UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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

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 þ No o

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 þ No o

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 þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a 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 o No þ

The number of shares outstanding with respect to each of the classes of common stock of Constellation Brands, Inc., as of September 30, 2010, is set forth below:

Class		Number of Shares Outstanding
Class A Common Stock, par value $.01 per share		187,659,975
Class B Common Stock, par value $.01 per share		23,687,975
Class 1 Common Stock, par value $.01 per share		None

 

 

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” of this Quarterly Report on Form 10-Q.

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)

		August 31,				February 28,
		2010				2010
ASSETS
CURRENT ASSETS:
Cash and cash investments		$	13.9			$	43.5
Accounts receivable, net			720.7				514.7
Inventories			1,722.4				1,879.9
Prepaid expenses and other			103.0				151.0
Total current assets			2,560.0				2,589.1
PROPERTY, PLANT AND EQUIPMENT, net			1,529.0				1,567.2
GOODWILL			2,566.1				2,570.6
INTANGIBLE ASSETS, net			920.1				925.0
OTHER ASSETS, net			301.9				442.4
Total assets		$	7,877.1			$	8,094.3
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Notes payable to banks		$	347.0			$	371.2
Current maturities of long-term debt			308.7				187.2
Accounts payable			253.5				268.8
Accrued excise taxes			57.7				43.8
Other accrued expenses and liabilities			482.8				501.6
Total current liabilities			1,449.7				1,372.6
LONG-TERM DEBT, less current maturities			3,127.7				3,277.1
DEFERRED INCOME TAXES			544.0				536.2
OTHER LIABILITIES			325.8				332.1
STOCKHOLDERS’ EQUITY:
Class A Common Stock, $.01 par value- Authorized, 322,000,000 shares; Issued, 226,948,305 shares at August 31, 2010, and 225,062,547 shares at February 28, 2010			2.3				2.3
Class B Convertible Common Stock, $.01 par value- Authorized, 30,000,000 shares; Issued, 28,717,433 shares at August 31, 2010, and 28,734,637 shares at February 28, 2010			0.3				0.3
Additional paid-in capital			1,538.4				1,493.2
Retained earnings			1,243.2				1,102.8
Accumulated other comprehensive income			550.6				587.2
			3,334.8				3,185.8
Less: Treasury stock -
Class A Common Stock, 39,450,317 shares at August 31, 2010, and 26,549,546 shares at February 28, 2010, at cost			(902.7	)			(607.3	)
Class B Convertible Common Stock, 5,005,800 shares at August 31, 2010, and February 28, 2010, at cost			(2.2	)			(2.2	)
			(904.9	)			(609.5	)
Total stockholders’ equity			2,429.9				2,576.3
Total liabilities and stockholders’ equity		$	7,877.1			$	8,094.3

The accompanying notes are an integral part of these statements.

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

		For the Six Months Ended August 31,								For the Three Months Ended August 31,
		2010				2009				2010				2009
SALES		$	2,033.1			$	2,094.5			$	1,056.9			$	1,090.7
Less — excise taxes			(382.8	)			(426.1	)			(194.1	)			(213.9	)
Net sales			1,650.3				1,668.4				862.8				876.8
COST OF PRODUCT SOLD			(1,066.1	)			(1,090.1	)			(548.6	)			(567.2	)
Gross profit			584.2				578.3				314.2				309.6
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			(336.1	)			(331.4	)			(167.3	)			(166.3	)
RESTRUCTURING CHARGES			(18.6	)			(22.1	)			(13.7	)			(3.2	)
Operating income			229.5				224.8				133.2				140.1
EQUITY IN EARNINGS OF EQUITY METHOD INVESTEES			120.9				136.0				66.4				73.2
INTEREST EXPENSE, net			(98.8	)			(136.5	)			(50.3	)			(68.1	)
Income before income taxes			251.6				224.3				149.3				145.2
PROVISION FOR INCOME TAXES			(111.2	)			(118.1	)			(58.0	)			(45.5	)
NET INCOME		$	140.4			$	106.2			$	91.3			$	99.7
SHARE DATA:
Earnings per common share:
Basic — Class A Common Stock		$	0.67			$	0.49			$	0.44			$	0.46
Basic — Class B Convertible Common Stock		$	0.61			$	0.44			$	0.40			$	0.42
Diluted — Class A Common Stock		$	0.65			$	0.48			$	0.43			$	0.45
Diluted — Class B Convertible Common Stock		$	0.60			$	0.44			$	0.40			$	0.41
Weighted average common shares outstanding:
Basic — Class A Common Stock			189.084				195.571				185.455				195.910
Basic — Class B Convertible Common Stock			23.719				23.740				23.712				23.736
Diluted — Class A Common Stock			215.136				220.274				211.149				220.714
Diluted — Class B Convertible Common Stock			23.719				23.740				23.712				23.736

The accompanying notes are an integral part of these statements.

