gross profit
$
225.6

 
$
211.2

Income from continuing operations
$
133.5

 
$
122.8

Net income
$
133.5

 
$
122.8


Investment in Accolade –
The Company has retained a less than 20% interest in Accolade Wines (“Accolade”), its previously owned Australian and U.K. business divested in January 2011 (the Constellation Wines Australia and Europe segment, “CWAE”), which consists of equity securities and AFS debt securities. The investment in the equity securities is accounted for under the cost method. Accordingly, the Company recognizes earnings only upon the receipt of a dividend from Accolade. Dividends received in excess of net accumulated earnings since the date of investment are considered a return of investment and are recorded as a reduction of the cost of the investment. No dividends were received for the three months ended May 31, 2013, and May 31, 2012. The AFS debt securities are measured at fair value on a recurring basis with unrealized holding gains and losses, including foreign currency gains and losses, reported in AOCI until realized (see Note 14). Interest income is recognized based on the interest rate implicit in the AFS debt securities’ fair value and is reported in interest expense, net, on the Company’s Consolidated Statements of Comprehensive Income (Loss). Interest income of $1.3 million and $1.2 million was recognized in connection with the AFS debt securities for the three months ended May 31, 2013, and May 31, 2012, respectively. The AFS debt securities contractually mature in January 2023 and can be settled, at the option of the issuer, in cash, equity shares of the issuer, or a combination thereof.


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The Company is party to several agreements with Accolade, including distribution agreements under which the Company’s Constellation Wine and Spirits segment distributes Accolade’s products primarily in Canada, and Accolade distributes Constellation Wine and Spirits’ products primarily in Australia, the U.K., and Mainland Europe; certain bulk wine supply agreements; and certain bottling agreements. Prior to October 1, 2012, the Company also distributed Accolade’s products in the U.S. The following table presents a summary of amounts recognized under these arrangements. As of May 31, 2013, and February 28, 2013, amounts receivable from or payable to Accolade under these arrangements were not material.
 
For the Three Months
Ended May 31,
 
2013
 
2012
(in millions)
 
 
 
Amounts sold to or related to services performed for Accolade
$
21.4

 
$
24.5

 
 
 
 
Amounts purchased from or related to services performed by Accolade
$
3.6

 
$
4.0


10.    BORROWINGS:

Borrowings consist of the following:
 
May 31, 2013
 
February 28, 2013
 
Current
 
Long-term
 
Total
 
Total
(in millions)
 
 
 
 
 
 
 
Notes Payable to Banks:
 
 
 
 
 
 
 
Senior Credit Facility – Revolving Credit Loans
$

 
$

 
$

 
$

Other
221.0

 

 
221.0

 

 
$
221.0

 
$

 
$
221.0

 
$

 
 
 
 
 
 
 
 
Long-term Debt:
 
 
 
 
 
 
 
Senior Credit Facility – Term Loans
$
15.0

 
$
747.5

 
$
762.5

 
$
762.5

Senior Notes

 
4,046.3

 
4,046.3

 
2,496.0

Other Long-term Debt
18.3

 
23.9

 
42.2

 
46.9

 
$
33.3

 
$
4,817.7

 
$
4,851.0

 
$
3,305.4


Senior credit facility –
On May 3, 2012 (the “Closing Date”), the Company, Bank of America, N.A., as administrative agent, and certain other lenders (all such parties other than the Company are collectively referred to as the “Lenders”) entered into a new Credit Agreement (the “May 2012 Credit Agreement”). On August 8, 2012, the May 2012 Credit Agreement was amended and restated (the “August 2012 Restatement”). The May 2012 Credit Agreement together with the August 2012 Restatement is referred to as the “2012 Credit Agreement.” The 2012 Credit Agreement provides for aggregate credit facilities of $2,225.0 million, consisting of a $550.0 million term loan facility maturing on May 3, 2017 (the “Term A Facility”), a $250.0 million term loan facility maturing on May 3, 2019 (the “Term A-1 Facility”), a $575.0 million delayed draw term loan facility maturing on August 8, 2017 (the “Term A-2 Facility”), and an $850.0 million revolving credit facility (including a sub-facility for letters of credit of up to $200.0 million) which terminates on May 3, 2017 (the “Revolving Credit Facility”). The obligation of the relevant Lenders to make loans pursuant to the Term A-2 Facility (the “Term A-2 Loans”) terminates no later than December 30, 2013, and is subject to limited conditions, including, but not limited to, the acquisition of Crown Imports pursuant to the June 2012 agreement to acquire the remaining 50% equity interest in Crown Imports (the “Initial Purchase Agreement”) having closed (or closing concurrently with the making of the Term A-2 Loans, the “Term A-2 Closing Date”) without a material adverse change in its terms. In February 2013, as a result of amendment to the terms of the Initial Purchase Agreement, the Term A-2 Facility became unavailable. The 2012 Credit Agreement also permits the Company from time to time after the Closing Date to elect to increase the Lenders’ revolving credit commitments or add one or more tranches of additional term loans, subject to the willingness of existing or new lenders to fund such increase or term loans and other customary conditions. The minimum aggregate principal

