| 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 are 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 nine months and three months ended November 30, 2014, and November 30, 2013, Unusual Items included in consolidated operating income consist of:
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For the Nine Months
Ended November 30, |
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For the Three Months
Ended November 30, |
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2014 |
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2013 |
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2014 |
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2013 |
(in millions) |
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Net Sales |
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Product recall |
$ |
3.3 |
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$ |
— |
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$ |
(0.2 |
) |
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$ |
— |
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Cost of Product Sold |
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Amortization of favorable interim supply agreement |
27.5 |
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4.3 |
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8.6 |
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2.2 |
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Net loss on undesignated commodity swap contracts |
24.2 |
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|
— |
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|
21.5 |
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|
— |
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Settlements of undesignated commodity swap contracts |
(0.6 |
) |
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— |
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(1.2 |
) |
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— |
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Product recall |
8.0 |
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— |
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2.6 |
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— |
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Flow through of inventory step-up |
— |
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11.0 |
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— |
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— |
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Other costs |
2.8 |
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— |
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0.2 |
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— |
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Total Cost of Product Sold |
61.9 |
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15.3 |
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31.7 |
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2.2 |
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Selling, General and Administrative Expenses |
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Transaction, integration and other acquisition-related costs |
21.1 |
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43.8 |
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8.0 |
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8.9 |
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Product recall |
0.5 |
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— |
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0.2 |
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— |
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Deferred compensation |
— |
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7.0 |
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— |
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— |
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Restructuring charges and other |
— |
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(2.8 |
) |
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— |
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0.1 |
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Total Selling, General and Administrative Expenses |
21.6 |
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48.0 |
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8.2 |
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9.0 |
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Impairment of Goodwill and Intangible Assets |
— |
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300.9 |
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— |
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— |
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Gain on Remeasurement to Fair Value of Equity Method Investment |
— |
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(1,642.0 |
) |
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— |
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— |
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Unusual Items |
$ |
86.8 |
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$ |
(1,277.8 |
) |
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$ |
39.7 |
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$ |
11.2 |
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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:
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For the Nine Months
Ended November 30, |
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For the Three Months
Ended November 30, |
|
2014 |
|
2013 |
|
2014 |
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2013 |
(in millions) |
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Beer |
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Net sales |
$ |
2,527.6 |
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$ |
2,237.8 |
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$ |
768.1 |
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$ |
661.6 |
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Segment operating income |
$ |
800.6 |
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$ |
572.9 |
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$ |
242.0 |
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$ |
212.5 |
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Long-lived tangible assets |
$ |
1,193.4 |
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$ |
694.4 |
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$ |
1,193.4 |
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$ |
694.4 |
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Total assets |
$ |
7,860.9 |
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$ |
7,214.7 |
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$ |
7,860.9 |
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$ |
7,214.7 |
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Capital expenditures |
$ |
434.9 |
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$ |
23.2 |
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$ |
206.1 |
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$ |
19.6 |
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Depreciation and amortization |
$ |
31.3 |
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$ |
19.9 |
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$ |
11.4 |
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$ |
8.9 |
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For the Nine Months
Ended November 30, |
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For the Three Months
Ended November 30, |
|
2014 |
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2013 |
|
2014 |
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2013 |
(in millions) |
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Wine and Spirits |
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Net sales: |
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Wine |
$ |
1,912.2 |
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$ |
1,938.3 |
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$ |
685.1 |
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$ |
711.9 |
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Spirits |
235.3 |
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213.8 |
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88.3 |
