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

Quarterly report pursuant to Section 13 or 15(d)

Wine and Spirits Transformation

Wine and Spirits Transformation

3 Months Ended

May 31, 2019

Wine and Spirits Transaction

In April 2019, we entered into a definitive agreement to sell a portion of our wine and spirits business, including approximately 30 lower-margin, lower-growth wine and spirits brands, wineries, vineyards, offices, and facilities (the “Wine and Spirits Transaction”). The Wine and Spirits Transaction is subject to the satisfaction of certain closing conditions, including receipt of required regulatory approval, and is expected to close in the second half of calendar 2019. We expect to use the net cash proceeds from the Wine and Spirits Transaction primarily to reduce outstanding borrowings.

In connection with the Wine and Spirits Transaction, certain Wine and Spirits segment net assets have met the held for sale criteria as of May 31, 2019. We have concluded that no impairment existed as of May 31, 2019. The carrying value of assets held for sale consists of the following:



	May 31, 2019
(in millions)
Assets
Inventories	$	658.8
Prepaid expenses and other	10.1
Assets held for sale - current	668.9

Property, plant, and equipment	179.7
Goodwill	397.3
Intangible assets	347.2
Other assets	1.5
Assets held for sale	925.7

Liabilities
Accounts payable	7.8
Other accrued expenses and liabilities	26.3
Deferred income taxes and other liabilities	0.1
Liabilities held for sale⁽¹⁾	34.2
Net assets held for sale	$	1,560.4


⁽¹⁾	Liabilities held for sale are included in the Consolidated Balance Sheet as of May 31, 2019, within the respective liability line items noted above.

Wine and Spirits Optimization

We recognized charges in connection with our ongoing efforts to gain efficiencies and reduce our cost structure within the Wine and Spirits segment as follows:



	Results of Operations Location	For the Three Months Ended May 31, 2019
(in millions)
Loss on inventory write-downs	Cost of product sold	$	27.2
Contract termination costs	Cost of product sold	15.8
Employee termination costs	Selling, general, and administrative expenses	11.9
Other costs	Selling, general, and administrative expenses	6.3
		$	61.2