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amount of such incremental revolving credit commitment increases or additional term loans may be no less than $25.0 million and the maximum aggregate principal amount of all such incremental revolving credit commitment increases and additional term loans (the “Incremental Facilities Cap”), other than term loans the proceeds of which are applied to repay existing term loans, may be no more than $500.0 million until the Term A-2 Closing Date (see additional discussion below). A portion of the proceeds of the May 2012 Credit Agreement were used to repay the outstanding obligations under the Company’s then existing senior credit facility. The Company uses its revolving credit facility under the 2012 Credit Agreement for general corporate purposes.

The rate of interest on borrowings under the 2012 Credit Agreement is a function of LIBOR plus a margin, or the base rate plus a margin. The margin is adjustable based upon the Company’s debt ratio (as defined in the 2012 Credit Agreement). As of May 31, 2013, the LIBOR margin for the Term A Facility and the Revolving Credit Facility was 1.5%, and the LIBOR margin for the Term A-1 Facility was 1.75%.

The changes to the May 2012 Credit Agreement effected by the August 2012 Restatement, among other things, (i)  arranged a portion of the debt to finance the Initial Purchase Agreement (the Term A-2 Facility), (ii)  facilitated the issuance of certain senior notes in August 2012 and arrangements under an associated escrow agreement, (iii)  modified certain defined terms and covenant requirements, and (iv)  adjusted the Incremental Facilities Cap from $750.0 million to $500.0 million until the Term A-2 Closing Date. Subsequent to the Term A-2 Closing Date, the Incremental Facilities Cap will be $750.0 million minus the amount by which the aggregate initial principal amount of the Term A-2 Loans exceeds $325.0 million, if any. If the Term A-2 Loans are never borrowed and the commitments for the Term A-2 Facility are terminated, the Incremental Facilities Cap will revert to $750.0 million.

The obligations under the 2012 Credit Agreement are guaranteed by certain of the Company’s U.S. subsidiaries. These obligations are also secured by a pledge of (i)  100% of the ownership interests in certain of the Company’s U.S. subsidiaries and (ii)  55-65% of certain interests of certain of the Company’s foreign subsidiaries.

The Company and its subsidiaries are also subject to covenants that are contained in the 2012 Credit Agreement, including those restricting the incurrence of additional indebtedness (including guarantees of indebtedness), additional liens, mergers and consolidations, the payment of dividends, the making of certain investments, prepayments of certain debt, transactions with affiliates, agreements that restrict the Company’s non-guarantor subsidiaries from paying dividends, and dispositions of property, in each case subject to numerous conditions, exceptions and thresholds. The financial covenants are limited to a minimum interest coverage ratio and a maximum net debt coverage ratio.

As of May 31, 2013, under the 2012 Credit Agreement, the Company had outstanding borrowings under the Term A Facility of $515.6 million bearing an interest rate of 1.7% and the Term A-1 Facility of $246.9 million bearing an interest rate of 1.9%, outstanding letters of credit of $14.5 million, and $835.5 million in revolving loans available to be drawn.


