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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, 2017
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
image_bw.jpg
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)
 
 
 
 
 
Not Applicable
 
(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.                     ý  Yes    ¨  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).  ý  Yes    ¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth 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
¨
 
 
Emerging growth company
¨


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ¨

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 23, 2017, is set forth below:
Class
 
Number of Shares Outstanding
Class A Common Stock, par value $.01 per share
 
171,963,496
Class B Common Stock, par value $.01 per share
 
23,338,727
Class 1 Common Stock, par value $.01 per share
 
7,720

Table of Contents

TABLE OF CONTENTS

 
 



























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 Company’s 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 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Unless the context otherwise requires, the terms “Company,” “CBI,” “we,” “our,” or “us” refer to Constellation Brands, Inc. and its subsidiaries. Unless otherwise defined herein, refer to the Notes to Consolidated Financial Statements under Item 1 of this Quarterly Report on Form 10-Q for the definition of capitalized terms used herein. All references to “Fiscal 2017” refer to our fiscal year ended February 28, 2017. All references to “Fiscal 2018” refer to our fiscal year ending February 28, 2018.


Table of Contents

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,
2017
 
February 28,
2017
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
199.1

 
$
177.4

Accounts receivable
832.0

 
737.0

Inventories
1,936.9

 
1,955.1

Prepaid expenses and other
392.5

 
360.5

Total current assets
3,360.5

 
3,230.0

Property, plant and equipment
4,186.9

 
3,932.8

Goodwill
7,972.3

 
7,920.5

Intangible assets
3,289.7

 
3,377.7

Other assets
150.0

 
141.4

Total assets
$
18,959.4

 
$
18,602.4

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Notes payable to banks
$
988.1

 
$
606.5

Current maturities of long-term debt
146.2

 
910.9

Accounts payable
558.8

 
559.8

Other accrued expenses and liabilities
489.3

 
620.4

Total current liabilities
2,182.4

 
2,697.6

Long-term debt, less current maturities
8,077.2

 
7,720.7

Deferred income taxes
1,135.5

 
1,133.6

Other liabilities
166.5

 
165.7

Total liabilities
11,561.6

 
11,717.6

Commitments and contingencies

 

CBI stockholders’ equity:
 
 
 
Class A Common Stock, $.01 par value – Authorized, 322,000,000 shares; Issued, 258,010,515 shares and 257,506,184 shares, respectively
2.6

 
2.6

Class B Convertible Common Stock, $.01 par value – Authorized, 30,000,000 shares; Issued, 28,344,527 shares and 28,358,527 shares, respectively
0.3

 
0.3

Additional paid-in capital
2,759.8

 
2,755.8

Retained earnings
7,612.3

 
7,310.0

Accumulated other comprehensive loss
(212.3
)
 
(399.8
)
 
10,162.7

 
9,668.9

Less: Treasury stock –
 
 
 
Class A Common Stock, at cost, 86,082,806 shares and 86,262,971 shares, respectively
(2,770.8
)
 
(2,775.5
)
Class B Convertible Common Stock, at cost, 5,005,800 shares
(2.2
)
 
(2.2
)
 
(2,773.0
)
 
(2,777.7
)
Total CBI stockholders’ equity
7,389.7

 
6,891.2

Noncontrolling interests
8.1

 
(6.4
)
Total stockholders’ equity
7,397.8

 
6,884.8

Total liabilities and stockholders’ equity
$
18,959.4

 
$
18,602.4


The accompanying notes are an integral part of these statements.

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CONSTELLATION BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions, except per share data)
(unaudited)
 
For the Three Months Ended May 31,
 
2017
 
2016
Sales
$
2,115.3

 
$
2,053.0

Less – excise taxes
(179.8
)
 
(181.2
)
Net sales
1,935.5

 
1,871.8

Cost of product sold
(940.2
)
 
(990.5
)
Gross profit
995.3

 
881.3

Selling, general and administrative expenses
(427.2
)
 
(328.6
)
Operating income
568.1

 
552.7

Equity in earnings of equity method investees
0.4

 
0.7

Interest expense
(82.4
)
 
(84.6
)
Loss on write-off of debt issuance costs
(6.7
)
 
—

Income before income taxes
479.4

 
468.8

Provision for income taxes
(74.1
)
 
(149.7
)
Net income
405.3

 
319.1

Net income attributable to noncontrolling interests
(2.5
)
 
(0.8
)
Net income attributable to CBI
$
402.8

 
$
318.3

 
 
 
 
Comprehensive income
$
604.8

 
$
313.2

Comprehensive (income) loss attributable to noncontrolling interests
(14.5
)
 
1.1

Comprehensive income attributable to CBI
$
590.3

 
$
314.3

 
 
 
 
Net income per common share attributable to CBI:
 
 
 
Basic – Class A Common Stock
$
2.09

 
$
1.61

Basic – Class B Convertible Common Stock
$
1.90

 
$
1.46

 
 
 
 
Diluted – Class A Common Stock
$
2.00

 
$
1.55

Diluted – Class B Convertible Common Stock
$
1.85

 
$
1.43

 
 
 
 
Weighted average common shares outstanding:
 
 
 
Basic – Class A Common Stock
171.555

 
176.542

Basic – Class B Convertible Common Stock
23.344

 
23.353

 
 
 
 
Diluted – Class A Common Stock
201.030

 
205.367

Diluted – Class B Convertible Common Stock
23.344

 
23.353

 
 
 
 
Cash dividends declared per common share:
 
 
 
Class A Common Stock
$
0.52

 
$
0.40

Class B Convertible Common Stock
$
0.47

 
$
0.36


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,
 
2017
 
2016
Cash flows from operating activities:
 
 
 
Net income
$
405.3

 
$
319.1

 
 
 
 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Impairment and amortization of intangible assets
88.2

 
4.2

Depreciation
70.1

 
55.8

Stock-based compensation
15.1

 
16.0

Amortization and loss on write-off of debt issuance costs
9.8

 
3.2

Deferred tax provision (benefit)
(8.5
)
 
56.0

Change in operating assets and liabilities, net of effects from purchase of business:
 
 
 
Accounts receivable
(96.8
)
 
(39.0
)
Inventories
18.4

 
(19.0
)
Prepaid expenses and other current assets
(36.0
)
 
(31.6
)
Accounts payable
(13.6
)
 
55.9

Deferred revenue
42.4

 
26.8

Other accrued expenses and liabilities
(130.7
)
 
