Quarterly report pursuant to Section 13 or 15(d)

Business Segment Information

v2.4.0.8
Business Segment Information
 6 Months Ended
Aug. 31, 2014
Segment Reporting [Abstract]  
BUSINESS SEGMENT INFORMATION
BUSINESS SEGMENT INFORMATION:

Prior to the Beer Business Acquisition, Crown Imports was a reportable segment of the Company. In connection with the Beer Business Acquisition and the resulting consolidation of the acquired businesses from the date of acquisition, the Crown Imports segment, together with the Brewery Purchase, is now known as the Beer segment. Accordingly, the Company’s internal management financial reporting consists of two business divisions:  (i)  Beer and (ii)  Wine and Spirits, and the Company reports its operating results in three segments:  (i)  Beer, (ii)  Wine and Spirits, and (iii)  Corporate Operations and Other. In the Beer segment, the Company has an exclusive perpetual brand license to import, market and sell in the U.S. the Mexican Beer Brands. In the Wine and Spirits segment, the Company sells a large number of wine brands across all categories – table wine, sparkling wine and dessert wine – and across all price points – popular, premium, super-premium and fine wine, complemented by certain premium spirits brands. Amounts included in the Corporate Operations and Other segment consist of costs of executive management, corporate development, corporate finance, human resources, internal audit, investor relations, legal, public relations and global information technology. The amounts included in the Corporate Operations and Other segment are general costs that are applicable to the consolidated group and are therefore not allocated to the other reportable segments. All costs reported within the Corporate Operations and Other segment are not included in the chief operating decision maker’s evaluation of the operating income performance of the other reportable segments. The business segments reflect how the Company’s operations are managed, how operating performance within the Company is evaluated by senior management and the structure of its internal financial reporting.

In addition, management excludes items that affect comparability (“Unusual Items”) from its evaluation of the results of each operating segment as these Unusual Items are not reflective of continuing operations of the segments. Segment operating performance and segment management compensation is evaluated based upon continuing segment operating income. As such, the performance measures for incentive compensation purposes for segment management do not include the impact of these items.

For the six months and three months ended August 31, 2014, and August 31, 2013, Unusual Items included in consolidated operating income consist of:
 
For the Six Months
Ended August 31,
 
For the Three Months
Ended August 31,
 
2014
 
2013
 
2014
 
2013
(in millions)
 
 
 
 
 
 
 
Net Sales
 
 
 
 
 
 
 
Product recall
$
3.5

 
$
—

 
$
3.5

 
$
—

 
 
 
 
 
 
 
 
Cost of Product Sold
 
 
 
 
 
 
 
Amortization of favorable interim supply agreement
18.9

 
2.1

 
11.3

 
2.1

Product recall
5.4

 
—

 
5.4

 
—

Flow through of inventory step-up
—

 
11.0

 
—

 
9.5

Other costs
5.9

 
—

 
5.6

 
—

Total Cost of Product Sold
30.2

 
13.1

 
22.3

 
11.6

 
 
 
 
 
 
 
 
Selling, General and Administrative Expenses
 
 
 
 
 
 
 
Transaction, integration and other acquisition-related costs
13.1

 
34.9

 
8.6

 
7.4

Product recall
0.3

 
—

 
0.3

 
—

Deferred compensation
—

 
7.0

 
—

 
—

Restructuring charges and other
—

 
(2.9
)
 
—

 
—

Total Selling, General and Administrative Expenses
13.4


39.0

 
8.9

 
7.4

 
 
 
 
 
 
 
 
Impairment of Goodwill and Intangible Assets
—

 
300.9

 
—

 
300.9

 
 
 
 
 
 
 
 
Gain on Remeasurement to Fair Value of Equity Method Investment
—

 
(1,642.0
)
 
—

 
(1,642.0
)
 
 
 
 
 
 
 
 
Unusual Items
$
47.1

 
$
(1,289.0
)
 
$
34.7

 
$
(1,322.1
)


The Company evaluates performance based on operating income of the respective business units. The accounting policies of the segments are the same as those described for the Company in the Summary of Significant Accounting Policies in Note 1 to the Company’s consolidated financial statements included in the Company’s 2014 Annual Report, and include the recently adopted accounting guidance described in Note 2 herein.