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As of May 31, 2013, the required principal repayments under the Term A Facility and the Term A-1 Facility for the remaining nine months of fiscal 2014 and for each of the five succeeding fiscal years and thereafter are as follows:
 
Term A
Facility
 
Term A-1
Facility
 
Total
(in millions)
 
 
 
 
 
2014
$
6.9

 
$
0.6

 
$
7.5

2015
41.2

 
2.5

 
43.7

2016
55.0

 
2.5

 
57.5

2017
55.0

 
2.5

 
57.5

2018
357.5

 
2.5

 
360.0

2019

 
2.5

 
2.5

Thereafter

 
233.8

 
233.8

 
$
515.6

 
$
246.9

 
$
762.5


In April 2012, the Company transitioned its interest rate swap agreement to a one-month LIBOR base rate versus the then existing three-month LIBOR base rate. Accordingly, the Company entered into a new interest rate swap agreement which was designated as a cash flow hedge for $500.0 million of the Company’s floating LIBOR rate debt. In addition, the then existing interest rate swap agreement was dedesignated by the Company and the Company entered into an additional undesignated interest rate swap agreement for $500.0 million to offset the prospective impact of the newly undesignated interest rate swap agreement. The unrealized losses in AOCI related to the dedesignated interest rate swap agreements are being reclassified from AOCI ratably into earnings in the same period in which the original hedged item is recorded in the Consolidated Statements of Comprehensive Income (Loss). Accordingly, the Company has fixed its interest rates on $500.0 million of the Company’s floating LIBOR rate debt at an average rate of 2.8% (exclusive of borrowing margins) through September 1, 2016. For the three months ended May 31, 2013, and May 31, 2012, the Company reclassified net losses of $2.1 million and $2.1 million, net of income tax effect, respectively, from AOCI to interest expense, net, on the Company’s Consolidated Statements of Comprehensive Income (Loss).

Senior notes –
On April 17, 2012, the Company issued $600.0 million aggregate principal amount of 6% Senior Notes due May 2022 (the “April 2012 Senior Notes”). The net proceeds of the offering ($591.4 million) were used for general corporate purposes, including, among others, reducing the outstanding indebtedness under the Company’s prior senior credit facility and common stock share repurchases under the 2013 Authorization (as defined in Note 12). Interest on the April 2012 Senior Notes is payable semiannually on May 1 and November 1 of each year, beginning November 1, 2012. The April 2012 Senior Notes are redeemable, in whole or in part, at the option of the Company at any time at a redemption price equal to 100% of the outstanding principal amount plus a make whole payment based on the present value of the future payments at the adjusted Treasury Rate plus 50 basis points. The April 2012 Senior Notes are senior unsecured obligations and rank equally in right of payment to all existing and future senior unsecured indebtedness of the Company. Certain of the Company’s U.S. subsidiaries guarantee the April 2012 Senior Notes on a senior unsecured basis. As of May 31, 2013, the Company had outstanding $600.0 million aggregate principal amount of April 2012 Senior Notes.

On May 14, 2013, the Company issued $500.0 million aggregate principal amount of 3.75% Senior Notes due May 2021 (the “May 2013 Eight Year Senior Notes”) and $1,050.0 million aggregate principal amount of 4.25% Senior Notes due May 2023 (the “May 2013 Ten Year Senior Notes” and, together with the May 2013 Eight Year Senior Notes, the “May 2013 Senior Notes”). The Company intends to use the net proceeds from the offering ($1,536.8 million) to fund a portion of the purchase price for the June 2013 Beer Business Acquisition. Interest on the May 2013 Senior Notes is payable semiannually on May 1 and November 1 of each year, beginning November 1, 2013. The May 2013 Senior Notes are redeemable, in whole or in part, at the option of the Company at any time at a redemption price equal to 100% of the outstanding principal amount plus a make whole payment based on the present value of the future payments at the adjusted Treasury Rate plus 50 basis points. In addition, if the Beer Business Acquisition is terminated or has not been consummated on or prior to December 30, 2013, all of the May

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2013 Senior Notes will be redeemed (the “Special Mandatory Redemption”) at a price equal to 100% of the outstanding principal amount, together with accrued and unpaid interest to the date of the Special Mandatory Redemption. The May 2013 Senior Notes are senior unsecured obligations that rank equally with the Company’s other senior unsecured indebtedness except that the Escrowed Property will be held in escrow and has been pledged to secure the May 2013 Senior Notes until it is used to fund a portion of the purchase price for the Beer Business Acquisition. Certain of the Company’s U.S. subsidiaries guarantee the May 2013 Senior Notes on a senior unsecured basis. As of May 31, 2013, the Company had outstanding $1,550.0 million aggregate principal amount of May 2013 Senior Notes.