(69.4
)
Other
17.9

 
(32.1
)
Total adjustments
(23.7
)
 
26.8

Net cash provided by operating activities
381.6

 
345.9

 
 
 
 
Cash flows from investing activities:
 
 
 
Purchases of property, plant and equipment
(217.1
)
 
(169.4
)
Payments related to sale of business
(5.0
)
 
—

Purchase of business
—

 
(284.9
)
Other investing activities
0.8

 
0.4

Net cash used in investing activities
(221.3
)
 
(453.9
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Principal payments of long-term debt
(1,913.4
)
 
(94.2
)
Dividends paid
(100.5
)
 
(79.3
)
Payments of minimum tax withholdings on stock-based payment awards
(22.3
)
 
(45.5
)
Payments of debt issuance costs
(11.8
)
 
(3.2
)
Proceeds from issuance of long-term debt
1,508.5

 
709.5

Net proceeds from (repayments of) notes payable
381.3

 
(379.1
)
Proceeds from shares issued under equity compensation plans
16.6

 
15.9

Excess tax benefits from stock-based payment awards
—

 
68.8

Purchases of treasury stock
—

 
(1.0
)
Net cash provided by (used in) financing activities
(141.6
)
 
191.9

 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
3.0

 
0.3

 
 
 
 
Net increase in cash and cash equivalents
21.7

 
84.2

Cash and cash equivalents, beginning of period
177.4

 
83.1

Cash and cash equivalents, end of period
$
199.1

 
$
167.3

 
 
 
 
Supplemental disclosures of noncash investing and financing activities:
 
 
 
Additions to property, plant and equipment
$
174.0

 
$
88.0

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, 2017
(unaudited)

1.    BASIS OF PRESENTATION:

Unless the context otherwise requires, the terms “Company,” “CBI,” “we,” “our,” or “us” refer to Constellation Brands, Inc. and its subsidiaries. We have prepared the consolidated financial statements included herein, 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 our opinion, all adjustments necessary to present fairly our financial information. 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 our Annual Report on Form 10-K for the fiscal year ended February 28, 2017 (the “2017 Annual Report”). Results of operations for interim periods are not necessarily indicative of annual results. For the three months ended May 31, 2016, we reclassified $9.5 million on the Consolidated Statements of Cash Flows from proceeds from noncontrolling interests to proceeds from issuance of long-term debt in connection with an immaterial adjustment recorded during the three months ended August 31, 2016, for the conversion of noncontrolling equity interest to long-term debt related to a prior period.

2.    RECENTLY ADOPTED ACCOUNTING GUIDANCE:

Stock-based employee compensation –
Effective March 1, 2017, we adopted the FASB amended guidance for, among other items, the accounting for income taxes related to share-based compensation and the related classification in the statement of cash flows. This guidance requires the recognition of excess tax benefits and deficiencies (resulting from an increase or decrease in the fair value of an award from grant date to the vesting or settlement date) in the provision for income taxes as a discrete item in the quarterly period in which they occur. Through February 28, 2017, these amounts were recognized in additional paid-in capital at the time of vesting or settlement. In addition, these amounts are classified as an operating activity in the statement of cash flows instead of as a financing activity where they were previously presented. We adopted this guidance on a prospective basis and, accordingly, prior periods have not been adjusted. Adoption of this guidance resulted in the recognition of excess tax benefits in our provision for income taxes rather than additional paid-in capital of $32.5 million for the three months ended May 31, 2017.

The adoption of this amended guidance also impacted our calculation of diluted earnings per share under the treasury stock method, as excess tax benefits and deficiencies resulting from share-based compensation are no longer included in the assumed proceeds calculation. This change resulted in a decrease in diluted earnings per share of $0.02 for the three months ended May 31, 2017.

We have elected to continue to estimate forfeitures expected to occur to determine the amount of compensation cost to be recognized in each period. The remaining provisions of this amended guidance did not have a material impact on our consolidated financial statements.


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3.    INVENTORIES:

Inventories are stated at the lower of cost (primarily computed in accordance with the first-in, first-out method) or net realizable value. Elements of cost include materials, labor and overhead and consist of the following:
 
May 31,
2017
 
February 28,
2017
(in millions)
 
 
 
Raw materials and supplies
$
169.5

 
$
149.7

In-process inventories
1,189.8

 
1,260.1

Finished case goods
577.6

 
545.3

 
$
1,936.9

 
$
1,955.1


4.    DERIVATIVE INSTRUMENTS:

Overview –
Our risk management and derivative accounting policies are presented in Notes 1 and 6 of our consolidated financial statements included in our 2017 Annual Report and have not changed significantly for the three months ended May 31, 2017.

The aggregate notional value of outstanding derivative instruments is as follows:
 
May 31,
2017
 
February 28,
2017
(in millions)
 
 
 
Derivative instruments designated as hedging instruments
 
 
 
Foreign currency contracts
$
998.7

 
$
981.7

Interest rate swap contracts
$
250.0

 
$
250.0

 
 
 
 
Derivative instruments not designated as hedging instruments
 
 
 
Foreign currency contracts
$
288.5

 
$
389.9

Commodity derivative contracts
$
165.8

 
$
153.2


Credit risk –
We are exposed to credit-related losses if the counterparties to our derivative contracts default. This credit risk is limited to the fair value of the derivative contracts. To manage this risk, we contract only with major financial institutions that have earned investment-grade credit ratings and with whom we have standard International Swaps and Derivatives Association agreements which allow for net settlement of the derivative contracts. We have also established counterparty credit guidelines that are regularly monitored. Because of these safeguards, we believe the risk of loss from counterparty default to be immaterial.

In addition, our derivative instruments are not subject to credit rating contingencies or collateral requirements. As of May 31, 2017, the estimated fair value of derivative instruments in a net liability position due to counterparties was $16.2 million. If we were required to settle the net liability position under these derivative instruments on May 31, 2017, we would have had sufficient available liquidity on hand to satisfy this obligation.


