NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2016
(unaudited)
1. BASIS OF PRESENTATION:
Unless the context otherwise requires, the terms “Company,” “CBI,” “we,” “our,” or “us” refer to Constellation Brands, Inc. and its subsidiaries. We have prepared the consolidated financial statements included herein, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission applicable to quarterly reporting on Form 10-Q and reflect, in our opinion, all adjustments necessary to present fairly our financial information. All such adjustments are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements, prepared in accordance with generally accepted accounting principles, have been condensed or omitted as permitted by such rules and regulations. These consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended
February 29, 2016
(the “2016 Annual Report”). Results of operations for interim periods are not necessarily indicative of annual results.
2. INVENTORIES:
Inventories are stated at the lower of cost (primarily computed in accordance with the first-in, first-out method) or net realizable value. Elements of cost include materials, labor and overhead and consist of the following:
|
|
|
|
|
|
|
|
|
|
May 31,
2016
|
|
February 29,
2016
|
(in millions
)
|
|
|
|
Raw materials and supplies
|
$
|
118.4
|
|
|
$
|
107.2
|
|
In-process inventories
|
1,157.1
|
|
|
1,218.7
|
|
Finished case goods
|
643.3
|
|
|
525.7
|
|
|
$
|
1,918.8
|
|
|
$
|
1,851.6
|
|
3. DERIVATIVE INSTRUMENTS:
Overview –
Our risk management and derivative accounting policies are presented in Notes 1 and 6 of our consolidated financial statements included in our 2016 Annual Report and have not changed significantly for the
three months ended
May 31, 2016
.
The aggregate notional value of outstanding derivative instruments is as follows:
|
|
|
|
|
|
|
|
|
|
May 31,
2016
|
|
February 29,
2016
|
(in millions
)
|
|
|
|
Derivative instruments designated as hedging instruments
|
|
|
|
Foreign currency contracts
|
$
|
847.4
|
|
|
$
|
731.6
|
|
Interest rate swap contracts
|
$
|
700.0
|
|
|
$
|
600.0
|
|
|
|
|
|
Derivative instruments not designated as hedging instruments
|
|
|
|
Foreign currency contracts
|
$
|
2,346.1
|
|
|
$
|
975.6
|
|
Commodity derivative contracts
|
$
|
186.9
|
|
|
$
|
198.7
|
|
Interest rate swap contracts
|
$
|
1,000.0
|
|
|
$
|
1,000.0
|
|
Credit risk –
We are exposed to credit-related losses if the counterparties to our derivative contracts default. This credit risk is limited to the fair value of the derivative contracts. To manage this risk, we contract only with major financial institutions that have earned investment-grade credit ratings and with whom we have standard International Swaps and Derivatives Association agreements which allow for net settlement of the derivative contracts. We have also established counterparty credit guidelines that are regularly monitored. Because of these safeguards, we believe the risk of loss from counterparty default to be immaterial.
In addition, our derivative instruments are not subject to credit rating contingencies or collateral requirements. As of
May 31, 2016
, the estimated fair value of derivative instruments in a net liability position due to counterparties was
$84.4 million
. If we were required to settle the net liability position under these derivative instruments on
May 31, 2016
, we would have had sufficient availability under our available liquidity on hand to satisfy this obligation.