As discussed previously, in connection with the issuance of the May 2013 Senior Notes, the Company entered into the Escrow Agreement pursuant to which the Escrowed Property was placed into an escrow account. In accordance with the terms of the Escrow Agreement, the Escrowed Property will be released to the Company upon the closing of the Beer Business Acquisition. If the Beer Business Acquisition is terminated or has not been consummated on or prior to December 30, 2013, the Escrowed Property will be released for purposes of effecting the Special Mandatory Redemption. In accordance with the terms of the Escrow Agreement, subsequent to May 31, 2013, in connection with the closing of the Beer Business Acquisition, the Escrowed Property was released to the Company and used to fund a portion of the purchase price for the Beer Business Acquisition.

Debt payments –
As of May 31, 2013, the required principal repayments under long-term debt obligations (excluding unamortized discount of $3.7 million) for the remaining nine months of fiscal 2014 and for each of the five succeeding fiscal years and thereafter are as follows:
(in millions)
 
2014
$
25.7

2015
555.1

2016
64.3

2017
760.6

2018
1,061.6

2019
3.6

Thereafter
2,383.8

 
$
4,854.7


Accounts receivable securitization facility –
On December 4, 2012, the Company entered into a 364-day revolving trade accounts receivable securitization facility. Under the facility, trade accounts receivable generated by the Company and certain of its subsidiaries are sold by the Company to a wholly-owned bankruptcy remote single purpose subsidiary (the “SPV”), which is consolidated with the Company for financial reporting purposes. Such trade accounts receivable have been pledged by the SPV to secure borrowings under the facility. The Company will continue to service the trade accounts receivable and act as servicer for the facility. The trade accounts receivable balances related to this facility will continue to be reported as accounts receivable on the Company’s Consolidated Balance Sheets, but the trade accounts receivable will at all times be owned by the SPV and be included on the financial statements of the Company to comply with generally accepted accounting principles. Any borrowings under the facility will be recorded as secured borrowings and will bear interest at a rate based on a margin of 100 basis points plus the conduit lender’s cost of funds or, if such borrowings were not funded by commercial paper issuances by the conduit lender, one-month LIBOR. The facility provides borrowing capacity of $65.0 million up to $250.0 million structured to account for the seasonality of the Company’s business, subject to further limitations based upon various pre-agreed formulas. As of May 31, 2013, the SPV had outstanding borrowings under the facility of $208.0 million bearing an interest rate of 1.2%.


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11.    COMMITMENTS AND CONTINGENCIES:

Indemnification liabilities
In connection with a prior divestiture, the Company indemnified respective parties against certain liabilities that may arise related to certain contracts with certain investees of the divested business, a certain facility in the U.K. and certain income tax matters. As of May 31, 2013, and February 28, 2013, the carrying amount of these indemnification liabilities was $15.1 million. If the indemnified party were to incur a liability, pursuant to the terms of the indemnification, the Company would be required to reimburse the indemnified party. As of May 31, 2013, the Company estimates that these indemnifications could require the Company to make potential future payments of up to $296.2 million under these indemnifications with $281.9 million of this amount able to be recovered by the Company from third parties under recourse provisions. The Company does not expect to be required to make material payments under the indemnifications and the Company believes that the likelihood is remote that the indemnifications could have a material adverse effect on the Company’s financial position, results of operations, cash flows or liquidity.

In addition, the Company is jointly and severally liable with Modelo to indemnify a third party for lease payments over the term of a lease contract between Crown Imports and the third party for the lease of certain office facilities which extends through June 2021. As of May 31, 2013, if the indemnified party were to incur a liability, pursuant to the terms of the indemnification, the Company would be required to reimburse the indemnified party which could require the Company to make potential future payments of up to $34.2 million. None of this amount is subject to recovery by the Company from third parties under recourse provisions. As of May 31, 2013, and February 28, 2013, the carrying amount of this indemnification liability was not material. Subsequent to May 31, 2013, in connection with the Beer Business Acquisition, this indemnification liability was released to selling, general and administrative expenses on the Company’s Consolidated Statements of Comprehensive Income (Loss) for the second quarter of fiscal 2014.