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Results of period derivative activity –
The estimated fair value and location of our derivative instruments on our balance sheets are as follows (see Note 5):
Assets
 
Liabilities
 
May 31,
2017
 
February 28,
2017
 
 
May 31,
2017
 
February 28,
2017
(in millions)
 
 
 
 
 
 
 
 
Derivative instruments designated as hedging instruments
Foreign currency contracts:
Prepaid expenses and other
$
15.4

 
$
5.2

 
Other accrued expenses and liabilities
$
11.7

 
$
30.4

Other assets
$
14.2

 
$
6.0

 
Other liabilities
$
15.7

 
$
37.4

Interest rate swap contracts:
Prepaid expenses and other
$
0.5

 
$
0.3

 
Other accrued expenses and liabilities
$
0.1

 
$
0.3

Other assets
$
3.3

 
$
4.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative instruments not designated as hedging instruments
Foreign currency contracts:
Prepaid expenses and other
$
1.7

 
$
2.0

 
Other accrued expenses and liabilities
$
1.0

 
$
2.6

Commodity derivative contracts:
Prepaid expenses and other
$
3.3

 
$
4.3

 
Other accrued expenses and liabilities
$
6.0

 
$
6.9

Other assets
$
1.2

 
$
1.5

 
Other liabilities
$
5.3

 
$
4.7


The principal effect of our derivative instruments designated in cash flow hedging relationships on our results of operations, as well as Other Comprehensive Income (“OCI”), net of income tax effect, is as follows:
Derivative Instruments in
Designated Cash Flow
Hedging Relationships
 
Net
Gain (Loss)
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, 2017
 
 
 
 
 
 
Foreign currency contracts
 
$
38.6

 
Sales
 
$
0.3

 
 
 
 
Cost of product sold
 
(2.7
)
Interest rate swap contracts
 
(2.0
)
 
Interest expense
 
(0.1
)
 
 
$
36.6

 
 
 
$
(2.5
)
 
 
 
 
 
 
 
For the Three Months Ended May 31, 2016
 
 
 
 
 
 
Foreign currency contracts
 
$
(2.3
)
 
Sales
 
$
0.1

 
 
 
 
Cost of product sold
 
(5.0
)
Interest rate swap contracts
 
0.9

 
Interest expense
 
(1.9
)
 
 
$
(1.4
)
 
 
 
$
(6.8
)

We expect $3.2 million of net gains, net of income tax effect, to be reclassified from accumulated other comprehensive income (loss) (“AOCI”) to our results of operations within the next 12 months.


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The effect of our undesignated derivative instruments on our results of operations is as follows:
Derivative Instruments Not
Designated as Hedging Instruments
 
 
 
Location of Net Gain (Loss)
Recognized in Income
 
Net
Gain (Loss)
Recognized
in Income
(in millions)
 
 
 
 
 
 
For the Three Months Ended May 31, 2017
 
 
 
 
 
 
Commodity derivative contracts
 
 
 
Cost of product sold
 
$
(3.1
)
Foreign currency contracts
 
 
 
Selling, general and administrative expenses
 
4.7

 
 
 
 
 
 
$
1.6

 
 
 
 
 
 
 
For the Three Months Ended May 31, 2016
 
 
 
 
 
 
Commodity derivative contracts
 
 
 
Cost of product sold
 
$
13.1

Foreign currency contracts
 
 
 
Selling, general and administrative expenses
 
(10.5
)
 
 
 
 
 
 
$
2.6


5.    FAIR VALUE OF FINANCIAL INSTRUMENTS:

Authoritative guidance establishes a framework for measuring fair value and requires disclosures about fair value measurements for financial instruments. 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. It 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 includes 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.

Fair value methodology and assumptions –
The methods and assumptions we use to estimate the fair value for each class of our financial instruments are presented in Notes 1 and 7 of our consolidated financial statements included in our 2017 Annual Report and have not changed significantly for the three months ended May 31, 2017. The carrying amounts of certain of our financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and notes payable to banks, approximate fair value as of May 31, 2017, and February 28, 2017, due to the relatively short maturity of these instruments. As of May 31, 2017, the carrying amount of long-term debt, including the current portion, was $8,223.4 million, compared with an estimated fair value of $8,534.5 million. As of February 28, 2017, the carrying amount of long-term debt, including the current portion, was $8,631.6 million, compared with an estimated fair value of $8,845.5 million.


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Recurring basis measurements –
The following table presents our financial assets and liabilities measured at estimated fair value on a recurring basis:
 
Fair Value Measurements Using
 
 
 
Quoted
Prices in
Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
(in millions)
 
 
 
 
 
 
 
May 31, 2017
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Foreign currency contracts
$
—

 
$
31.3

 
$
—

 
$
31.3

Commodity derivative contracts
$
—

 
$
4.5

 
$
—

 
$
4.5

Interest rate swap contracts
$
—

 
$
3.8

 
$
—

 
$
3.8

Available-for-sale (“AFS”) debt securities
$
—

 
$
—

 
$
9.2

 
$
9.2

Liabilities:
 
 
 
 
 
 
 
Foreign currency contracts
$
—

 
$
28.4

 
$
—

 
$
28.4

Commodity derivative contracts
$
—

 
$
11.3

 
$
—

 
$
11.3

Interest rate swap contracts
$
—

 
$
0.1

 
$
—

 
$
0.1

 
 
 
 
 
 
 
 
February 28, 2017
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Foreign currency contracts
$
—

 
$
13.2

 
$
—

 
$
13.2

Commodity derivative contracts
$
—

 
$
5.8

 
$
—

 
$
5.8

Interest rate swap contracts
$
—

 
$
4.7

 
$
—

 
$
4.7

AFS debt securities
$
—

 
$
—

 
$
9.5

 
$
9.5

Liabilities:
 
 
 
 
 
 
 
Foreign currency contracts
$
—

 
$
70.4

 
$
—

 
$
70.4

Commodity derivative contracts
$
—

 
$
11.6

 
$
—

 
$
11.6

Interest rate swap contracts
$
—

 
$
0.3

 
$
—

 
$
0.3


Nonrecurring basis measurements –
The following table presents our assets and liabilities measured at estimated fair value on a nonrecurring basis for which an impairment assessment was performed for the period presented:
 
Fair Value Measurements Using
 
 
 
Quoted
Prices in
Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total Losses
(in millions)
 
 
 
 
 
 
 
For the Three Months Ended May 31, 2017
 
 
 
 
 
 
 
Trademarks
$
—

 
$
—

 
$
136.0

 
$
86.8


Trademarks:
For the first quarter of fiscal 2018, we identified certain negative trends within our Beer segment’s Ballast Point craft beer portfolio which, when combined with the recent negative craft beer industry trends, including slower growth rates and increased competition, indicated that it was more likely than not that the fair value of our indefinite lived intangible asset associated with the craft beer trademarks might be below its carrying value. These negative trends were the result of (i)  a disruption in our distribution network transition plan, (ii)  an unexpected decrease in sales from product innovations and (iii)  a significant shift in market conditions for our craft beer