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69.8 |
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Net sales |
$ |
2,147.5 |
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$ |
2,152.1 |
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$ |
773.4 |
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$ |
781.7 |
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Segment operating income |
$ |
512.4 |
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$ |
471.9 |
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$ |
199.4 |
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$ |
186.1 |
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Equity in earnings of equity method investees |
$ |
21.1 |
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$ |
18.1 |
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$ |
21.2 |
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$ |
18.0 |
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Long-lived tangible assets |
$ |
1,096.3 |
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$ |
1,094.6 |
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$ |
1,096.3 |
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$ |
1,094.6 |
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Investments in equity method investees |
$ |
85.3 |
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$ |
81.9 |
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$ |
85.3 |
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$ |
81.9 |
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Total assets |
$ |
6,780.5 |
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$ |
6,704.6 |
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$ |
6,780.5 |
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$ |
6,704.6 |
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Capital expenditures |
$ |
74.1 |
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$ |
51.0 |
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$ |
22.6 |
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$ |
15.4 |
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Depreciation and amortization |
$ |
75.2 |
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$ |
72.2 |
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$ |
24.3 |
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$ |
24.7 |
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Corporate Operations and Other |
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Segment operating loss |
$ |
(79.7 |
) |
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$ |
(71.7 |
) |
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$ |
(26.1 |
) |
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$ |
(23.6 |
) |
Long-lived tangible assets |
$ |
129.4 |
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$ |
116.4 |
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$ |
129.4 |
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$ |
116.4 |
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Total assets |
$ |
339.1 |
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$ |
417.0 |
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$ |
339.1 |
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$ |
417.0 |
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Capital expenditures |
$ |
32.3 |
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$ |
12.0 |
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$ |
4.4 |
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$ |
1.7 |
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Depreciation and amortization |
$ |
20.6 |
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$ |
17.4 |
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$ |
7.3 |
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$ |
6.3 |
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Unusual Items |
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Net sales |
$ |
(3.3 |
) |
|
$ |
— |
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$ |
0.2 |
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$ |
— |
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Operating (loss) income |
$ |
(86.8 |
) |
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$ |
1,277.8 |
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$ |
(39.7 |
) |
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$ |
(11.2 |
) |
Equity in losses of equity method investees |
$ |
— |
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$ |
(0.1 |
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$ |
— |
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|
$ |
— |
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Depreciation and amortization |
$ |
27.5 |
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$ |
4.3 |
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$ |
8.6 |
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$ |
2.2 |
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Consolidation and Eliminations |
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Net sales |
$ |
— |
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$ |
(813.4 |
) |
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$ |
— |
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$ |
— |
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Operating income |
$ |
— |
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|
$ |
(142.6 |
) |
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$ |
— |
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|
$ |
— |
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Equity in earnings of Crown Imports |
$ |
— |
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$ |
70.3 |
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$ |
— |
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$ |
— |
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Capital expenditures |
$ |
— |
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$ |
(0.3 |
) |
|
$ |
— |
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|
$ |
— |
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Depreciation and amortization |
$ |
— |
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|
$ |
(0.5 |
) |
|
$ |
— |
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$ |
— |
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Consolidated |
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Net sales |
$ |
4,671.8 |
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$ |
3,576.5 |
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$ |
1,541.7 |
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$ |
1,443.3 |
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Operating income |
$ |
1,146.5 |
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$ |
2,108.3 |
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$ |
375.6 |
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$ |
363.8 |
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Equity in earnings of equity method investees |
$ |
21.1 |
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$ |
88.3 |
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$ |
21.2 |
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$ |
18.0 |
|
Long-lived tangible assets |
$ |
2,419.1 |
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$ |
1,905.4 |
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$ |
2,419.1 |
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|
$ |
1,905.4 |
|
Investments in equity method investees |
$ |
85.3 |
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$ |
81.9 |
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$ |
85.3 |
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$ |
81.9 |
|
Total assets |
$ |
14,980.5 |
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$ |
14,336.3 |
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$ |
14,980.5 |
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|
$ |
14,336.3 |
|
Capital expenditures |
$ |
541.3 |
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|
$ |
85.9 |
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|
$ |
233.1 |
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|
$ |
36.7 |
|
Depreciation and amortization |
$ |
154.6 |
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|
$ |
113.3 |
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|
$ |
51.6 |
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|
$ |
42.1 |
|
|