Segment information is as follows:
 
For the Six Months
Ended August 31,
 
For the Three Months
Ended August 31,
 
2014
 
2013
 
2014
 
2013
(in millions)
 
 
 
 
 
 
 
Beer
 
 
 
 
 
 
 
Net sales
$
1,759.5

 
$
1,576.2

 
$
891.8

 
$
814.6

Segment operating income
$
558.6

 
$
360.4

 
$
271.1

 
$
226.4

Long-lived tangible assets
$
1,060.6

 
$
668.7

 
$
1,060.6

 
$
668.7

Total assets
$
7,713.3

 
$
7,294.5

 
$
7,713.3

 
$
7,294.5

Capital expenditures
$
228.8

 
$
3.6

 
$
143.5

 
$
3.3

Depreciation and amortization
$
19.9

 
$
11.0

 
$
10.1

 
$
10.5

 
 
 
 
 
 
 
 
Wine and Spirits
 
 
 
 
 
 
 
Net sales:
 
 
 
 
 
 
 
Wine
$
1,227.1

 
$
1,226.4

 
$
640.7

 
$
629.1

Spirits
147.0

 
144.0

 
75.1

 
67.9

Net sales
$
1,374.1

 
$
1,370.4

 
$
715.8

 
$
697.0

Segment operating income
$
312.9

 
$
285.8

 
$
169.7

 
$
158.2

Equity in (losses) earnings of equity method investees
$
(0.1
)
 
$
0.1

 
$
(0.6
)
 
$
(0.6
)
Long-lived tangible assets
$
1,107.5

 
$
1,081.3

 
$
1,107.5

 
$
1,081.3

Investments in equity method investees
$
72.0

 
$
73.2

 
$
72.0

 
$
73.2

Total assets
$
6,610.0

 
$
6,403.1

 
$
6,610.0

 
$
6,403.1

Capital expenditures
$
51.5

 
$
35.6

 
$
20.2

 
$
19.1

Depreciation and amortization
$
50.9

 
$
47.5

 
$
25.3

 
$
23.4

 
 
 
 
 
 
 
 
Corporate Operations and Other
 
 
 
 
 
 
 
Segment operating loss
$
(53.5
)
 
$
(48.1
)
 
$
(27.4
)
 
$
(24.1
)
Long-lived tangible assets
$
131.8

 
$
120.4

 
$
131.8

 
$
120.4

Total assets
$
334.1

 
$
425.2

 
$
334.1

 
$
425.2

Capital expenditures
$
27.9

 
$
10.3

 
$
13.1

 
$
4.8

Depreciation and amortization
$
13.3

 
$
11.1

 
$
6.8

 
$
6.2

 
 
 
 
 
 
 
 
Unusual Items
 
 
 
 
 
 
 
Net sales
$
(3.5
)
 
$
—

 
$
(3.5
)
 
$
—

Operating (loss) income
$
(47.1
)
 
$
1,289.0

 
$
(34.7
)
 
$
1,322.1

Equity in losses of equity method investees
$
—

 
$
(0.1
)
 
$
—

 
$
—

Depreciation and amortization
$
18.9

 
$
2.1

 
$
11.3

 
$
2.1

 
 
 
 
 
 
 
 
Consolidation and Eliminations
 
 
 
 
 
 
 
Net sales
$
—

 
$
(813.4
)
 
$
—

 
$
(51.8
)
Operating income
$
—

 
$
(142.6
)
 
$
—

 
$
(8.6
)
Equity in earnings of Crown Imports
$
—

 
$
70.3

 
$
—

 
$
4.3

Capital expenditures
$
—

 
$
(0.3
)
 
$
—

 
$
—

Depreciation and amortization
$
—

 
$
(0.5
)
 
$
—

 
$
—

 
 
 
 
 
 
 
 
 
For the Six Months
Ended August 31,
 
For the Three Months
Ended August 31,
 
2014
 
2013
 
2014
 
2013
(in millions)
 
 
 
 
 
 
 
Consolidated
 
 
 
 
 
 
 
Net sales
$
3,130.1

 
$
2,133.2

 
$
1,604.1

 
$
1,459.8

Operating income
$
770.9

 
$
1,744.5

 
$
378.7

 
$
1,674.0

Equity in (losses) earnings of equity method investees
$
(0.1
)
 
$
70.3

 
$
(0.6
)
 
$
3.7

Long-lived tangible assets
$
2,299.9

 
$
1,870.4

 
$
2,299.9

 
$
1,870.4

Investments in equity method investees
$
72.0

 
$
73.2

 
$
72.0

 
$
73.2

Total assets
$
14,657.4

 
$
14,122.8

 
$
14,657.4

 
$
14,122.8

Capital expenditures
$
308.2

 
$
49.2

 
$
176.8

 
$
27.2

Depreciation and amortization
$
103.0

 
$
71.2

 
$
53.5

 
$
42.2