CONSTELLATION BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)

		For the Six Months Ended August 31,
		2010				2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	140.4			$	106.2
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant and equipment			61.0				77.1
Deferred tax provision (benefit)			50.6				(28.7	)
Equity in earnings of equity method investees, net of distributed earnings			36.5				(12.3	)
Stock-based compensation expense			25.7				25.4
Amortization of intangible and other assets			7.3				6.0
Loss (gain) on disposal or impairment of long-lived assets, net			4.8				(1.4	)
Loss on business sold			—				0.8
Change in operating assets and liabilities, net of effects from purchases and sales of businesses:
Accounts receivable, net			(204.5	)			(204.5	)
Inventories			157.2				91.3
Prepaid expenses and other current assets			5.3				1.0
Accounts payable			(10.7	)			(11.5	)
Accrued excise taxes			13.2				17.6
Other accrued expenses and liabilities			39.7				8.8
Other, net			(20.8	)			21.6
Total adjustments			165.3				(8.8	)
Net cash provided by operating activities			305.7				97.4
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment			(43.2	)			(65.1	)
Investment in equity method investee			(29.7	)			(0.5	)
(Repayments related to) proceeds from sale of business			(1.6	)			276.4
Proceeds from note receivable			60.0				—
Proceeds from sales of assets			3.1				14.5
Other investing activities			0.5				1.2
Net cash (used in) provided by investing activities			(10.9	)			226.5
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchases of treasury stock			(300.0	)			—
Principal payments of long-term debt			(24.5	)			(271.4	)
Net repayment of notes payable			(24.1	)			(60.2	)
Payment of financing costs of long-term debt			(0.2	)			—
Exercise of employee stock options			18.0				9.0
Excess tax benefits from stock-based payment awards			4.7				2.2
Proceeds from employee stock purchases			2.1				2.3
Net cash used in financing activities			(324.0	)			(318.1	)
Effect of exchange rate changes on cash and cash investments			(0.4	)			0.8
NET (DECREASE) INCREASE IN CASH AND CASH INVESTMENTS			(29.6	)			6.6
CASH AND CASH INVESTMENTS, beginning of period			43.5				13.1
CASH AND CASH INVESTMENTS, end of period		$	13.9			$	19.7
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Property, plant and equipment acquired under financing arrangements		$	4.8			$	—
Note receivable from sale of value spirits business		$	—			$	60.0

The accompanying notes are an integral part of these statements.

CONSTELLATION BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2010
(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, 2010. Results of operations for interim periods are not necessarily indicative of annual results.

     In connection with the Company’s recent changes within its internal management structure for its United Kingdom (“U.K.”) and Australia businesses, and the Company’s revised business strategy within these markets, the Company changed its reportable operating segments on May 1, 2010, to consist of: Constellation Wines North America (“CWNA”), Constellation Wines Australia and Europe (“CWAE”), Corporate Operations and Other, and Crown Imports (see Note 17).

2. RECENTLY ADOPTED ACCOUNTING GUIDANCE:

     Consolidation of variable interest entities —

     Effective March 1, 2010, the Company adopted the Financial Accounting Standards Board (“FASB”) June 2009 amended guidance for consolidation. This guidance, among other things, (i) requires an entity to perform an analysis to determine whether an entity’s variable interest or interests give it a controlling financial interest in a variable interest entity; (ii) requires ongoing reassessments of whether an entity is the primary beneficiary of a variable interest entity and eliminates the quantitative approach previously required for determining the primary beneficiary of a variable interest entity; (iii) amends previously issued guidance for determining whether an entity is a variable interest entity; and (iv) requires enhanced disclosure that will provide users of financial statements with more transparent information about an entity’s involvement in a variable interest entity. In addition, effective March 1, 2010, the Company adopted the FASB additional December 2009 guidance on assessing whether a variable interest entity should be consolidated. This guidance identifies the determination of whether a reporting entity should consolidate another entity is based upon, among other things, (i) the other entity’s purpose and design, and (ii) the reporting entity’s ability to direct the activities of the other entity that most significantly impact the other entity’s economic performance. This guidance also requires additional disclosures about an entity’s involvement with a variable interest entity, including significant changes in risk exposure due to an entity’s involvement with a variable interest entity and how the involvement with the variable interest entity affects the financial statements of the reporting entity. The adoption of the combined guidance did not have a material impact on the Company’s consolidated financial statements.

     Fair value measurements and disclosures —

     In January 2010, the FASB issued amended guidance for fair value measurements and disclosures. This guidance requires an entity to (i) disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and the reasons for the transfers, and (ii) present separately information about purchases, sales, issuances and settlements on a gross basis in the reconciliation for fair value measurements using significant unobservable inputs (Level 3). This guidance also clarifies existing disclosures requiring an entity to provide fair value measurement disclosures for each class of assets and liabilities and, for Level 2 or Level 3 fair value measurements, disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. Effective March 1, 2010, the Company adopted the additional disclosure requirements and clarifications of existing disclosures of this guidance, except for the disclosures about purchases, sales, issuances and settlements in the reconciliation for fair value measurements using significant unobservable inputs (Level 3). The Company is required to adopt those disclosures for its annual and interim periods beginning March 1, 2011. The adoption of the applicable provisions of this guidance on March 1, 2010, did not have a material impact on the Company’s consolidated financial statements. The Company does not expect the adoption of the remaining provision of this guidance to have a material impact on its consolidated financial statements.

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:

		August 31,				February 28,
(in millions)		2010				2010
Raw materials and supplies		$	45.8			$	44.3
In-process inventories			1,162.7				1,325.0
Finished case goods			513.9				510.6
		$	1,722.4			$	1,879.9

4. DERIVATIVE INSTRUMENTS:

     As a multinational company, the Company is exposed to market risk from changes in foreign currency exchange rates 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 and interest rate market movements during that same period.