Results of period derivative activity –
The estimated fair value and location of our derivative instruments on our balance sheets are as follows (see Note
4
):
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
Liabilities
|
|
May 31,
2016
|
|
February 29,
2016
|
|
|
May 31,
2016
|
|
February 29,
2016
|
(in millions)
|
|
|
|
|
|
|
|
|
Derivative instruments designated as hedging instruments
|
Foreign currency contracts:
|
Prepaid expenses and other
|
$
|
4.5
|
|
|
$
|
5.5
|
|
|
Other accrued expenses and liabilities
|
$
|
31.1
|
|
|
$
|
33.0
|
|
Other assets
|
$
|
2.0
|
|
|
$
|
1.2
|
|
|
Other liabilities
|
$
|
27.4
|
|
|
$
|
26.2
|
|
Interest rate swap contracts:
|
Other assets
|
$
|
0.9
|
|
|
$
|
0.3
|
|
|
Other accrued expenses and liabilities
|
$
|
1.1
|
|
|
$
|
1.5
|
|
|
|
|
|
|
Other liabilities
|
$
|
0.4
|
|
|
$
|
0.4
|
|
|
|
|
|
|
|
|
|
|
Derivative instruments not designated as hedging instruments
|
Foreign currency contracts:
|
Prepaid expenses and other
|
$
|
2.6
|
|
|
$
|
4.8
|
|
|
Other accrued expenses and liabilities
|
$
|
5.4
|
|
|
$
|
9.8
|
|
Commodity derivative contracts:
|
Prepaid expenses and other
|
$
|
1.6
|
|
|
$
|
0.6
|
|
|
Other accrued expenses and liabilities
|
$
|
18.4
|
|
|
$
|
29.3
|
|
Other assets
|
$
|
1.3
|
|
|
$
|
0.3
|
|
|
Other liabilities
|
$
|
8.2
|
|
|
$
|
16.8
|
|
Interest rate swap contracts:
|
Prepaid expenses and other
|
$
|
0.8
|
|
|
$
|
0.7
|
|
|
Other accrued expenses and liabilities
|
$
|
5.7
|
|
|
$
|
5.7
|
|
The principal effect of our derivative instruments designated in cash flow hedging relationships on our results of operations, as well as Other Comprehensive Income (“OCI”), net of income tax effect, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Instruments in
Designated Cash Flow
Hedging Relationships
|
|
Net
Gain (Loss)
Recognized
in OCI
(Effective
portion)
|
|
Location of Net Gain (Loss)
Reclassified from AOCI to
Income (Effective portion)
|
|
Net
Gain (Loss)
Reclassified
from AOCI to
Income
(Effective
portion)
|
(in millions)
|
|
|
|
|
|
|
For the Three Months Ended May 31, 2016
|
|
|
|
|
|
|
Foreign currency contracts
|
|
$
|
(2.3
|
)
|
|
Sales
|
|
$
|
0.1
|
|
|
|
|
|
Cost of product sold
|
|
(5.0
|
)
|
Interest rate swap contracts
|
|
0.9
|
|
|
Interest expense
|
|
(1.9
|
)
|
|
|
$
|
(1.4
|
)
|
|
|
|
$
|
(6.8
|
)
|
|
|
|
|
|
|
|
For the Three Months Ended May 31, 2015
|
|
|
|
|
|
|
Foreign currency contracts
|
|
$
|
(6.9
|
)
|
|
Sales
|
|
$
|
0.6
|
|
|
|
|
|
Cost of product sold
|
|
(3.5
|
)
|
Interest rate swap contracts
|
|
(0.7
|
)
|
|
Interest expense
|
|
(2.1
|
)
|
|
|
$
|
(7.6
|
)
|
|
|
|
$
|
(5.0
|
)
|
We expect
$23.0 million
of net losses, net of income tax effect, to be reclassified from accumulated other comprehensive income (loss) (“AOCI”) to our results of operations within the next 12 months.
The effect of our undesignated derivative instruments on our results of operations is as follows:
|
|
|
|
|
|
|
|
|
|
Derivative Instruments Not
Designated as Hedging Instruments
|
|
|
|
Location of Net Gain (Loss)
Recognized in Income
|
|
Net
Gain (Loss)
Recognized
in Income
|
(in millions)
|
|
|
|
|
|
|
For the Three Months Ended May 31, 2016
|
|
|
|
|
|
|
Commodity derivative contracts
|
|
|
|
Cost of product sold
|
|
$
|
13.1
|
|
Foreign currency contracts
|
|
|
|
Selling, general and administrative expenses
|
|
(10.5
|
)
|
|
|
|
|
|
|
$
|
2.6
|
|
|
|
|
|
|
|
|
For the Three Months Ended May 31, 2015
|
|
|
|
|
|
|
Commodity derivative contracts
|
|
|
|
Cost of product sold
|
|
$
|
(5.2
|
)
|
Foreign currency contracts
|
|
|
|
Selling, general and administrative expenses
|
|
(4.1
|
)
|
|
|
|
|
|
|
$
|
(9.3
|
)
|
4. FAIR VALUE OF FINANCIAL INSTRUMENTS:
Authoritative guidance establishes a framework for measuring fair value and requires disclosures about fair value measurements for financial instruments. This guidance emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and states that a fair value measurement should be determined based on assumptions that market participants would use in pricing an asset or liability. It establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The hierarchy includes three levels:
|
|
•
|
Level 1 inputs are quoted prices in active markets for identical assets or liabilities;
|
|
|
•
|
Level 2 inputs include data points that are observable such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) such as interest rates and yield curves that are observable for the asset and liability, either directly or indirectly; and
|
|
|
•
|
Level 3 inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.