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portfolio, all of which resulted in a decline in net sales and depletion trends, which represent distributor shipments of our branded products to retail customers, for the first quarter of fiscal 2018 as compared to the first quarter of fiscal 2017, following consecutive quarters of significant net sales and depletion volume growth for our craft beer portfolio. Additionally, net sales for the first quarter of fiscal 2018 were below our forecasted net sales for the first quarter of fiscal 2018. Accordingly, we performed a quantitative assessment for impairment of the craft beer trademark asset. As a result of this assessment, the craft beer trademark asset with a carrying value of $222.8 million was written down to its estimated fair value of $136.0 million, resulting in an impairment of $86.8 million. This impairment is included in selling, general and administrative expenses.

We measured the amount of impairment by calculating the amount by which the carrying value of the trademark asset exceeded its estimated fair value. The estimated fair value was determined based on an income approach using the relief from royalty method, which assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to exploit the related benefits of the trademark asset. The cash flow projections we use to estimate the fair values of our trademarks involve several assumptions, including (i)  projected revenue growth rates, (ii)  estimated royalty rates, (iii)  after-tax royalty savings expected from ownership of the trademarks and (iv)  discount rates used to derive the estimated fair value of the trademarks.

6.    GOODWILL:

The changes in the carrying amount of goodwill are as follows:
 
Beer
 
Wine and Spirits
 
Consolidated
(in millions)
 
 
 
 
 
Balance, February 29, 2016
$
4,530.1

 
$
2,608.5

 
$
7,138.6

Purchase accounting allocations (1)
510.8

 
373.7

 
884.5

Canadian Divestiture (2)
—

 
(126.1
)
 
(126.1
)
Foreign currency translation adjustments
12.1

 
11.4

 
23.5

Balance, February 28, 2017
5,053.0

 
2,867.5

 
7,920.5

Purchase accounting allocations (3)
7.8

 
(0.2
)
 
7.6

Foreign currency translation adjustments
45.6

 
(1.4
)
 
44.2

Balance, May 31, 2017
$
5,106.4

 
$
2,865.9

 
$
7,972.3

(1) 
Preliminary purchase accounting allocations associated with the acquisitions of the Obregon Brewery (Beer), and High West and Charles Smith (Wine and Spirits), and purchase accounting allocations primarily associated with the acquisition of Prisoner (Wine and Spirits). See defined acquisition terms below.
(2) 
Includes accumulated impairment losses of C$289.1 million, or $216.8 million.
(3) 
Preliminary purchase accounting allocations associated primarily with the acquisition of the Obregon Brewery.

Acquisitions –
Obregon Brewery:
In December 2016, we acquired a brewery operation business in Obregon, Sonora, Mexico from Grupo Modelo, S. de R.L. de C.V., formerly known as Grupo Modelo, S.A.B. de C.V., (“Modelo”), a subsidiary of Anheuser-Busch InBev SA/NV for cash paid of $568.7 million, net of cash acquired, subject to estimated working capital adjustments due to seller of $1.0 million (the “Obregon Brewery”). The transaction primarily included the acquisition of operations; goodwill; property, plant and equipment; and inventories. The purchase accounting has not yet been finalized due primarily to an incomplete valuation of property, plant and equipment. Further changes to the preliminary purchase price allocation will be recognized as valuations are finalized. This acquisition provided us with immediate functioning brewery capacity to support our fast-growing, high-end Mexican beer portfolio and flexibility for future innovation initiatives. It also enabled us to become fully independent from an interim supply agreement with Modelo, which was terminated at the time of this acquisition. The results of operations of the Obregon Brewery are reported in the Beer segment and have been included in our consolidated results of operations from the date of acquisition.

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High West:
In October 2016, we acquired all of the issued and outstanding common and preferred membership interests of High West Holdings, LLC for $136.6 million, net of cash acquired (“High West”). This transaction primarily included the acquisition of operations, goodwill, trademarks, inventories and property, plant and equipment. This acquisition included a portfolio of craft whiskeys and other select spirits. The results of operations of High West are reported in the Wine and Spirits segment and have been included in our consolidated results of operations from the date of acquisition.

Charles Smith:
In October 2016, we acquired the Charles Smith Wines, LLC business, a collection of five super and ultra-premium wine brands, for $120.8 million (“Charles Smith”). This transaction primarily included the acquisition of goodwill, trademarks, inventories and certain grape supply contracts, plus an earn-out over three years based on the performance of the brands. The results of operations of Charles Smith are reported in the Wine and Spirits segment and have been included in our consolidated results of operations from the date of acquisition.

Prisoner:
In April 2016, we acquired The Prisoner Wine Company business, including a portfolio of five super-luxury wine brands, for $284.9 million (“Prisoner”). This transaction primarily included the acquisition of goodwill, inventories, trademarks and certain grape supply contracts. The results of operations of Prisoner are reported in the Wine and Spirits segment and have been included in our results of operations from the date of acquisition.

Divestiture –
Canadian Divestiture:
In December 2016, we sold the Wine and Spirits’ Canadian wine business, which included Canadian wine brands such as Jackson-Triggs and Inniskillin, wineries, vineyards, offices, facilities and Wine Rack retail stores, at a transaction value of C$1.03 billion, or $775.1 million, (the “Canadian Divestiture”). We received cash proceeds of $570.3 million, net of outstanding debt and direct costs to sell of $194.9 million and $9.9 million, respectively. The following table summarizes the net gain recognized in connection with this divestiture:
(in millions)
 
Cash received from buyer
$
580.2

Net assets sold
(175.3
)
AOCI reclassification adjustments, primarily foreign currency translation
(122.5
)
Direct costs to sell
(9.9
)
Other
(10.1
)
Gain on sale of business
$
262.4