     The Company enters into derivative instruments, primarily interest rate swaps and foreign currency forward and option contracts, to manage interest rate and foreign currency risks. In accordance with the FASB guidance for derivatives and hedging, the Company recognizes all derivatives as either assets or liabilities on the balance sheet and measures those instruments at fair value. The fair values of the Company’s derivative instruments change with fluctuations in interest rates and/or currency rates 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 and foreign currency 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 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 repatriation of those loans or investments. Foreign currency contracts, generally less than 12 months in duration, are used to hedge some of these risks. The Company’s derivative policy permits the use of undesignated derivatives when the derivative instrument is settled within the fiscal quarter or offsets a recognized balance sheet exposure. In these circumstances, the mark to fair value is reported currently through earnings in selling, general and administrative expenses on the Company’s Consolidated Statements of Operations. As of August 31, 2010, and February 28, 2010, the Company had undesignated foreign currency contracts outstanding with a notional value of $761.8 million and $554.9 million, respectively. In addition, the Company had offsetting undesignated interest rate swap agreements with an absolute notional amount of $2,400.0 million outstanding at February 28, 2010 (see Note 9). The Company had no undesignated interest rate swap agreements outstanding as of August 31, 2010.

     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. 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, but at least quarterly, 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 in the Company’s Consolidated Statements of Operations. In conjunction with its effectiveness testing, the Company also evaluates ineffectiveness associated with the hedge relationship. Resulting ineffectiveness, if any, is recognized immediately in the Company’s Consolidated Statements of Operations.

     The Company records the fair value of its foreign currency and interest rate swap contracts qualifying for cash flow hedge accounting treatment in its consolidated balance sheet with the effective portion of the related gain or loss on those contracts deferred in stockholders’ equity (as a component of AOCI (as defined in Note 14)). These deferred gains or losses are recognized in the Company’s Consolidated Statements of Operations 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 this derivative instrument is immediately recognized in the Company’s Consolidated Statements of Operations in selling, general and administrative expenses.

     As of August 31, 2010, and February 28, 2010, the Company had cash flow designated foreign currency contracts outstanding with a notional value of $528.6 million and $465.2 million, respectively. In addition, as of August 31, 2010, and February 28, 2010, the Company had cash flow designated interest rate swap agreements outstanding with a notional value of $500.0 million and $1,200.0 million, respectively (see Note 9). The Company expects $3.1 million of net gains, net of income tax effect, to be reclassified from AOCI to earnings within the next 12 months.

     Fair value hedges:

     Fair value hedges are hedges that offset the risk of changes in the fair values of recorded assets and liabilities, and firm commitments. The Company records changes in fair value of derivative instruments which are designated and deemed effective as fair value hedges, in earnings offset by the corresponding changes in the fair value of the hedged items. The Company did not designate any derivative instruments as fair value hedges for the six months and three months ended August 31, 2010, and August 31, 2009.

     Net investment hedges:

     Net investment hedges are hedges that use derivative instruments or non-derivative instruments to hedge the foreign currency exposure of a net investment in a foreign operation. Historically, the Company has managed currency exposures resulting from certain of its net investments in foreign subsidiaries principally with debt denominated in the related foreign currency. Accordingly, gains and losses on these instruments were recorded as foreign currency translation adjustments in AOCI. The Company did not designate any derivative or non-derivative instruments as net investment hedges for the six months and three months ended August 31, 2010, and August 31, 2009.

     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):

		August 31,				February 28,
Balance Sheet Location		2010				2010
(in millions)
Derivative instruments designated as hedging instruments
Foreign currency contracts
Prepaid expenses and other		$	16.7			$	17.1
Other accrued expenses and liabilities		$	11.5			$	15.1
Other assets, net		$	7.0			$	13.5
Other liabilities		$	1.8			$	5.5
Interest rate swap contracts
Other accrued expenses and liabilities		$	—			$	11.8
Other liabilities		$	19.7			$	—

		August 31,				February 28,
Balance Sheet Location		2010				2010
(in millions)
Derivative instruments not designated as hedging instruments
Foreign currency contracts
Prepaid expenses and other		$	11.9			$	12.0
Other accrued expenses and liabilities		$	7.5			$	7.8
Other assets, net		$	0.1			$	1.6
Other liabilities		$	0.2			$	1.2
Interest rate swap contracts
Prepaid expenses and other		$	—			$	2.7
Other accrued expenses and liabilities		$	—			$	2.9

     The effect of the Company’s derivative instruments designated in cash flow hedging relationships on its Consolidated Statements of Operations, as well as its Other Comprehensive Income (“OCI”), net of income tax effect, is as follows:

								Net
		Net						Gain (Loss)
		Gain (Loss)						Reclassified
		Recognized						from AOCI to
Derivative Instruments in		in OCI				Location of Net Gain (Loss)		Income
Designated Cash Flow		(Effective				Reclassified from AOCI to		(Effective
Hedging Relationships		portion)				Income (Effective portion)		portion)
(in millions)
For the Six Months Ended August 31, 2010
Foreign currency contracts		$	0.1			Sales		$	7.9
Foreign currency contracts			(2.1	)		Cost of product sold			1.3
Interest rate swap contracts			(12.0	)		Interest expense, net			—
Total		$	(14.0	)		Total		$	9.2
For the Six Months Ended August 31, 2009
Foreign currency contracts		$	32.0			Sales		$	7.1
Foreign currency contracts			13.8			Cost of product sold			(5.6	)
Foreign currency contracts			8.2			Selling, general and administrative expenses			18.5
Interest rate swap contracts			(4.5	)		Interest expense, net			(12.9	)
Total		$	49.5			Total		$	7.1
For the Three Months Ended August 31, 2010
Foreign currency contracts		$	1.2			Sales		$	4.3
Foreign currency contracts			1.2			Cost of product sold			(0.9	)
Foreign currency contracts			—			Selling, general and administrative expenses			—
Interest rate swap contracts			(12.0	)		Interest expense, net			—
Total		$	(9.6	)		Total		$	3.4
For the Three Months Ended August 31, 2009
Foreign currency contracts		$	(1.4	)		Sales		$	3.8
Foreign currency contracts			2.7			Cost of product sold			(2.7	)
Foreign currency contracts			0.9			Selling, general and administrative expenses			0.7
Interest rate swap contracts			(1.3	)		Interest expense, net			(7.1	)
Total		$	0.9			Total		$	(5.3	)