|
Fair value methodology and assumptions –
The methods and assumptions we use to estimate the fair value for each class of our financial instruments are presented in Notes 1 and 7 of our consolidated financial statements included in our 2016 Annual Report and have not changed significantly for the
three months ended
May 31, 2016
. The carrying amounts of certain of our financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and notes payable to banks, approximate fair value as of
May 31, 2016
, and
February 29, 2016
, due to the relatively short maturity of these instruments. As of
May 31, 2016
, the carrying amount of long-term debt, including the current portion, was
$8,278.4 million
, compared with an estimated fair value of
$8,154.8 million
. As of
February 29, 2016
, the carrying amount of long-term debt, including the current portion, was
$7,672.9 million
, compared with an estimated fair value of
$7,252.0 million
.
Recurring basis measurements –
The following table presents our financial assets and liabilities measured at estimated fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
Quoted
Prices in
Active
Markets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Total
|
(in millions)
|
|
|
|
|
|
|
|
May 31, 2016
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
Foreign currency contracts
|
$
|
—
|
|
|
$
|
9.1
|
|
|
$
|
—
|
|
|
$
|
9.1
|
|
Commodity derivative contracts
|
$
|
—
|
|
|
$
|
2.9
|
|
|
$
|
—
|
|
|
$
|
2.9
|
|
Interest rate swap contracts
|
$
|
—
|
|
|
$
|
1.7
|
|
|
$
|
—
|
|
|
$
|
1.7
|
|
Available-for-sale (“AFS”) debt securities
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4.7
|
|
|
$
|
4.7
|
|
Liabilities:
|
|
|
|
|
|
|
|
Foreign currency contracts
|
$
|
—
|
|
|
$
|
63.9
|
|
|
$
|
—
|
|
|
$
|
63.9
|
|
Commodity derivative contracts
|
$
|
—
|
|
|
$
|
26.6
|
|
|
$
|
—
|
|
|
$
|
26.6
|
|
Interest rate swap contracts
|
$
|
—
|
|
|
$
|
7.2
|
|
|
$
|
—
|
|
|
$
|
7.2
|
|
|
|
|
|
|
|
|
|
February 29, 2016
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
Foreign currency contracts
|
$
|
—
|
|
|
$
|
11.5
|
|
|
$
|
—
|
|
|
$
|
11.5
|
|
Commodity derivative contracts
|
$
|
—
|
|
|
$
|
0.9
|
|
|
$
|
—
|
|
|
$
|
0.9
|
|
Interest rate swap contracts
|
$
|
—
|
|
|
$
|
1.0
|
|
|
$
|
—
|
|
|
$
|
1.0
|
|
AFS debt securities
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4.6
|
|
|
$
|
4.6
|
|
Liabilities:
|
|
|
|
|
|
|
|
Foreign currency contracts
|
$
|
—
|
|
|
$
|
69.0
|
|
|
$
|
—
|
|
|
$
|
69.0
|
|
Commodity derivative contracts
|
$
|
—
|
|
|
$
|
46.1
|
|
|
$
|
—
|
|
|
$
|
46.1
|
|
Interest rate swap contracts
|
$
|
—
|
|
|
$
|
7.6
|
|
|
$
|
—
|
|
|
$
|
7.6
|
|
5. GOODWILL:
The changes in the carrying amount of goodwill are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beer
|
|
Wine and Spirits
|
|
Consolidated
|
(in millions)
|
|
|
|
|
|
Balance, February 28, 2015
|
$
|
3,776.2
|
|
|
$
|
2,432.0
|
|
|
$
|
6,208.2
|
|
Purchase accounting allocations
(1)
|
761.8
|
|
|
203.3
|
|
|
965.1
|
|
Foreign currency translation adjustments
|
(7.9
|
)
|
|
(26.8
|
)
|
|
(34.7
|
)
|
Balance, February 29, 2016
|
4,530.1
|
|
|
2,608.5
|
|
|
7,138.6
|
|
Purchase accounting allocations
(2)
|
(0.1
|
)
|
|
204.8
|
|
|
204.7
|
|
Foreign currency translation adjustments
|
(0.7
|
)
|
|
7.6
|
|
|
6.9
|
|
Balance, May 31, 2016
|
$
|
4,529.3
|
|
|
$
|
2,820.9
|
|
|
$
|
7,350.2
|
|
|
|
(1)
|
Purchase accounting allocations associated with the acquisitions of Ballast Point (as defined below) (Beer) and Meiomi (as defined below) (Wine and Spirits).
|
|
|
(2)
|
Preliminary purchase accounting allocations associated primarily with the acquisition of Prisoner (as defined below) (Wine and Spirits).
|
As of
May 31, 2016
, and
February 29, 2016
, we have accumulated impairment losses of
$220.8 million
and
$213.5 million
, respectively, within our Wine and Spirits segment. The change between periods is due to foreign currency translation adjustments.
