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, 2013

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

The following table presents a rollforward of the restructuring liability for the Company’s remaining restructuring plans.



(in millions)
Restructuring liability, February 28, 2013	$	5.6

Restructuring charges:
Employee termination benefit costs	—
Contract termination costs	(0.9		)
Facility consolidation/relocation costs	—
Restructuring charges, May 31, 2013	(0.9		)

Cash expenditures	(1.7		)

Foreign currency translation and other noncash adjustments	—
Restructuring liability, May 31, 2013	$	3.0

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



	For the Three Months Ended May 31,
	2013			2012
(in millions)
Restructuring charges	$	(0.9	)	$	0.5
Other costs:
Accelerated depreciation (cost of product sold)	—			—
Other costs (selling, general and administrative expenses)	(2.0		)	2.7
Total other costs	(2.0		)	2.7
Total costs	$	(2.9	)	$	3.2

Total Costs by Reportable Segment:
Constellation Wine and Spirits
Restructuring charges	$	(0.7	)	$	0.7
Other costs	—			1.6
Total Constellation Wine and Spirits	$	(0.7	)	$	2.3

Corporate Operations and Other
Restructuring charges	$	(0.2	)	$	(0.2	)
Other costs	(2.0		)	1.1
Total Corporate Operations and Other	$	(2.2	)	$	0.9

The following table presents a summary of restructuring charges and other costs incurred since inception for the Company’s remaining restructuring plans. The Company does not expect to incur any additional costs associated with these restructuring plans.



(in millions)
Costs Incurred to Date
Restructuring charges:
Employee termination benefit costs	$	56.6
Contract termination costs	13.2
Facility consolidation/relocation costs	4.0
Total restructuring charges	73.8
Other costs:
Accelerated depreciation, inventory write-down and/or other costs (cost of product sold)	31.8
Asset write-down, other costs and/or acquisition-related integration costs (selling, general and administrative expenses)	71.8
Asset impairment (impairment of intangible assets)	7.4
Total other costs	111.0
Total costs incurred to date	$	184.8

Total Costs Incurred to Date by Reportable Segment:
Constellation Wine and Spirits
Restructuring charges	$	43.0
Other costs	88.5
Total Constellation Wine and Spirits	$	131.5

CWAE
Restructuring charges	$	23.6
Other costs	13.3
Total CWAE	$	36.9

Corporate Operations and Other
Restructuring charges	$	7.2
Other costs	9.2
Total Corporate Operations and Other	$	16.4

- 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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