				Net Gain
				Recognized
Derivative Instruments in		Location of Net Gain		in Income
Designated Cash Flow		Recognized in Income		(Ineffective
Hedging Relationships		(Ineffective portion)		portion)
(in millions)
For the Six Months Ended August 31, 2010
Foreign currency contracts		Selling, general and administrative expenses		$	0.7
For the Six Months Ended August 31, 2009
Foreign currency contracts		Selling, general and administrative expenses		$	0.1
For the Three Months Ended August 31, 2010
Foreign currency contracts		Selling, general and administrative expenses		$	0.4
For the Three Months Ended August 31, 2009
Foreign currency contracts		Selling, general and administrative expenses		$	0.1

     The effect of the Company’s undesignated derivative instruments on its Consolidated Statements of Operations is as follows:

				Net
				(Loss) Gain
Derivative Instruments not		Location of Net (Loss) Gain		Recognized
Designated as Hedging Instruments		Recognized in Income		in Income
(in millions)
For the Six Months Ended August 31, 2010
Foreign currency contracts		Selling, general and administrative expenses		$	(1.0	)
Total				$	(1.0	)
For the Six Months Ended August 31, 2009
Foreign currency contracts		Selling, general and administrative expenses		$	8.0
Interest rate swap contracts		Interest expense, net			(0.4	)
Total				$	7.6
For the Three Months Ended August 31, 2010
Foreign currency contracts		Selling, general and administrative expenses		$	3.3
Total				$	3.3
For the Three Months Ended August 31, 2009
Foreign currency contracts		Selling, general and administrative expenses		$	5.3
Interest rate swap contracts		Interest expense, net			(0.1	)
Total				$	5.2

     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 August 31, 2010, the fair value of derivative instruments in a net liability position due to counterparties was $30.0 million. If the Company were required to settle the net liability position under these derivative instruments on August 31, 2010, 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 August 31, 2010, 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 August 31, 2010, the fair value of derivative instruments in a net receivable position due from counterparties was $25.0 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:

		August 31, 2010								February 28, 2010
		Carrying				Fair				Carrying				Fair
(in millions)		Amount				Value				Amount				Value
Assets
Cash and cash investments		$	13.9			$	13.9			$	43.5			$	43.5
Accounts receivable		$	720.7			$	720.7			$	514.7			$	514.7
Foreign currency contracts		$	35.7			$	35.7			$	44.2			$	44.2
Interest rate swap contracts		$	—			$	—			$	2.7			$	2.7
Notes receivable		$	4.9			$	4.9			$	65.7			$	65.7
Liabilities
Notes payable to banks		$	347.0			$	337.7			$	371.2			$	370.1
Accounts payable		$	253.5			$	253.5			$	268.8			$	268.8
Long-term debt, including current portion		$	3,436.4			$	3,482.5			$	3,464.3			$	3,483.4
Foreign currency contracts		$	21.0			$	21.0			$	29.6			$	29.6
Interest rate swap contracts		$	19.7			$	19.7			$	14.7			$	14.7

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

     Cash and cash investments, accounts receivable and accounts payable: The carrying amounts approximate fair value due to the short maturity of these instruments.

     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).

     Interest rate swap contracts: The fair value is estimated based on quoted market prices from respective counterparties (see “Fair value measurements” below).

     Notes receivable: These instruments are fixed interest rate bearing notes. The fair value is estimated by discounting cash flows using market-based inputs, including counterparty credit risk.

     Notes payable to banks: The revolving credit facility under the 2006 Credit Agreement (as defined in Note 9) 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 2006 Credit Agreement). 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.

     Long-term debt: The tranche A term loan facility under the 2006 Credit Agreement is a variable interest rate bearing note which includes a fixed margin which is adjustable based upon the Company’s debt ratio. The tranche B term loan facility under the 2006 Credit Agreement is a variable interest rate bearing note which includes a fixed margin. The fair value of the tranche A term loan facility and the tranche B term loan facility 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 rate, is estimated by discounting cash flows using interest rates currently available for debt with similar terms and maturities.

     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 expands 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. In addition, 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; 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.

     The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis:

		Quoted				Significant
		Prices in				Other				Significant
		Active				Observable				Unobservable
		Markets				Inputs				Inputs
(in millions)		(Level 1)				(Level 2)				(Level 3)				Total
August 31, 2010
Assets:
Foreign currency contracts		$	—			$	35.7			$	—			$	35.7
Liabilities:
Foreign currency contracts		$	—			$	21.0			$	—			$	21.0
Interest rate swap contracts		$	—			$	19.7			$	—			$	19.7
February 28, 2010
Assets:
Foreign currency contracts		$	—			$	44.2			$	—			$	44.2
Interest rate swap contracts		$	—			$	2.7			$	—			$	2.7
Liabilities:
Foreign currency contracts		$	—			$	29.6			$	—			$	29.6
Interest rate swap contracts		$	—			$	14.7			$	—			$	14.7

     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.