Additionally, our Wine and Spirits’ U.S. business recognized an impairment of $8.4 million in the fourth quarter of fiscal 2017 for trademarks associated with certain U.S. brands sold exclusively through the Canadian wine business for which we expect future sales of these brands to be minimal subsequent to the Canadian Divestiture. We have also recognized $15.2 million of other costs associated with the Canadian Divestiture, with $12.0 million recognized for the year ended February 28, 2017, primarily in connection with the evaluation of the merits of executing an initial public offering for a portion of our then-owned Canadian wine business, and $3.2 million recognized for the three months ended May 31, 2017, in connection with the sale of the Canadian wine business. These amounts are included in selling, general and administrative expenses. In total, we have recognized $238.8 million of net gains associated with the Canadian Divestiture, with $242.0 million of net gains recognized for the year ended February 28, 2017, and $3.2 million of net losses recognized for the three months ended May 31, 2017, as follows:
(in millions)
 
Gain on sale of business
$
262.4

Impairment of trademarks
(8.4
)
Other net costs
(15.2
)
Net gain associated with the Canadian Divestiture and related activities
$
238.8


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7.    INTANGIBLE ASSETS:

The major components of intangible assets are as follows:
 
May 31, 2017
 
February 28, 2017
 
Gross
Carrying
Amount
 
Net
Carrying
Amount
 
Gross
Carrying
Amount
 
Net
Carrying
Amount
(in millions)
 
 
 
 
 
 
 
Amortizable intangible assets
 
 
 
 
 
 
 
Customer relationships
$
89.1

 
$
47.3

 
$
89.1

 
$
48.6

Other
19.9

 
1.6

 
19.9

 
1.7

Total
$
109.0

 
48.9

 
$
109.0

 
50.3

 
 
 
 
 
 
 
 
Nonamortizable intangible assets
 
 
 
 
 
 
 
Trademarks
 
 
3,240.8

 
 
 
3,327.4

Total intangible assets
 
 
$
3,289.7

 
 
 
$
3,377.7


We did not incur costs to renew or extend the term of acquired intangible assets for the three months ended May 31, 2017, and May 31, 2016. Net carrying amount represents the gross carrying value net of accumulated amortization. Amortization expense for intangible assets was $1.4 million and $4.2 million for the three months ended May 31, 2017, and May 31, 2016, respectively. Estimated amortization expense for the remaining nine months of fiscal 2018 and for each of the five succeeding fiscal years and thereafter is as follows:
(in millions)
 
2018
$
4.3

2019
$
5.7

2020
$
5.5

2021
$
5.2

2022
$
4.9

2023
$
3.2

Thereafter
$
20.1


8.    BORROWINGS:

Borrowings consist of the following:
 
May 31, 2017
 
February 28,
2017
 
Current
 
Long-term
 
Total
 
Total
(in millions)
 
 
 
 
 
 
 
Notes payable to banks
 
 
 
 
 
 
 
Senior Credit Facility – Revolving Credit Loans
$
505.0

 
$
—

 
$
505.0

 
$
231.0

Other
483.1

 
—

 
483.1

 
375.5

 
$
988.1

 
$
—

 
$
988.1

 
$
606.5

 
 
 
 
 
 
 
 
Long-term debt
 
 
 
 
 
 
 
Senior Credit Facility – Term Loans
$
129.0

 
$
2,458.1

 
$
2,587.1

 
$
3,787.5

Senior Notes
—

 
5,401.2

 
5,401.2

 
4,617.0

Other
17.2

 
217.9

 
235.1

 
227.1

 
$
146.2

 
$
8,077.2

 
$
8,223.4

 
$
8,631.6



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Senior credit facility –
The Company, CIH International S.à r.l., a wholly-owned indirect subsidiary of ours (“CIH”), CIH Holdings S.à r.l., a wholly-owned indirect subsidiary of ours (“CIHH”), CB International Finance S.à r.l., a wholly-owned indirect subsidiary of ours (“CB International” and together with CIH and CIHH, the “European Borrowers”), Bank of America, N.A., as administrative agent (the “Administrative Agent”), and certain other lenders are parties to a credit agreement, as amended and restated (the “2016 Credit Agreement”).

In May 2017, we repaid the outstanding obligations under the U.S. Term A loan facility under the 2016 Credit Agreement primarily with a portion of the proceeds from the May 2017 Senior Notes (as defined below) and revolver borrowings under the 2016 Credit Agreement. Accordingly, as of May 31, 2017, information with respect to borrowings under the 2016 Credit Agreement is as follows:
 
Revolving
Credit
Facility
 
U.S.
Term A-1
Facility (1)
 
European
Term A
Facility (1)
 
European
Term A-1
Facility (1)
 
European
Term A-2
Facility (1)
(in millions)
 
 
 
 
 
 
 
 
 
Outstanding borrowings
$
505.0

 
$
237.4

 
$
1,299.4

 
$
662.4

 
$
387.9

Interest rate
2.5
%
 
2.7
%
 
2.5
%
 
2.5
%
 
2.5
%
LIBOR margin
1.5
%
 
1.75
%
 
1.5
%
 
1.5
%
 
1.5
%
Outstanding letters of credit
$
17.5

 
 
 
 
 
 
 
 
Remaining borrowing capacity
$
627.5

 
 
 
 
 
 
 
 
(1) 
Outstanding term loan facility borrowings are net of unamortized debt issuance costs.

As of May 31, 2017, the required principal repayments of the term loans under the 2016 Credit Agreement (excluding unamortized debt issuance costs of $10.6 million) for the remaining nine months of fiscal 2018 and for each of the remaining succeeding fiscal years are as follows:
 
U.S.
Term A-1
Facility
 
European
Term A
Facility
 
European
Term A-1
Facility
 
European
Term A-2
Facility
 
Total
(in millions)
 
 
 
 
 
 
 
 
 
2018
$
1.8

 
$
53.7

 
$
26.2

 
$
15.0

 
$
96.7

2019
2.4

 
71.5

 
35.0

 
20.0

 
128.9

2020
2.4

 
71.5

 
35.0

 
20.0

 
128.9

2021
2.4

 
1,108.3

 
35.0

 
20.0

 
1,165.7

2022
228.7

 
—

 
533.8

 
315.0

 
1,077.5

 
$
237.7

 
$
1,305.0

 
$
665.0


$
390.0

 
$
2,597.7


Interest rate swap contracts –
We have entered into interest rate swap agreements, which are designated as cash flow hedges for $250.0 million of our floating LIBOR rate debt. As a result of these hedges, we have fixed our interest rates on $250.0 million of our floating LIBOR rate debt at an average rate of 1.1% (exclusive of borrowing margins) from September 1, 2016, through July 1, 2020.


