Constellation Brands, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Other Assets

Other Assets

12 Months Ended

Feb. 28, 2014

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

OTHER ASSETS

OTHER ASSETS:

The major components of other assets are as follows:



	February 28, 2014			February 28, 2013
(in millions)
Deferred financing costs	$	85.2		$	54.4
Investments in equity method investees	73.3			243.6
Investment in Accolade	11.5			42.8
Other	18.2			17.3
	188.2			358.1
Less – Accumulated amortization	(25.5		)	(13.9		)
	$	162.7		$	344.2

Investments in equity method investees –

Crown Imports:

Prior to June 7, 2013, Constellation Beers Ltd., an indirect wholly-owned subsidiary of the Company, and Diblo, S.A. de C.V., an entity majority-owned by Grupo Modelo, S.A.B. de C.V. (“Modelo”), each had, directly or indirectly, equal interests in a joint venture, Crown Imports LLC (“Crown Imports”). Crown Imports had the exclusive right to import, market and sell primarily Modelo’s Mexican beer portfolio sold in the U.S. and Guam (the “Mexican Beer Brands”).

In addition, prior to June 7, 2013, the Company accounted for its investment in Crown Imports under the equity method. Accordingly, the results of operations of Crown Imports were included in equity in earnings of equity method investees on the Company’s Consolidated Statements of Comprehensive Income through June 6, 2013. The Company received $30.3 million, $230.2 million and $222.0 million of cash distributions from Crown Imports for the years ended February 28, 2014, February 28, 2013, and February 29, 2012, respectively, all of which represent distributions of earnings. As of February 28, 2013, the Company’s investment in Crown Imports was $169.3 million. As of February 28, 2013, the carrying amount of the investment was 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.

Ruffino:

Prior to the October 2011 acquisition of Ruffino, the Company had a 49.9% interest in Ruffino. The Company did not have a controlling interest in Ruffino or exert any managerial control and the Company accounted for its investment in Ruffino under the equity method. Accordingly, the results of operations of Ruffino were included in equity in earnings of equity method investees on the Company’s Consolidated Statements of Comprehensive Income through the date of acquisition.

Other:

In connection with prior acquisitions, the Company acquired several investments which are being accounted for under the equity method. The primary investment consists of Opus One Winery LLC (“Opus One”), a 50% owned joint venture arrangement. As of February 28, 2014, and February 28, 2013, the Company’s investment in Opus One was $63.5 million and $59.3 million, respectively. The percentage of ownership of the remaining investments ranges from 20% to 50%.

The following table presents summarized financial information for the Company’s Crown Imports equity method investment and the other material equity method investments discussed above. The amounts shown represent 100% of these equity method investments’ financial position and results of operations for those investments accounted for under the equity method as of February 28, 2014. As the financial position and results of operations of Crown Imports and Ruffino have been included in the Company’s consolidated financial position and results of operations from the dates of acquisition, amounts included for Crown Imports and Ruffino each represent 100% of the respective equity method investment’s results of operations prior to each of their respective dates of acquisition.



	February 28, 2014						February 28, 2013
	Crown Imports		Other		Total		Crown Imports		Other		Total
(in millions)
Current assets	$	—	$	32.0	$	32.0	$	404.1	$	27.4	$	431.5
Noncurrent assets	$	—	$	50.5	$	50.5	$	36.4	$	50.8	$	87.2
Current liabilities	$	—	$	4.2	$	4.2	$	123.2	$	4.7	$	127.9
Noncurrent liabilities	$	—	$	19.5	$	19.5	$	6.0	$	22.6	$	28.6



	Crown Imports		Other		Total
(in millions)
For the Year Ended February 28, 2014
Net sales	$	813.4	$	62.8	$	876.2
Gross profit	$	241.5	$	49.9	$	291.4
Income from continuing operations	$	142.1	$	34.5	$	176.6
Net income	$	142.1	$	34.5	$	176.6

For the Year Ended February 28, 2013
Net sales	$	2,588.1	$	52.6	$	2,640.7
Gross profit	$	755.4	$	39.0	$	794.4
Income from continuing operations	$	446.2	$	24.8	$	471.0
Net income	$	446.2	$	24.8	$	471.0

For the Year Ended February 29, 2012
Net sales	$	2,469.5	$	106.2	$	2,575.7
Gross profit	$	721.0	$	61.5	$	782.5
Income from continuing operations	$	430.2	$	28.1	$	458.3
Net income	$	430.2	$	28.1	$	458.3

Investment in Accolade –

The Company’s less than 20% interest in its previously owned Australian and United Kingdom (“U.K.”) business, Accolade Wines (“Accolade”), consists of equity securities and AFS debt securities. The investment in the equity securities is accounted for under the cost method. Accordingly, the Company recognizes earnings only upon the receipt of a dividend from Accolade. The Company received a return of investment of $5.9 million for the year ended February 28, 2014, which was recorded as a reduction of the cost of the investment and is included in other investing activities on the Company’s Consolidated Statements of Cash Flows. The AFS debt securities are measured at fair value on a recurring basis with unrealized holding gains and losses, including foreign currency gains and losses, reported in AOCI until realized (see Note 18). Interest income is recognized based on the interest rate implicit in the AFS debt securities’ fair value and is reported in interest expense, net, on the Company’s Consolidated Statements of Comprehensive Income. Interest income recognized for the years ended February 28, 2014, February 28, 2013, and February 29, 2012, was not material. For the years ended February 28, 2014, and February 29, 2012, the Company received cash proceeds of $28.6 million (proceeds for principal of $23.4 million and interest of $5.2 million) and $21.7 million (proceeds for principal of $20.2 million and interest of $1.5 million), respectively, in connection with the early redemptions of certain of the AFS debt securities. No cash proceeds were received for the year ended February 28, 2013. Amounts reclassified from AOCI to selling, general and administrative expenses on the Company’s Consolidated Statements of Comprehensive Income in connection with the early redemptions for the years ended February 28, 2014, and February 29, 2012, were not material. The AFS debt securities contractually mature in January 2023 and can be settled, at the option of the issuer, in cash, equity shares of the issuer, or a combination thereof.