     The following table presents the Company’s assets and liabilities measured at fair value on a nonrecurring basis for which an impairment assessment was performed for the six months and three months ended August 31, 2010. There were no assets and liabilities measured at fair value on a nonrecurring basis during the six months and three months ended August 31, 2009.

		Fair Value Measurements Using
		Quoted				Significant
		Prices in				Other				Significant
		Active				Observable				Unobservable
		Markets				Inputs				Inputs
(in millions)		(Level 1)				(Level 2)				(Level 3)				Total Losses
Long-lived assets held for sale		$	—			$	—			$	4.1			$	5.8
Total		$	—			$	—			$	4.1			$	5.8

     Long-lived assets held for sale:

     In connection with the Company’s Australian Initiative (as defined in Note 15), long-lived assets held for sale with a carrying value of $10.1 million were written down to their estimated fair value of $4.1 million, less cost to sell (which was estimated to be minimal), resulting in a loss of $5.8 million for the six months and three months ended August 31, 2010. This loss is included in restructuring charges on the Company’s Consolidated Statements of Operations. These assets consisted primarily of certain winery and vineyard assets which had satisfied the conditions necessary to be classified as held for sale. As such, these assets were written down to a value based on the Company’s estimate of fair value less cost to sell. The fair value was determined based on a market value approach adjusted for the different characteristics between assets measured and the assets upon which the observable inputs were based.

6. GOODWILL:

     The changes in the carrying amount of goodwill are as follows:

														Consolidations
										Crown				and
(in millions)		CWNA				CWAE				Imports				Eliminations				Consolidated
Balance, February 28, 2009
Goodwill		$	2,615.0			$	852.6			$	13.0			$	(13.0	)		$	3,467.6
Accumulated impairment losses			—				(852.6	)			—				—				(852.6	)
			2,615.0				—				13.0				(13.0	)			2,615.0
Foreign currency translation adjustments			114.1				—				—				—				114.1
Divestiture of business			(158.5	)			—				—				—				(158.5	)
Balance, February 28, 2010
Goodwill			2,570.6				852.6				13.0				(13.0	)			3,423.2
Accumulated impairment losses			—				(852.6	)			—				—				(852.6	)
			2,570.6				—				13.0				(13.0	)			2,570.6
Foreign currency translation adjustments			(4.5	)			—				—				—				(4.5	)
Balance, August 31, 2010
Goodwill			2,566.1				852.6				13.0				(13.0	)			3,418.7
Accumulated impairment losses			—				(852.6	)			—				—				(852.6	)
		$	2,566.1			$	—			$	13.0			$	(13.0	)		$	2,566.1

     For the year ended February 28, 2010, the Company’s CWNA segment’s divestiture of business consists of the reduction of goodwill in connection with the divestiture of its value spirits business in March 2009. The Company sold its value spirits business for $336.4 million, net of direct costs to sell. The Company received $276.4 million, net of direct costs to sell, in cash proceeds and a note receivable for $60.0 million in connection with this divestiture. In March 2010, the Company received full payment of the note receivable. In connection with the classification of the value spirits business as an asset group held for sale as of February 28, 2009, the Company recorded a loss of $15.6 million in the fourth quarter of fiscal 2009, primarily related to asset impairments. For the first quarter of fiscal 2010, the Company recognized a net gain of $0.2 million, which included a gain on settlement of a postretirement obligation of $1.0 million, partially offset by an additional loss of $0.8 million. This net gain is included in selling, general and administrative expenses on the Company’s Consolidated Statements of Operations for the six months ended August 31, 2009.

7. INTANGIBLE ASSETS:

     The major components of intangible assets are as follows:

		August 31, 2010								February 28, 2010
		Gross				Net				Gross				Net
		Carrying				Carrying				Carrying				Carrying
(in millions)		Amount				Amount				Amount				Amount
Amortizable intangible assets:
Customer relationships		$	84.7			$	66.2			$	85.0			$	69.0
Other			2.6				0.1				2.6				0.3
Total		$	87.3				66.3			$	87.6				69.3
Nonamortizable intangible assets:
Trademarks							844.2								846.0
Other							9.6								9.7
Total							853.8								855.7
Total intangible assets, net						$	920.1							$	925.0

     The Company did not incur costs to renew or extend the term of acquired intangible assets during the six months and three months ended August 31, 2010, and August 31, 2009. 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 $2.8 million for the six months ended August 31, 2010, and August 31, 2009, and $1.4 for the three months ended August 31, 2010, and August 31, 2009. Estimated amortization expense for the remaining six months of fiscal 2011 and for each of the five succeeding fiscal years and thereafter is as follows:

(in millions)
2011		$	2.8
2012		$	4.9
2013		$	4.8
2014		$	4.8
2015		$	4.8
2016		$	4.8
Thereafter		$	39.4

8. INVESTMENTS IN EQUITY METHOD INVESTEES:

     Crown Imports:

     Constellation Beers Ltd. (“Constellation Beers”) (previously known as Barton Beers, Ltd.), 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 have, directly or indirectly, equal interests in a joint venture, Crown Imports LLC (“Crown Imports”). Crown Imports has the exclusive right to import, market and sell Modelo’s Mexican beer portfolio (the “Modelo Brands”) in the U.S. and Guam. In addition, Crown Imports also has the exclusive rights to import, market and sell the Tsingtao and St. Pauli Girl brands in the U.S.