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Table of Contents

Senior notes –
In May 2017, we issued $1,500.0 million aggregate principal amount of Senior Notes (the “May 2017 Senior Notes”). Proceeds from this offering, net of discount and debt issuance costs, were $1,483.8 million. The May 2017 Senior Notes consist of:
 
Date of
 
 
 
Maturity
 
Interest
Payments
 
Principal
(in millions)
 
 
 
 
 
2.70% Senior Notes (1) (2)
May 2022
 
May/Nov
 
$
500.0

3.50% Senior Notes (1) (3)
May 2027
 
May/Nov
 
$
500.0

4.50% Senior Notes (1) (4)
May 2047
 
May/Nov
 
$
500.0

(1) 
Senior unsecured obligations which rank equally in right of payment to all of our existing and future senior unsecured indebtedness. Guaranteed by certain of our U.S. subsidiaries on a senior unsecured basis.
(2) 
Redeemable, in whole or in part, at our option at any time prior to April 9, 2022, at a redemption price equal to 100% of the outstanding principal amount, plus accrued and unpaid interest and a make-whole payment based on the present value of the future payments at the adjusted Treasury Rate plus 15 basis points. On or after April 9, 2022, redeemable, in whole or in part, at our option at any time at a redemption price equal to 100% of the outstanding principal amount, plus accrued and unpaid interest.
(3) 
Redeemable, in whole or in part, at our option at any time prior to February 9, 2027, at a redemption price equal to 100% of the outstanding principal amount, plus accrued and unpaid interest and a make-whole payment based on the present value of the future payments at the adjusted Treasury Rate plus 20 basis points. On or after February 9, 2027, redeemable, in whole or in part, at our option at any time at a redemption price equal to 100% of the outstanding principal amount, plus accrued and unpaid interest.
(4) 
Redeemable, in whole or in part, at our option at any time prior to November 9, 2046, at a redemption price equal to 100% of the outstanding principal amount, plus accrued and unpaid interest and a make-whole payment based on the present value of the future payments at the adjusted Treasury Rate plus 25 basis points. On or after November 9, 2046, redeemable, in whole or in part, at our option at any time at a redemption price equal to 100% of the outstanding principal amount, plus accrued and unpaid interest.

In January 2008, we issued $700.0 million aggregate principal amount of 7.25% Senior Notes due May 2017 (the “January 2008 Senior Notes”) in exchange for notes originally issued in May 2007. In May 2017, we repaid the January 2008 Senior Notes with a portion of the proceeds from the May 2017 Senior Notes.

Accounts receivable securitization facilities:
On September 27, 2016, we amended our prior trade accounts receivable securitization facility (as amended, the “CBI Facility”) for an additional 364-day term. Under the CBI Facility, trade accounts receivable generated by us and certain of our subsidiaries are sold by us to a wholly-owned bankruptcy remote single purpose subsidiary, the CBI SPV, which is consolidated by us for financial reporting purposes. The CBI Facility provides borrowing capacity of $235.0 million up to $340.0 million structured to account for the seasonality of our business, subject to further limitations based upon various pre-agreed formulas.

Also, on September 27, 2016, Crown Imports amended its prior trade accounts receivable securitization facility (as amended, the “Crown Facility”) for an additional 364-day term. Under the Crown Facility, trade accounts receivable generated by Crown Imports are sold by Crown Imports to its wholly-owned bankruptcy remote single purpose subsidiary, the Crown SPV, which is consolidated by us for financial reporting purposes. The Crown Facility provides borrowing capacity of $120.0 million up to $210.0 million structured to account for the seasonality of Crown Imports’ business.


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Table of Contents

As of May 31, 2017, our accounts receivable securitization facilities are as follows:
 
Outstanding
Borrowings
 
Weighted
Average
Interest Rate
 
Remaining
Borrowing
Capacity
(in millions)
 
 
 
 
 
CBI Facility
$
198.2

 
1.9
%
 
$
101.8

Crown Facility
$
206.0

 
1.9
%
 
$
4.0


9.    INCOME TAXES:

Our effective tax rate for the three months ended May 31, 2017, and May 31, 2016, was 15.5% and 31.9%, respectively. For the three months ended May 31, 2017, our effective tax rate was lower than the federal statutory rate of 35% primarily due to (i)  lower effective tax rates applicable to our foreign businesses, including our assertion regarding indefinitely reinvesting earnings of certain foreign subsidiaries, which was asserted in the third quarter of fiscal 2017, and (ii)  the recognition of the income tax effect of stock-based compensation awards in the income statement when the awards vest or are settled in connection with our March 1, 2017, adoption of the FASB’s amended share-based compensation guidance. For the three months ended May 31, 2016, our effective tax rate was lower than the federal statutory rate primarily due to lower effective tax rates applicable to our foreign businesses.

10.    NET INCOME PER COMMON SHARE ATTRIBUTABLE TO CBI:

For the three months ended May 31, 2017, and May 31, 2016, net income per common share – diluted for Class A Common Stock has been computed using the if-converted method and assumes the exercise of stock options using the treasury stock method and the conversion of Class B Convertible Common Stock as this method is more dilutive than the two-class method. For the three months ended May 31, 2017, and May 31, 2016, net income per common share – diluted for Class B Convertible Common Stock has been computed using the two-class method and does not assume conversion of Class B Convertible Common Stock into shares of Class A Common Stock.

The computation of basic and diluted net income per common share is as follows:
 
For the Three Months Ended
 
May 31, 2017
 
May 31, 2016
 
Common Stock
 
Common Stock
 
Class A
 
Class B
 
Class A
 
Class B
(in millions, except per share data)
 
 
 
 
 
 
 
Net income attributable to CBI allocated – basic
$
358.6

 
$
44.2

 
$
284.2

 
$
34.1

Conversion of Class B common shares into Class A common shares
44.2

 
—

 
34.1

 
—

Effect of stock-based awards on allocated net income
—

 
(1.0
)
 
—

 
(0.7
)
Net income attributable to CBI allocated – diluted
$
402.8

 
$
43.2

 
$
318.3

 
$
33.4

 
 
 
 
 
 
 
 
Weighted average common shares outstanding – basic
171.555

 
23.344

 
176.542

 
23.353

Conversion of Class B common shares into Class A common shares
23.344

 
—

 
23.353

 
—

Stock-based awards, primarily stock options
6.131

 
—

 
5.472

 
—

Weighted average common shares outstanding – diluted
201.030

 
23.344

 
205.367

 
23.353

 
 