12.    STOCKHOLDERS’ EQUITY:

In April 2011, the Company’s Board of Directors authorized the repurchase of up to $500.0 million of the Company’s Class A Common Stock and Class B Convertible Common Stock (the “2012 Authorization”). During the year ended February 29, 2012, the Company repurchased 21,234,266 shares of Class A Common Stock pursuant to the 2012 Authorization at an aggregate cost of $413.7 million, or an average cost of $19.48 per share, through open market transactions. During the three months ended May 31, 2012, the Company utilized the remaining $86.3 million outstanding under the 2012 Authorization to repurchase 3,970,481 shares of Class A Common Stock at an average cost of $21.74 per share, through open market transactions. In total, the Company has repurchased 25,204,747 shares of Class A Common Stock pursuant to the 2012 Authorization at an aggregate cost of $500.0 million, or an average cost of $19.84 per share. The Company used proceeds from revolver borrowings under its then existing senior credit facility and cash generated from operations to pay the purchase price for the repurchased shares. The repurchased shares have become treasury shares.

In April 2012, the Company’s Board of Directors authorized the repurchase of up to $1.0 billion of the Company’s Class A Common Stock and Class B Convertible Common Stock (the “2013 Authorization”). The Board of Directors did not specify a date upon which the 2013 Authorization would expire. Share repurchases under the 2013 Authorization may be accomplished at management’s discretion from time to time based on market conditions, the Company’s cash and debt position, and other factors as determined by management. Shares may be repurchased through open market or privately negotiated transactions. The Company may fund future share repurchases with cash generated from operations, proceeds from borrowings under the accounts receivable securitization facility or proceeds from revolver borrowings under its senior credit facility. Any repurchased shares will become treasury shares.

During the three months ended May 31, 2012, the Company repurchased 14,023,985 shares of Class A Common Stock pursuant to the 2013 Authorization at an aggregate cost of $296.7 million, or an average cost of $21.15 per share, through open market transactions. The Company used proceeds from the April 2012 Senior Notes, revolver borrowings under both the May 2012 Credit Agreement and its prior senior credit facility, and cash

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generated from operations to pay the purchase price for the repurchased shares. The repurchased shares have become treasury shares.

13.    EARNINGS PER COMMON SHARE:

Earnings per common share – basic excludes the effect of common stock equivalents and is computed using the two-class computation method. Earnings per common share – diluted for Class A Common Stock reflects the potential dilution that could result if securities or other contracts to issue common stock were exercised or converted into common stock. Earnings per common share – diluted for Class A Common Stock has been computed using the more dilutive of the if-converted or two-class computation method. Using the if-converted method, earnings per common share – diluted for Class A Common Stock assumes the exercise of stock options using the treasury stock method and the conversion of Class B Convertible Common Stock. Using the two-class computation method, earnings per common share – diluted for Class A Common Stock assumes the exercise of stock options using the treasury stock method and no conversion of Class B Convertible Common Stock. For the three months ended May 31, 2013, and May 31, 2012, earnings per common share – diluted for Class A Common Stock has been calculated using the if-converted method. For the three months ended May 31, 2013, and May 31, 2012, earnings per common share – diluted for Class B Convertible Common Stock is presented without assuming conversion into Class A Common Stock and is computed using the two-class computation method.

The computation of basic and diluted earnings per common share is as follows:
 
For the Three Months
Ended May 31,
 
2013
 
2012
(in millions, except per share data)
 
 
 
Income available to common stockholders
$
52.9

 
$
72.0

 
 
 
 
Weighted average common shares outstanding – basic:
 
 
 
Class A Common Stock
161.729

 
162.259

Class B Convertible Common Stock
23.499

 
23.554

 
 
 
 
Weighted average common shares outstanding – diluted:
 
 
 
Class A Common Stock
161.729

 
162.259

Class B Convertible Common Stock
23.499

 
23.554

Stock-based awards, primarily stock options
9.656

 
4.448

Weighted average common shares outstanding – diluted
194.884

 
190.261

 
 
 
 
Earnings per common share – basic:
 
 
 
Class A Common Stock
$
0.29

 
$
0.39

Class B Convertible Common Stock
$
0.26

 
$
0.36

Earnings per common share – diluted:
 
 
 
Class A Common Stock
$
0.27

 
$
0.38

Class B Convertible Common Stock
$
0.25

 
$
0.35


For the three months ended May 31, 2013, and May 31, 2012, stock-based awards, primarily stock options, which could result in the issuance of 1.0 million and 9.8 million shares, respectively, of Class A Common Stock were outstanding, but were not included in the computation of earnings per common share – diluted for Class A Common Stock because the effect of including such awards would have been antidilutive.