     The Company accounts 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 Operations. As of August 31, 2010, and February 28, 2010, the Company’s investment in Crown Imports was $130.8 million and $167.2 million, respectively. 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 $156.0 million and $123.7 million of cash distributions from Crown Imports for the six months ended August 31, 2010, and August 31, 2009, respectively, all of which represent distributions of earnings.

     Constellation Beers provides certain administrative services to Crown Imports. Amounts related to the performance of these services for the six months and three months ended August 31, 2010, and August 31, 2009, were not material. In addition, as of August 31, 2010, and February 28, 2010, amounts receivable from Crown Imports were not material.

     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 investments’ results of operations.

		Crown
(in millions)		Imports
For the Six Months Ended August 31, 2010
Net sales		$	1,300.9
Gross profit		$	368.0
Income from continuing operations		$	239.2
Net income		$	239.2
For the Six Months Ended August 31, 2009
Net sales		$	1,335.5
Gross profit		$	395.1
Income from continuing operations		$	270.2
Net income		$	270.2
For the Three Months Ended August 31, 2010
Net sales		$	679.4
Gross profit		$	191.8
Income from continuing operations		$	130.7
Net income		$	130.7
For the Three Months Ended August 31, 2009
Net sales		$	696.4
Gross profit		$	204.5
Income from continuing operations		$	144.5
Net income		$	144.5

     Other:

     In connection with the Company’s December 2004 investment in Ruffino S.r.l. (“Ruffino”), the Company granted separate irrevocable and unconditional options to the two other shareholders of Ruffino to put to the Company all of the ownership interests held by these shareholders for a price as calculated in the joint venture agreement. Each option may be exercised during the period starting from January 1, 2010, and ending on December 31, 2010. For the year ended February 28, 2010, in connection with the notification by the 9.9% shareholder of Ruffino to exercise the option to put its entire equity interest in Ruffino to the Company for the specified minimum value of €23.5 million, the Company recognized a loss of $34.3 million for the third quarter of fiscal 2010 on the contractual obligation created by this notification. In May 2010, the Company settled this put option through a cash payment of €23.5 million ($29.6 million) to the 9.9% shareholder of Ruffino, thereby increasing the Company’s equity interest in Ruffino to 49.9%. The price of the other option, which represents the remaining 50.1% interest in Ruffino, is based upon a formula contained in the joint venture agreement. The formula is subject to a number of variables, including future results of Ruffino. The Company continues to evaluate the impact of the variables in the formula on the cash settlement if the 50.1% shareholder of Ruffino were to exercise the option to put its entire equity interest in Ruffino to the Company. Subject to the mutual agreement and understanding of the respective rights of each of the parties to this put option, the Company currently estimates that the cash settlement for this put option could be as much as €55 million ($70 million). As of August 31, 2010, the Company concluded that it is not probable that there is a likelihood of loss under this contingent obligation. Therefore, no liability has been recorded by the Company related to this contingent obligation and an estimate of any loss is currently not estimable. As of August 31, 2010, and February 28, 2010, the Company’s investment in Ruffino was $4.1 million.

9. BORROWINGS:

     Borrowings consist of the following:

														February 28,
		August 31, 2010												2010
(in millions)		Current				Long-term				Total				Total
Notes Payable to Banks
Senior Credit Facility —
Revolving Credit Loans		$	277.0			$	—			$	277.0			$	289.3
Other			70.0				—				70.0				81.9
		$	347.0			$	—			$	347.0			$	371.2
Long-term Debt
Senior Credit Facility — Term Loans		$	302.8			$	1,225.2			$	1,528.0			$	1,549.1
Senior Notes			—				1,893.1				1,893.1				1,892.6
Other Long-term Debt			5.9				9.4				15.3				22.6
		$	308.7			$	3,127.7			$	3,436.4			$	3,464.3

     Senior credit facility —

     The Company and certain of its U.S. subsidiaries, JPMorgan Chase Bank, N.A. as a lender and administrative agent, and certain other agents, lenders, and financial institutions are parties to a credit agreement, as amended (the “2006 Credit Agreement”). The 2006 Credit Agreement provides for aggregate credit facilities of $3,842.0 million, consisting of (i) a $1,200.0 million tranche A term loan facility with a final maturity in June 2011 (the “Tranche A Term Loans”), (ii) a $1,800.0 million tranche B term loan facility, of which $1,500.0 million has a final maturity in June 2013 (the “2013 Tranche B Term Loans”) and $300.0 million has a final maturity in June 2015 (the “2015 Tranche B Term Loans”), and (iii) an $842.0 million revolving credit facility (including a sub-facility for letters of credit of up to $200 million), of which $192.0 million terminates in June 2011 (the “2011 Revolving Facility”) and $650.0 million terminates in June 2013 (the “2013 Revolving Facility”). The Company uses its revolving credit facility under the 2006 Credit Agreement for general corporate purposes.

     As of August 31, 2010, under the 2006 Credit Agreement, the Company had outstanding Tranche A Term Loans of $300.0 million bearing an interest rate of 1.6%, 2013 Tranche B Term Loans of $928.0 million bearing an interest rate of 1.8%, 2015 Tranche B Term Loans of $300.0 million bearing an interest rate of 3.1%, 2011 Revolving Facility of $55.9 million bearing an interest rate of 1.6%, 2013 Revolving Facility of $221.1 million bearing an interest rate of 2.7%, outstanding letters of credit of $13.9 million, and $551.1 million in revolving loans available to be drawn.

