Constellation Brands, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Restructuring Charges

Restructuring Charges

3 Months Ended

May 31, 2012

Restructuring and Related Activities [Abstract]

RESTRUCTURING CHARGES:

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

The Company’s significant restructuring plan with current activity is as follows:

Fiscal 2012 Initiative –

In May 2011, the Company committed to a plan (announced in June 2011) to streamline operations, gain efficiencies and reduce its cost structure following the CWAE Divestiture (the “Fiscal 2012 Initiative”). The Fiscal 2012 Initiative includes an approximate two to three percent reduction in the Company’s then existing global workforce. This initiative is part of the Company’s ongoing efforts to maximize asset utilization, reduce costs and improve long-term return on invested capital throughout the Company’s operations. The Company expects all costs and related cash expenditures associated with the Fiscal 2012 Initiative to be substantially complete by February 28, 2013.

Details of this plan for which the Company expects to incur additional costs are presented separately in the following table. Plans for which exit activities were substantially complete prior to March 1, 2012, are reported below under “Other Plans.”



	Fiscal 2012 Initiative			Other Plans			Total
(in millions)
Restructuring liability, February 29, 2012	$	8.0		$	6.8		$	14.8

Restructuring charges:
Employee termination benefit costs	0.4			—			0.4
Contract termination costs	—			—			—
Facility consolidation/relocation costs	—			0.1			0.1
Restructuring charges, May 31, 2012	0.4			0.1			0.5

Cash expenditures	(3.9		)	(1.0		)	(4.9		)

Foreign currency translation and other noncash adjustments	—			(0.1		)	(0.1		)
Restructuring liability, May 31, 2012	$	4.5		$	5.8		$	10.3

The following table presents a summary of restructuring charges and other costs incurred, including a summary of amounts incurred by each of the Company’s reportable segments, in connection with the Company’s restructuring plans noted above.



	Fiscal 2012 Initiative			Other Plans		Total
(in millions)
For the Three Months Ended May 31, 2012
Restructuring charges	$	0.4		$	0.1	$	0.5
Other costs:
Accelerated depreciation (cost of product sold)	—			—		—
Other costs (selling, general and administrative expenses)	2.7			—		2.7
Total other costs	2.7			—		2.7
Total costs	$	3.1		$	0.1	$	3.2

Total Costs by Reportable Segment:
Constellation Wines and Spirits
Restructuring charges	$	0.6		$	0.1	$	0.7
Other costs	1.6			—		1.6
Total Constellation Wines and Spirits	$	2.2		$	0.1	$	2.3

Corporate Operations and Other
Restructuring charges	$	(0.2	)	$	—	$	(0.2	)
Other costs	1.1			—		1.1
Total Corporate Operations and Other	$	0.9		$	—	$	0.9

For the Three Months Ended May 31, 2011
Restructuring charges	$	11.0		$	0.1	$	11.1
Other costs:
Accelerated depreciation (cost of product sold)	—			0.2		0.2
Other costs (selling, general and administrative expenses)	1.0			0.1		1.1
Total other costs	1.0			0.3		1.3
Total costs	$	12.0		$	0.4	$	12.4

Total Costs by Reportable Segment:
Constellation Wines and Spirits
Restructuring charges	$	5.5		$	0.1	$	5.6
Other costs	0.1			0.3		0.4
Total Constellation Wines and Spirits	$	5.6		$	0.4	$	6.0

Corporate Operations and Other
Restructuring charges	$	5.5		$	—	$	5.5
Other costs	0.9			—		0.9
Total Corporate Operations and Other	$	6.4		$	—	$	6.4

A summary of restructuring charges and other costs incurred since inception for the Company's significant restructuring plan with current activity, as well as total expected costs for such plan, is presented in the following table.



	Fiscal 2012 Initiative
(in millions)
Costs Incurred to Date
Restructuring charges:
Employee termination benefit costs	$	12.6
Contract termination costs	—
Facility consolidation/relocation costs	—
Total restructuring charges	12.6
Other costs:
Accelerated depreciation (cost of product sold)	—
Other costs (selling, general and administrative expenses)	10.0
Total other costs	10.0
Total costs incurred to date	$	22.6

Total Costs Incurred to Date by Reportable Segment:
Constellation Wines and Spirits
Restructuring charges	$	8.5
Other costs	6.8
Total Constellation Wines and Spirits	$	15.3

Corporate Operations and Other
Restructuring charges	$	4.1
Other costs	3.2
Total Corporate Operations and Other	$	7.3

Total Expected Costs
Restructuring charges:
Employee termination benefit costs	$	13.3
Contract termination costs	0.4
Facility consolidation/relocation costs	—
Total restructuring charges	13.7
Other costs:
Accelerated depreciation (cost of product sold)	—
Other costs (selling, general and administrative expenses)	16.2
Total other costs	16.2
Total expected costs	$	29.9



	Fiscal 2012 Initiative
(in millions)
Total Expected Costs by Reportable Segment:
Constellation Wines and Spirits
Restructuring charges	$	9.0
Other costs	9.9
Total Constellation Wines and Spirits	$	18.9

Corporate Operations and Other
Restructuring charges	$	4.7
Other costs	6.3
Total Corporate Operations and Other	$	11.0

- Definition

The entire disclosure for restructuring and related activities. Description of restructuring activities such as exit and disposal activities, include facts and circumstances leading to the plan, the expected plan completion date, the major types of costs associated with the plan activities, total expected costs, the accrual balance at the end of the period, and the periods over which the remaining accrual will be settled.

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