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14.    COMPREHENSIVE INCOME (LOSS):

Comprehensive income (loss) consists of net income, foreign currency translation adjustments, net unrealized gains (losses) on derivative instruments, net unrealized losses on AFS debt securities and pension/postretirement adjustments. The reconciliation of net income to comprehensive income (loss) is as follows:
 
Before Tax
Amount
 
Tax (Expense)Benefit
 
Net of Tax
Amount
(in millions)
 
 
 
 
 
For the Three Months Ended May 31, 2013
 
 
 
 
 
Net income
 
 
 
 
$
52.9

Other comprehensive (loss) income:
 
 
 
 
 
Foreign currency translation adjustments:
 
 
 
 
 
Net losses
$
(22.3
)
 
$
(0.5
)
 
(22.8
)
Reclassification adjustments

 

 

Net loss recognized in other comprehensive loss
(22.3
)
 
(0.5
)
 
(22.8
)
Unrealized gain on cash flow hedges:
 
 
 
 
 
Net derivative losses

 
(0.5
)
 
(0.5
)
Reclassification adjustments
1.5

 
(0.7
)
 
0.8

Net gain recognized in other comprehensive loss
1.5

 
(1.2
)
 
0.3

Unrealized loss on AFS debt securities:
 
 
 
 
 
Net AFS debt securities losses
(1.2
)
 
(0.1
)
 
(1.3
)
Reclassification adjustments

 

 

Net loss recognized in other comprehensive loss
(1.2
)
 
(0.1
)
 
(1.3
)
Pension/postretirement adjustments:
 
 
 
 
 
Net actuarial gains
0.2

 
(0.1
)
 
0.1

Reclassification adjustments
0.3

 
(0.1
)
 
0.2

Net gain recognized in other comprehensive loss
0.5

 
(0.2
)
 
0.3

Other comprehensive loss
$
(21.5
)
 
$
(2.0
)
 
(23.5
)
Total comprehensive income
 
 
 
 
$
29.4

 
 
 
 
 
 
For the Three Months Ended May 31, 2012
 
 
 
 
 
Net income
 
 
 
 
$
72.0

Other comprehensive (loss) income:
 
 
 
 
 
Foreign currency translation adjustments:
 
 
 
 
 
Net losses
$
(83.1
)
 
$
(0.2
)
 
(83.3
)
Reclassification adjustments

 

 

Net loss recognized in other comprehensive loss
(83.1
)
 
(0.2
)
 
(83.3
)
Unrealized loss on cash flow hedges:
 
 
 
 
 
Net derivative losses
(8.6
)
 
2.4

 
(6.2
)
Reclassification adjustments
1.1

 
(0.7
)
 
0.4

Net loss recognized in other comprehensive loss
(7.5
)
 
1.7

 
(5.8
)
Unrealized loss on AFS debt securities:
 
 
 
 
 
Net AFS debt securities losses
(2.3
)
 

 
(2.3
)
Reclassification adjustments

 

 

Net loss recognized in other comprehensive loss
(2.3
)
 

 
(2.3
)
Pension/postretirement adjustments:
 
 
 
 
 
Net actuarial gains
0.8

 
(0.2
)
 
0.6

Reclassification adjustments
0.2

 

 
0.2

Net gain recognized in other comprehensive loss
1.0

 
(0.2
)
 
0.8

Other comprehensive loss
$
(91.9
)
 
$
1.3

 
(90.6
)
Total comprehensive loss
 
 
 
 
$
(18.6
)


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Accumulated other comprehensive income (“AOCI”), net of income tax effect, includes the following components:
 
Foreign
Currency
Translation
Adjustments
 
Net
Unrealized
Losses on
Derivative Instruments
 
Net
Unrealized
Gains (Losses)
on AFS Debt
Securities
 
Pension/
Postretirement
Adjustments
 
Accumulated
Other
Comprehensive
Income
(in millions)
 
 
 
 
 
 
 
 
 
Balance, February 28, 2013
$
170.4

 
$
(20.2
)
 
$
1.4

 
$
(19.5
)
 
$
132.1

Other comprehensive (loss) income:
 
 
 
 
 
 
 
 
 
Other comprehensive (loss) income before reclassification adjustments
(22.8
)
 
(0.5
)
 
(1.3
)
 
0.1

 
(24.5
)
Amounts reclassified from accumulated other comprehensive income

 
0.8

 