     Through February 28, 2010, the Company had outstanding interest rate swap agreements which were designated as cash flow hedges of $1,200.0 million of the Company’s floating LIBOR rate debt. The designated cash flow hedges fixed the Company’s interest rates on $1,200.0 million of the Company’s floating LIBOR rate debt through February 28, 2010. In addition, the Company had offsetting undesignated interest rate swap agreements with an absolute notional amount of $2,400.0 million outstanding as of February 28, 2010. On March 1, 2010, the Company paid $11.9 million in connection with the maturity of these outstanding interest rate swap agreements, which is reported in other, net in cash flows from operating activities in the Company’s Consolidated Statements of Cash Flows. In June 2010, the Company entered into a new five year delayed start interest rate swap agreement effective September 1, 2011, which was designated as a cash flow hedge for $500.0 million of the Company’s floating LIBOR rate debt. Accordingly, the Company fixed its interest rates on $500.0 million of the Company’s floating LIBOR rate debt at an average rate of 2.9% (exclusive of borrowing margins) through September 1, 2016. For the six months and three months ended August 31, 2009, the Company reclassified net losses of $12.9 million and $7.1 million, net of income tax effect, respectively, from AOCI to interest expense, net on the Company’s Consolidated Statements of Operations. The Company did not reclassify any amount from AOCI to interest expense, net on its Consolidated Statements of Operations for the six months and three months ended August 31, 2010.

10. INCOME TAXES:

     The Company’s effective tax rate for the six months ended August 31, 2010, and August 31, 2009, was 44.2% and 52.7%, respectively. The Company’s effective tax rate for the six months ended August 31, 2010, includes the recognition of a valuation allowance against deferred tax assets in the U.K. of $30.1 million, partially offset by a decrease in uncertain tax positions in connection with the completion of various income tax examinations during the six months ended August 31, 2010. During the first quarter of fiscal 2011, lower estimates of future U.K. operating results and cash flows, combined with cumulative losses in recent years in the U.K., impacted the Company’s assessment regarding the realizability of certain deferred tax assets in the U.K. As a result of this assessment, the Company determined that additional valuation allowances were required in the first quarter of fiscal 2011. The Company’s effective tax rate for the six months ended August 31, 2009, includes $37.5 million of taxes associated with the sale of the value spirits business, primarily related to the write-off of nondeductible goodwill, partially offset by a decrease in uncertain tax positions in connection with the completion of various income tax examinations during the second quarter of fiscal 2010.

     The Company’s effective tax rate for the three months ended August 31, 2010, and August 31, 2009, was 38.8% and 31.3%, respectively. The Company’s effective tax rates for both the three months ended August 31, 2010, and August 31, 2009, reflect, among other items, decreases in uncertain tax positions in connection with the completion of various income tax examinations during each respective period. The amount of the decrease recorded for the three months ended August 31, 2010, was less than the amount recorded for the three months ended August 31, 2009.

11. DEFINED BENEFIT PENSION PLANS:

     Net periodic benefit cost reported in the Consolidated Statements of Operations for the Company’s defined benefit pension plans includes the following components:

		For the Six Months								For the Three Months
		Ended August 31,								Ended August 31,
(in millions)		2010				2009				2010				2009
Service cost		$	2.2			$	1.1			$	1.1			$	0.6
Interest cost			11.7				10.7				5.9				5.6
Expected return on plan assets			(12.6	)			(12.5	)			(6.4	)			(6.6	)
Amortization of prior service cost			0.1				—				0.1				—
Recognized net actuarial loss			4.8				2.2				2.4				1.2
Recognized net loss due to settlement			—				1.1				—				1.1
Net periodic benefit cost		$	6.2			$	2.6			$	3.1			$	1.9

     Contributions of $5.4 million have been made by the Company to fund its defined benefit pension plans for the six months ended August 31, 2010. The Company presently anticipates contributing an additional $5.2 million to fund its defined benefit pension plans during the year ending February 28, 2011, resulting in total employer contributions of $10.6 million for the year ending February 28, 2011.

12. STOCKHOLDERS’ EQUITY:

     In April 2010, the Company’s Board of Directors authorized the repurchase of up to $300.0 million of the Company’s Class A Common Stock and Class B Convertible Common Stock. Pursuant to this authorization, the Company repurchased $300.0 million of its shares of Class A Common Stock through a collared accelerated stock buyback (“ASB”) transaction which was announced in April 2010. During the first quarter of fiscal 2011, the Company received 13,801,480 shares of Class A Common Stock, representing the minimum number of shares that will be received under the ASB transaction. The Company used revolver borrowings under the 2006 Credit Agreement to pay the purchase price for the repurchased shares. The repurchased shares that have been received have become treasury shares. The final number of shares to which the Company is entitled under the ASB transaction will generally be based on the average of the daily volume weighted average prices of the Company’s Class A Common Stock over a calculation period (scheduled to end on November 24, 2010, subject to being shortened by the counterparty to the ASB transaction), but no less than 13,801,480 shares or more than 18,401,973 shares subject to certain terms of the ASB transaction. The Company paid the purchase price under the ASB transaction in April 2010, at which time it received an initial installment of 11,016,451 shares of Class A Common Stock. In May 2010, the Company received an additional 2,785,029 shares of Class A Common Stock in connection with the early termination of the hedge period on May 10, 2010. The Company may be entitled to receive up to 4,600,493 additional shares pursuant to the ASB transaction following the end of the calculation period.

