| BUSINESS SEGMENT INFORMATION |
BUSINESS SEGMENT INFORMATION:
Our internal management financial reporting consists of two business divisions: (i) Beer and (ii) Wine and Spirits, and we report our operating results in three segments: (i) Beer, (ii) Wine and Spirits, and (iii) Corporate Operations and Other. In the Beer segment, our portfolio consists of high-end imported and craft beer brands. We have an exclusive perpetual brand license to import, market and sell in the U.S. our Mexican beer portfolio. In the Wine and Spirits segment, we sell a large number of wine brands across all categories – table wine, sparkling wine and dessert wine – and across all price points – popular, premium and luxury categories, primarily within the $5 to $25 price range at U.S. retail – 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 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 our chief operating decision maker’s evaluation of the operating income performance of the other reportable segments. The business segments reflect how our operations are managed, how resources are allocated, how operating performance is evaluated by senior management and the structure of our internal financial reporting.
In addition, management excludes items that affect comparability (“Comparable Adjustments”) from its evaluation of the results of each operating segment as these Comparable Adjustments are not reflective of core operations of the segments. Segment operating performance and segment management compensation are evaluated based upon core segment operating income (loss). As such, the performance measures for incentive compensation purposes for segment management do not include the impact of these Comparable Adjustments.
We evaluate segment operating performance based on operating income (loss) of the respective business units. Comparable Adjustments that impacted comparability in our segment operating income (loss) for each period are as follows:
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For the Years Ended |
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February 28, 2018 |
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February 28, 2017 |
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February 29, 2016 |
(in millions) |
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Cost of product sold |
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Loss on inventory write-down |
$ |
(19.1 |
) |
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$ |
— |
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$ |
— |
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Flow through of inventory step-up |
(18.7 |
) |
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(20.1 |
) |
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(18.4 |
) |
Net gain (loss) on undesignated commodity derivative contracts |
7.4 |
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16.3 |
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(48.1 |
) |
Settlements of undesignated commodity derivative contracts |
2.3 |
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23.4 |
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29.5 |
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Amortization of favorable interim supply agreement |
— |
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(2.2 |
) |
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(31.7 |
) |
Total cost of product sold |
(28.1 |
) |
|
17.4 |
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(68.7 |
) |
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Selling, general and administrative expenses |
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Impairment of intangible assets |
(86.8 |
) |
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(37.6 |
) |
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— |
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Loss on contract termination (1)
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(59.0 |
) |
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— |
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— |
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Restructuring and other strategic business development costs |
(14.0 |
) |
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(0.9 |
) |
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(16.4 |
) |
Transaction, integration and other acquisition-related costs |
(8.1 |
) |
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(14.2 |
) |
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(15.4 |
) |
Costs associated with the Canadian Divestiture and related activities |
(3.2 |
) |
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(20.4 |
) |
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— |
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Other gains (losses) (2)
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10.5 |
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(2.6 |
) |
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— |
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Total selling, general and administrative expenses |
(160.6 |
) |
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(75.7 |
) |
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(31.8 |
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Gain on sale of business |
— |
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262.4 |
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— |
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Comparable Adjustments, Operating income (loss) |
$ |
(188.7 |
) |
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$ |
204.1 |
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$ |
(100.5 |
) |
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(1) |
Represents a loss incurred in connection with the early termination of a beer glass supply contract with an affiliate of Owens-Illinois. |
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(2) |
Includes a gain of $8.1 million for the year ended February 28, 2018, in connection with the reduction in estimated fair value of a contingent liability associated with a prior period acquisition.