 
0.2

 
1.0

Other comprehensive (loss) income
(22.8
)
 
0.3

 
(1.3
)
 
0.3

 
(23.5
)
Balance, May 31, 2013
$
147.6

 
$
(19.9
)
 
$
0.1

 
$
(19.2
)
 
$
108.6


15.    RESTRUCTURING CHARGES:

Restructuring charges consist of employee termination benefit costs, contract termination costs and other associated costs. Employee termination benefit costs are accounted for under the FASB guidance for compensation – nonretirement postemployment benefits, as the Company has had several restructuring programs which have provided employee termination benefits in the past. The Company includes employee severance, related payroll benefit costs (such as costs to provide continuing health insurance) and outplacement services as employee termination benefit costs. Contract termination costs, and other associated costs including, but not limited to, facility consolidation and relocation costs, are accounted for under the FASB guidance for exit or disposal cost obligations. Contract termination costs are costs to terminate a contract that is not a capital lease, including costs to terminate the contract before the end of its term or costs that will continue to be incurred under the contract for its remaining term without economic benefit to the Company. The Company includes costs to terminate certain operating leases for buildings, computer and IT equipment, and costs to terminate contracts, including distributor contracts and contracts for long-term purchase commitments, as contract termination costs. Other associated costs include, but are not limited to, costs to consolidate or close facilities and relocate employees. The Company includes employee relocation costs and equipment relocation costs as other associated costs.

The Company has several remaining restructuring plans for which exit activities were substantially complete prior to March 1, 2013. These plans included efforts to restructure and integrate operations of acquired businesses, streamline certain international and domestic operations and product portfolios, maximize asset utilization, reduce costs, and improve long-term return on invested capital throughout its domestic and international operations (which included its previously owned Australian and U.K. business). Restructuring and related activities included footprint reductions/consolidations; the buy-out, termination and/or renegotiation of various contracts; the planned sale of wineries, facilities and other property, plant and equipment; employee termination costs and equipment relocation costs. The Company does not expect any significant additional costs associated with these plans to be recognized in its Consolidated Statements of Comprehensive Income (Loss). The Company expects cash expenditures to be substantially complete by February 28, 2014.


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The following table presents a rollforward of the restructuring liability for the Company’s remaining restructuring plans.
(in millions)
 
Restructuring liability, February 28, 2013
$
5.6

 
 
Restructuring charges:
 
Employee termination benefit costs

Contract termination costs
(0.9
)
Facility consolidation/relocation costs

Restructuring charges, May 31, 2013
(0.9
)
 
 
Cash expenditures
(1.7
)
 
 
Foreign currency translation and other noncash adjustments

Restructuring liability, May 31, 2013
$
3.0


The following table presents a summary of restructuring charges and other costs incurred, including a summary of amounts incurred by each of the Company’s reportable segments, in connection with the Company’s remaining restructuring plans.
 
For the Three Months
Ended May 31,
 
2013
 
2012
(in millions)
 
 
 
Restructuring charges
$
(0.9
)
 
$
0.5

Other costs:
 
 
 
Accelerated depreciation (cost of product sold)

 

Other costs (selling, general and administrative expenses)
(2.0
)
 
2.7

Total other costs
(2.0
)
 
2.7

Total costs
$
(2.9
)
 
$
3.2

 
 
 
 
Total Costs by Reportable Segment:
 
 
 
Constellation Wine and Spirits
 
 
 
Restructuring charges
$
(0.7
)
 
$
0.7

Other costs

 
1.6

Total Constellation Wine and Spirits
$
(0.7
)
 
$
2.3

 
 
 
 
Corporate Operations and Other
 
 
 
Restructuring charges
$
(0.2
)
 
$
(0.2
)
Other costs
(2.0
)
 
1.1

Total Corporate Operations and Other
$
(2.2
)
 
$
0.9



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The following table presents a summary of restructuring charges and other costs incurred since inception for the Company’s remaining restructuring plans. The Company does not expect to incur any additional costs associated with these restructuring plans.
(in millions)
 
Costs Incurred to Date
 
Restructuring charges:
 
Employee termination benefit costs
$
56.6

Contract termination costs
13.2

Facility consolidation/relocation costs
4.0

Total restructuring charges
73.8

Other costs:
 
Accelerated depreciation, inventory write-down and/or other costs (cost of product sold)
31.8