 
 
 
 
 
 
Net income per common share attributable to CBI – basic
$
2.09

 
$
1.90

 
$
1.61

 
$
1.46

Net income per common share attributable to CBI – diluted
$
2.00

 
$
1.85

 
$
1.55

 
$
1.43



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Table of Contents

11.    COMPREHENSIVE INCOME ATTRIBUTABLE TO CBI:

Comprehensive income consists of net income, foreign currency translation adjustments, net unrealized gains (losses) on derivative instruments, net unrealized gains (losses) on AFS debt securities and pension/postretirement adjustments. The reconciliation of net income attributable to CBI to comprehensive income attributable to CBI is as follows:
 
Before Tax
Amount
 
Tax (Expense)
Benefit
 
Net of Tax
Amount
(in millions)
 
 
 
 
 
For the Three Months Ended May 31, 2017
 
 
 
 
 
Net income attributable to CBI
 
 
 
 
$
402.8

Other comprehensive income (loss) attributable to CBI:
 
 
 
 
 
Foreign currency translation adjustments:
 
 
 
 
 
Net gains
$
148.7

 
$
(0.2
)
 
148.5

Reclassification adjustments
—

 
—

 
—

Net gain recognized in other comprehensive income
148.7

 
(0.2
)
 
148.5

Unrealized gain on cash flow hedges:
 
 
 
 
 
Net derivative gains
51.9

 
(15.3
)
 
36.6

Reclassification adjustments
3.8

 
(1.2
)
 
2.6

Net gain recognized in other comprehensive income
55.7

 
(16.5
)
 
39.2

Unrealized loss on AFS debt securities:
 
 
 
 
 
Net AFS debt securities losses
(0.3
)
 
—

 
(0.3
)
Reclassification adjustments
—

 
—

 
—

Net loss recognized in other comprehensive income
(0.3
)
 
—

 
(0.3
)
Pension/postretirement adjustments:
 
 
 
 
 
Net actuarial gains
—

 
—

 
—

Reclassification adjustments
0.1

 
—

 
0.1

Net gain recognized in other comprehensive income
0.1

 
—

 
0.1

Other comprehensive income attributable to CBI
$
204.2

 
$
(16.7
)
 
187.5

Comprehensive income attributable to CBI
 
 
 
 
$
590.3

 
 
 
 
 
 

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Table of Contents

 
Before Tax
Amount
 
Tax (Expense)
Benefit
 
Net of Tax
Amount
(in millions)
 
 
 
 
 
For the Three Months Ended May 31, 2016
 
 
 
 
 
Net income attributable to CBI
 
 
 
 
$
318.3

Other comprehensive income (loss) attributable to CBI:
 
 
 
 
 
Foreign currency translation adjustments:
 
 
 
 
 
Net losses
$
(7.4
)
 
$
(1.8
)
 
(9.2
)
Reclassification adjustments
—

 
—

 
—

Net loss recognized in other comprehensive loss
(7.4
)
 
(1.8
)
 
(9.2
)
Unrealized loss on cash flow hedges:
 
 
 
 
 
Net derivative losses
(3.2
)
 
1.8

 
(1.4
)
Reclassification adjustments
10.1

 
(3.4
)
 
6.7

Net gain recognized in other comprehensive loss
6.9

 
(1.6
)
 
5.3

Unrealized gain on AFS debt securities:
 
 
 
 
 
Net AFS debt securities gains
0.1

 
—

 
0.1

Reclassification adjustments
—

 
—

 
—

Net gain recognized in other comprehensive loss
0.1

 
—

 
0.1

Pension/postretirement adjustments:
 
 
 
 
 
Net actuarial losses
(0.6
)
 
0.2

 
(0.4
)
Reclassification adjustments
0.2

 
—

 
0.2

Net loss recognized in other comprehensive loss
(0.4
)
 
0.2

 
(0.2
)
Other comprehensive loss attributable to CBI
$
(0.8
)
 
$
(3.2
)
 
(4.0
)
Comprehensive income attributable to CBI
 
 
 
 
$
314.3

 
 
 
 
 
 

Accumulated other comprehensive income (loss), net of income tax effect, includes the following components:
 
Foreign
Currency
Translation
Adjustments
 
Net
Unrealized
Gains (Losses)
on Derivative
Instruments
 
Net
Unrealized
Losses
on AFS Debt
Securities
 
Pension/
Postretirement
Adjustments
 
Accumulated
Other
Comprehensive
Income (Loss)
(in millions)
 
 
 
 
 
 
 
 
 
Balance, February 28, 2017
$
(358.0
)
 
$
(38.0
)
 
$
(2.3
)
 
$
(1.5
)
 
$
(399.8
)
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss) before reclassification adjustments
148.5

 
36.6

 
(0.3
)
 
—

 
184.8

Amounts reclassified from accumulated other comprehensive income (loss)
—

 
2.6

 
—

 
0.1

 
2.7

Other comprehensive income (loss)
148.5

 
39.2

 
(0.3
)
 
0.1

 
187.5

Balance, May 31, 2017
$
(209.5
)
 
$
1.2

 
$
(2.6
)
 
$
(1.4
)
 
$
(212.3
)

12.    CONDENSED CONSOLIDATING FINANCIAL INFORMATION:

The following information sets forth the condensed consolidating balance sheets as of May 31, 2017, and February 28, 2017, the condensed consolidating statements of comprehensive income for the three months ended May 31, 2017, and May 31, 2016, and the condensed consolidating statements of cash flows for the three months ended May 31, 2017, and May 31, 2016, for the parent company, our combined subsidiaries which guarantee our senior notes (“Subsidiary Guarantors”), our combined subsidiaries which are not Subsidiary Guarantors (primarily foreign subsidiaries) (“Subsidiary Nonguarantors”) and the Company. 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

16


Table of Contents

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 our 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 our senior notes. Separate financial information for our Subsidiary Guarantors is not presented because we have determined that such financial information 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 Note 1 of our consolidated financial statements included in our 2017 Annual Report. There are no restrictions on the ability of the Subsidiary Guarantors to transfer funds to us 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, 2017
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
32.6

 
$
6.9

 
$
159.6

 
$
—

 
$
199.1

Accounts receivable
1.7

 
10.1

 
820.2

 
—

 
832.0

Inventories
170.8

 
1,578.4

 
371.2

 
(183.5
)
 