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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. Segment information is as follows:
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For the Years Ended |
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February 28, 2018 |
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February 28, 2017 |
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February 29, 2016 |
(in millions) |
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Beer |
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Net sales |
$ |
4,658.5 |
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$ |
4,229.3 |
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$ |
3,622.6 |
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Segment operating income |
$ |
1,838.3 |
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$ |
1,534.4 |
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$ |
1,264.1 |
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Long-lived tangible assets |
$ |
3,611.6 |
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$ |
2,810.0 |
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$ |
2,187.8 |
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Total assets |
$ |
12,325.2 |
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$ |
11,325.3 |
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$ |
9,900.7 |
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Capital expenditures |
$ |
882.6 |
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$ |
759.2 |
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$ |
800.3 |
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Depreciation and amortization |
$ |
168.8 |
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$ |
114.9 |
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$ |
61.5 |
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Wine and Spirits |
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Net sales: |
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Wine |
$ |
2,559.5 |
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$ |
2,739.3 |
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$ |
2,591.4 |
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Spirits |
367.0 |
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362.9 |
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334.4 |
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Net sales |
$ |
2,926.5 |
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$ |
3,102.2 |
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$ |
2,925.8 |
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Segment operating income |
$ |
800.7 |
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$ |
800.8 |
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$ |
727.0 |
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Income from unconsolidated investments |
$ |
34.4 |
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$ |
29.2 |
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$ |
26.6 |
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Long-lived tangible assets |
$ |
1,080.7 |
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$ |
992.9 |
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$ |
1,039.8 |
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Investments in equity method investees |
$ |
80.7 |
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$ |
77.6 |
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$ |
76.2 |
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Total assets |
$ |
7,217.4 |
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$ |
6,976.6 |
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$ |
6,770.4 |
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Capital expenditures |
$ |
151.1 |
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$ |
100.0 |
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$ |
81.7 |
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Depreciation and amortization |
$ |
94.0 |
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$ |
99.4 |
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$ |
100.2 |
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Corporate Operations and Other |
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Segment operating loss |
$ |
(165.8 |
) |
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$ |
(139.9 |
) |
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$ |
(125.5 |
) |
Income (loss) from unconsolidated investments |
$ |
0.2 |
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$ |
(0.2 |
) |
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$ |
— |
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Long-lived tangible assets |
$ |
97.4 |
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$ |
129.9 |
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$ |
105.8 |
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Investments in equity method investees |
$ |
40.8 |
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$ |
21.1 |
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$ |
6.0 |
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Total assets |
$ |
996.1 |
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$ |
300.5 |
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$ |
293.9 |
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Capital expenditures |
$ |
23.9 |
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$ |
48.2 |
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$ |
9.3 |
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Depreciation and amortization |
$ |
36.9 |
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$ |
31.4 |
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$ |
27.6 |
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Comparable Adjustments |
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Operating income (loss) |
$ |
(188.7 |
) |
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$ |
204.1 |
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$ |
(100.5 |
) |
Income (loss) from unconsolidated investments |
$ |
452.6 |
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$ |
(1.7 |
) |
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$ |
24.5 |
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Depreciation and amortization |
$ |
— |
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$ |
2.2 |
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$ |
31.7 |
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For the Years Ended |
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February 28, 2018 |
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February 28, 2017 |
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February 29, 2016 |
(in millions) |
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Consolidated |
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Net sales |
$ |
7,585.0 |
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$ |
7,331.5 |
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$ |
6,548.4 |
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Operating income |
$ |
2,284.5 |
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$ |
2,399.4 |
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$ |
1,765.1 |
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Income from unconsolidated investments (1)
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$ |
487.2 |
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$ |
27.3 |
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$ |
51.1 |
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Long-lived tangible assets |
$ |
4,789.7 |
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$ |
3,932.8 |
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$ |
3,333.4 |
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Investments in equity method investees |
$ |
121.5 |
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$ |
98.7 |
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$ |
82.2 |
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Total assets |
$ |
20,538.7 |
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$ |
18,602.4 |
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$ |
16,965.0 |
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Capital expenditures |
$ |
1,057.6 |
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$ |
907.4 |
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$ |
891.3 |
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Depreciation and amortization |
$ |
299.7 |
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$ |
247.9 |
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$ |
221.0 |
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(1) Income from unconsolidated investments consists of:
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For the Years Ended |
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February 28, 2018 |
|
February 28, 2017 |
|
February 29, 2016 |
(in millions) |
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Equity in earnings from equity method investees |
$ |
34.6 |
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$ |
27.3 |
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$ |
26.6 |
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Unrealized gain on equity securities and related activities |
452.6 |
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— |
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— |
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Dividend income from a retained interest in a previously divested business |
— |
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— |
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24.5 |
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$ |
487.2 |
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$ |
27.3 |
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$ |
51.1 |
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Our principal area of operation is in the U.S. Current operations outside the U.S. are in Mexico for the Beer segment and primarily in New Zealand, Italy and Canada for the Wine and Spirits segment. Revenues are attributed to countries based on the location of the customer.
Geographic data is as follows:
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For the Years Ended |
|
February 28, 2018 |
|
February 28, 2017 |
|
February 29, 2016 |
(in millions) |
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Net sales |
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U.S. |
$ |
7,330.1 |
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$ |
6,807.7 |
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$ |
5,960.9 |
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Non-U.S. (primarily Canada) |
254.9 |
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|
523.8 |
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|
587.5 |
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$ |
7,585.0 |
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$ |
7,331.5 |
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$ |
6,548.4 |
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February 28, 2018 |
|
February 28, 2017 |
(in millions) |
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Long-lived tangible assets |
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U.S. |
$ |
1,124.5 |
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$ |
1,037.6 |
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Non-U.S. (primarily Mexico) |
3,665.2 |
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2,895.2 |
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$ |
4,789.7 |
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$ |
3,932.8 |
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