Asset write-down, other costs and/or acquisition-related integration costs (selling, general and administrative expenses)
71.8

Asset impairment (impairment of intangible assets)
7.4

Total other costs
111.0

Total costs incurred to date
$
184.8

 
 
Total Costs Incurred to Date by Reportable Segment:
 
Constellation Wine and Spirits
 
Restructuring charges
$
43.0

Other costs
88.5

Total Constellation Wine and Spirits
$
131.5

 
 
CWAE
 
Restructuring charges
$
23.6

Other costs
13.3

Total CWAE
$
36.9

 
 
Corporate Operations and Other
 
Restructuring charges
$
7.2

Other costs
9.2

Total Corporate Operations and Other
$
16.4



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16.    CONDENSED CONSOLIDATING FINANCIAL INFORMATION:

The following information sets forth the condensed consolidating balance sheets as of May 31, 2013, and February 28, 2013, the condensed consolidating statements of comprehensive income (loss) for the three months ended May 31, 2013, and May 31, 2012, and the condensed consolidating statements of cash flows for the three months ended May 31, 2013, and May 31, 2012, for the Company, the parent company, the combined subsidiaries of the Company which guarantee the Company’s senior notes (“Subsidiary Guarantors”) and the combined subsidiaries of the Company which are not Subsidiary Guarantors (primarily foreign subsidiaries) (“Subsidiary Nonguarantors”). The Subsidiary Guarantors are 100% owned, directly or indirectly, by the parent company and the guarantees are joint and several obligations of each of the Subsidiary Guarantors. The guarantees are full and unconditional, as those terms are used in Rule 3-10 of Regulation S-X, except that a Subsidiary Guarantor can be automatically released and relieved of its obligations under certain customary circumstances contained in the indentures governing the Company’s senior notes. These customary circumstances include, so long as other applicable provisions of the indentures are adhered to, the termination or release of a Subsidiary Guarantor’s guarantee of other indebtedness or upon the legal defeasance or covenant defeasance or satisfaction and discharge of the Company’s senior notes. Separate financial statements for the Subsidiary Guarantors of the Company are not presented because the Company has determined that such financial statements would not be material to investors. The accounting policies of the parent company, the Subsidiary Guarantors and the Subsidiary Nonguarantors are the same as those described for the Company in the Summary of Significant Accounting Policies in Note 1 to the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 28, 2013, and include the recently adopted accounting guidance described in Note 2 herein. There are no restrictions on the ability of the Subsidiary Guarantors to transfer funds to the Company in the form of cash dividends, loans or advances.
 
Parent
Company
 
Subsidiary
Guarantors
 
Subsidiary
Nonguarantors
 
Eliminations
 
Consolidated
(in millions)
 
 
 
 
 
 
 
 
 
Condensed Consolidating Balance Sheet at May 31, 2013
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash investments
$
474.1

 
$
2.6

 
$
132.6

 
$

 
$
609.3

Accounts receivable, net
1.5

 
9.6

 
442.7

 

 
453.8

Inventories
155.7

 
946.4

 
349.5

 
(7.8
)
 
1,443.8

Prepaid expenses and other
34.7

 
56.1

 
447.9

 
(322.3
)
 
216.4

Intercompany (payable) receivable
(2,987.5
)
 
3,075.4

 
(87.9
)
 

 

Total current assets
(2,321.5
)
 
4,090.1

 
1,284.8

 
(330.1
)
 
2,723.3

Property, plant and equipment, net
41.8

 
824.0

 
341.8

 

 
1,207.6

Investments in subsidiaries
7,366.9

 
3.9

 

 
(7,370.8
)
 

Goodwill

 
2,098.0

 
616.5

 

 
2,714.5

Intangible assets, net

 
684.5

 
181.7

 

 
866.2

Restricted cash
1,550.0

 

 

 

 
1,550.0

Intercompany notes receivable
1,631.7

 
6.1

 
32.8

 
(1,670.6
)
 

Other assets, net
62.8

 
284.8

 
56.8

 
(13.6
)
 
390.8

Total assets
$
8,331.7

 
$
7,991.4

 
$
2,514.4

 
$
(9,385.1
)
 
$
9,452.4

 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Notes payable to banks
$

 
$

 
$
221.0

 
$

 
$
221.0

Current maturities of long-term debt
16.3

 
17.0

 

 

 
33.3

Accounts payable
30.4

 
60.7

 
58.9