1,936.9

Intercompany receivable
22,818.1

 
29,965.6

 
13,180.2

 
(65,963.9
)
 
—

Prepaid expenses and other
90.6

 
66.8

 
247.7

 
(12.6
)
 
392.5

Total current assets
23,113.8

 
31,627.8

 
14,778.9

 
(66,160.0
)
 
3,360.5

Property, plant and equipment
70.1

 
942.8

 
3,174.0

 
—

 
4,186.9

Investments in subsidiaries
14,483.5

 
126.2

 
—

 
(14,609.7
)
 
—

Goodwill
—

 
6,587.8

 
1,384.5

 
—

 
7,972.3

Intangible assets
—

 
866.9

 
2,422.8

 
—

 
3,289.7

Intercompany notes receivable
5,129.9

 
—

 
101.1

 
(5,231.0
)
 
—

Other assets
17.8

 
77.2

 
55.0

 
—

 
150.0

Total assets
$
42,815.1

 
$
40,228.7

 
$
21,916.3

 
$
(86,000.7
)
 
$
18,959.4

 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Notes payable to banks
$
485.0

 
$
—

 
$
503.1

 
$
—

 
$
988.1

Current maturities of long-term debt
4.5

 
15.1

 
126.6

 
—

 
146.2

Accounts payable
35.7

 
157.7

 
365.4

 
—

 
558.8

Intercompany payable
29,013.0

 
23,973.0

 
12,977.9

 
(65,963.9
)
 
—

Other accrued expenses and liabilities
201.8

 
219.4

 
109.1

 
(41.0
)
 
489.3

Total current liabilities
29,740.0

 
24,365.2

 
14,082.1

 
(66,004.9
)
 
2,182.4

Long-term debt, less current maturities
5,638.1

 
19.3

 
2,419.8

 
—

 
8,077.2

Deferred income taxes
13.6

 
814.1

 
307.8

 
—

 
1,135.5

Intercompany notes payable
—

 
5,201.3

 
29.7

 
(5,231.0
)
 
—

Other liabilities
33.7

 
21.2

 
111.6

 
—

 
166.5

Total liabilities
35,425.4

 
30,421.1

 
16,951.0

 
(71,235.9
)
 
11,561.6

Total CBI stockholders’ equity
7,389.7

 
9,807.6

 
4,957.2

 
(14,764.8
)
 
7,389.7

Noncontrolling interests
—

 
—

 
8.1

 
—

 
8.1

Total stockholders’ equity
7,389.7

 
9,807.6

 
4,965.3

 
(14,764.8
)
 
7,397.8

Total liabilities and stockholders’ equity
$
42,815.1

 
$
40,228.7

 
$
21,916.3

 
$
(86,000.7
)
 
$
18,959.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

17


Table of Contents

 
Parent
Company
 
Subsidiary
Guarantors
 
Subsidiary
Nonguarantors
 
Eliminations
 
Consolidated
(in millions)
 
 
 
 
 
 
 
 
 
Condensed Consolidating Balance Sheet at February 28, 2017
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
9.6

 
$
5.8

 
$
162.0

 
$
—

 
$
177.4

Accounts receivable
2.4

 
18.5

 
716.1

 
—

 
737.0

Inventories
162.3

 
1,628.5

 
330.9

 
(166.6
)
 
1,955.1

Intercompany receivable
21,927.8

 
28,384.7

 
12,410.6

 
(62,723.1
)
 
—

Prepaid expenses and other
40.4

 
74.8

 
169.0

 
76.3

 
360.5

Total current assets
22,142.5

 
30,112.3

 
13,788.6

 
(62,813.4
)
 
3,230.0

Property, plant and equipment
69.5

 
951.1

 
2,912.2

 
—

 
3,932.8

Investments in subsidiaries
13,884.2

 
125.0

 
—

 
(14,009.2
)
 
—

Goodwill
—

 
6,589.9

 
1,330.6

 
—

 
7,920.5

Intangible assets
—

 
955.1

 
2,422.6

 
—

 
3,377.7

Intercompany notes receivable
5,074.5

 
188.3

 
100.6

 
(5,363.4
)
 
—

Other assets
17.9

 
77.2

 
46.3

 
—

 
141.4

Total assets
$
41,188.6

 
$
38,998.9

 
$
20,600.9

 
$
(82,186.0
)
 
$
18,602.4

 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Notes payable to banks
$
231.0

 
$
—

 
$
375.5

 
$
—

 
$
606.5

Current maturities of long-term debt
767.9

 
16.3

 
126.7

 
—

 
910.9

Accounts payable
47.6

 
146.2

 
366.0

 
—

 
559.8

Intercompany payable
27,675.4

 
22,786.3

 
12,261.4

 
(62,723.1
)
 
—

Other accrued expenses and liabilities
270.2

 
164.8

 
153.8

 
31.6

 
620.4

Total current liabilities
28,992.1

 
23,113.6

 
13,283.4

 
(62,691.5
)
 
2,697.6

Long-term debt, less current maturities
5,260.2

 
23.0

 
2,437.5

 
—

 
7,720.7

Deferred income taxes
13.3

 
823.2

 
297.1

 
—

 
1,133.6

Intercompany notes payable
—

 
5,334.0

 
29.4

 
(5,363.4
)
 
—

Other liabilities
31.8

 
18.9

 
115.0

 
—

 
165.7

Total liabilities
34,297.4

 
29,312.7

 
16,162.4

 
(68,054.9
)
 
11,717.6

Total CBI stockholders’ equity
6,891.2

 
9,686.2

 
4,444.9

 
(14,131.1
)
 
6,891.2

Noncontrolling interests
—

 
—

 
(6.4
)
 
—

 
(6.4
)
Total stockholders’ equity
6,891.2

 
9,686.2

 
4,438.5

 
(14,131.1
)
 
6,884.8

Total liabilities and stockholders’ equity
$
41,188.6

 
$
38,998.9

 
$
20,600.9

 
$
(82,186.0
)
 
$
18,602.4


18


Table of Contents


 
Parent
Company
 
Subsidiary
Guarantors
 
Subsidiary
Nonguarantors
 
Eliminations
 
Consolidated
(in millions)
 
 
 
 
 
 
 
 
 
Condensed Consolidating Statement of Comprehensive Income for the Three Months Ended May 31, 2017
Sales
$
698.8

 
$
1,794.2