13. EARNINGS PER COMMON SHARE:

     The Company has two classes of outstanding common stock: Class A Common Stock and Class B Convertible Common Stock. 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 six months ended August 31, 2010, and August 31, 2009, earnings per common share — diluted for Class A Common Stock has been calculated using the if-converted method. For the six months ended August 31, 2010, and August 31, 2009, 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. For the three months ended August 31, 2010, and August 31, 2009, earnings per common share — diluted for Class A Common Stock has been calculated using the if-converted method. For the three months ended August 31, 2010, and August 31, 2009, 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 Six Months								For the Three Months
		Ended August 31,								Ended August 31,
(in millions, except per share data)		2010				2009				2010				2009
Income available to common stockholders		$	140.4			$	106.2			$	91.3			$	99.7
Weighted average common shares outstanding — basic:
Class A Common Stock			189.084				195.571				185.455				195.910
Class B Convertible Common Stock			23.719				23.740				23.712				23.736
Weighted average common shares outstanding — diluted:
Class A Common Stock			189.084				195.571				185.455				195.910
Class B Convertible Common Stock			23.719				23.740				23.712				23.736
Stock-based awards, primarily stock options			2.333				0.963				1.982				1.068
Weighted average common shares outstanding — diluted			215.136				220.274				211.149				220.714
Earnings per common share — basic:
Class A Common Stock		$	0.67			$	0.49			$	0.44			$	0.46
Class B Convertible Common Stock		$	0.61			$	0.44			$	0.40			$	0.42
Earnings per common share — diluted:
Class A Common Stock		$	0.65			$	0.48			$	0.43			$	0.45
Class B Convertible Common Stock		$	0.60			$	0.44			$	0.40			$	0.41

     For the six months ended August 31, 2010, and August 31, 2009, stock-based awards, primarily stock options, which could result in the issuance of 23.5 million and 32.8 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. For the three months ended August 31, 2010, and August 31, 2009, stock-based awards, primarily stock options, which could result in the issuance of 25.3 million and 32.5 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.

14. COMPREHENSIVE INCOME:

     Comprehensive income consists of net income, foreign currency translation adjustments, net unrealized (losses) gains on derivative instruments and pension/postretirement adjustments. The reconciliation of net income to comprehensive income is as follows:

		Before Tax				Tax Benefit				Net of Tax
(in millions)		Amount				(Expense)				Amount
For the Six Months Ended August 31, 2010
Net income										$	140.4
Other comprehensive (loss) income:
Foreign currency translation adjustments		$	(14.3	)		$	(1.6	)			(15.9	)
Unrealized loss on cash flow hedges:
Net derivative losses			(19.1	)			5.1				(14.0	)
Reclassification adjustments			(13.3	)			3.4				(9.9	)
Net loss recognized in other comprehensive income			(32.4	)			8.5				(23.9	)
Pension/postretirement:
Net losses arising during the period			(0.7	)			0.4				(0.3	)
Reclassification adjustments			4.9				(1.4	)			3.5
Net gain recognized in other comprehensive income			4.2				(1.0	)			3.2
Other comprehensive loss		$	(42.5	)		$	5.9				(36.6	)
Total comprehensive income										$	103.8
For the Six Months Ended August 31, 2009
Net income										$	106.2
Other comprehensive income (loss):
Foreign currency translation adjustments		$	429.4			$	(3.8	)			425.6
Unrealized gain on cash flow hedges:
Net derivative gains			74.4				(24.9	)			49.5
Reclassification adjustments			(13.9	)			6.7				(7.2	)
Net gain recognized in other comprehensive income			60.5				(18.2	)			42.3
Pension/postretirement:
Net losses arising during the period			(10.7	)			2.9				(7.8	)
Reclassification adjustments			2.2				(0.5	)			1.7
Net loss recognized in other comprehensive income			(8.5	)			2.4				(6.1	)
Other comprehensive income		$	481.4			$	(19.6	)			461.8
Total comprehensive income										$	568.0

		Before Tax				Tax Benefit				Net of Tax
		Amount				(Expense)				Amount
For the Three Months Ended August 31, 2010
Net income										$	91.3
Other comprehensive income (loss):
Foreign currency translation adjustments		$	36.8			$	2.5				39.3
Unrealized loss on cash flow hedges:
Net derivative losses			(14.1	)			4.5				(9.6	)
Reclassification adjustments			(5.3	)			1.5				(3.8	)
Net loss recognized in other comprehensive income			(19.4	)			6.0				(13.4	)
Pension/postretirement:
Net losses arising during the period			(6.7	)			2.1				(4.6	)
Reclassification adjustments			2.5				(0.7	)			1.8
Net loss recognized in other comprehensive income			(4.2	)			1.4				(2.8	)
Other comprehensive income		$	13.2			$	9.9				23.1
Total comprehensive income										$	114.4
For the Three Months Ended August 31, 2009
Net income										$	99.7
Other comprehensive income (loss):
Foreign currency translation adjustments		$	59.9			$	0.9				60.8
Unrealized gain on cash flow hedges:
Net derivative gains			9.3				(8.4	)			0.9
Reclassification adjustments			6.5				(1.3	)			5.2
Net gain recognized in other comprehensive income			15.8				(9.7	)			6.1
Pension/postretirement:
Net losses arising during the period			(0.5	)			—				(0.5	)
Reclassification adjustments			2.2				(0.6	)			1.6
Net gain recognized in other comprehensive income			1.7				(0.6	)			1.1
Other comprehensive income		$	77.4			$	(9.4	)			68.0
Total comprehensive income										$	167.7