Prisoner –
In April 2016, we acquired The Prisoner Wine Company business, consisting primarily of trademarks, related inventories and certain grape supply contracts, for
$284.9 million
(“Prisoner”). The results of operations of Prisoner are reported in the Wine and Spirits segment and have been included in our results of operations from the date of acquisition.
Ballast Point –
In December 2015, we acquired all of the issued and outstanding common and preferred stock of Home Brew Mart, Inc. d/b/a/ Ballast Point Brewing & Spirits (“Ballast Point”). The following table summarizes the allocation of the estimated fair value for the significant assets acquired:
|
|
|
|
|
(in millions)
|
|
Goodwill
|
$
|
761.7
|
|
Trademarks
|
222.8
|
|
Other
|
15.5
|
|
Total estimated fair value
|
1,000.0
|
|
Less – cash acquired
|
(1.5
|
)
|
Purchase price
|
$
|
998.5
|
|
Goodwill associated with the acquisition is primarily attributable to the future growth opportunities associated with the acquisition of a high-growth premium platform that will enable us to compete in the fast-growing craft beer category, further strengthening our position in the high-end U.S. beer market.
None
of the goodwill recognized is expected to be deductible for income tax purposes. The results of operations of Ballast Point are reported in the Beer segment and have been included in our consolidated results of operations from the date of acquisition.
Meiomi –
In August 2015, we acquired the Meiomi wine business, consisting primarily of the trademark, related inventories and certain grape supply contracts, for
$316.2 million
(“Meiomi”). The results of operations of Meiomi
are reported in the Wine and Spirits segment and have been included in our consolidated results of operations from the date of acquisition.
6. INTANGIBLE ASSETS:
The major components of intangible assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 31, 2016
|
|
February 29, 2016
|
|
Gross
Carrying
Amount
|
|
Net
Carrying
Amount
|
|
Gross
Carrying
Amount
|
|
Net
Carrying
Amount
|
(
in millions)
|
|
|
|
|
|
|
|
Amortizable intangible assets
|
|
|
|
|
|
|
|
Customer relationships
|
$
|
104.7
|
|
|
$
|
60.8
|
|
|
$
|
102.5
|
|
|
$
|
60.2
|
|
Favorable interim supply agreement
|
68.3
|
|
|
—
|
|
|
68.3
|
|
|
2.2
|
|
Other
|
22.5
|
|
|
3.4
|
|
|
22.3
|
|
|
3.5
|
|
Total
|
$
|
195.5
|
|
|
64.2
|
|
|
$
|
193.1
|
|
|
65.9
|
|
|
|
|
|
|
|
|
|
Nonamortizable intangible assets
|
|
|
|
|
|
|
|
Trademarks
|
|
|
3,372.0
|
|
|
|
|
3,333.8
|
|
Other
|
|
|
4.2
|
|
|
|
|
4.1
|
|
Total
|
|
|
3,376.2
|
|
|
|
|
3,337.9
|
|
Total intangible assets
|
|
|
$
|
3,440.4
|
|
|
|
|
$
|
3,403.8
|
|
We did not incur costs to renew or extend the term of acquired intangible assets for the
three months ended
May 31, 2016
, and
May 31, 2015
. Net carrying amount represents the gross carrying value net of accumulated amortization. Amortization expense for intangible assets was
$4.2 million
and
$11.7 million
for the
three months ended
May 31, 2016
, and
May 31, 2015
, respectively. Estimated amortization expense for the remaining nine months of
fiscal 2017
and for each of the five succeeding fiscal years and thereafter is as follows:
|
|
|
|
|
(in millions)
|
|
2017
|
$
|
6.3
|
|
2018
|
$
|
6.2
|
|
2019
|
$
|
6.2
|
|
2020
|
$
|
5.9
|
|
2021
|
$
|
5.6
|
|
2022
|
$
|
5.3
|
|
Thereafter
|
$
|
28.7
|
|
7. BORROWINGS:
Borrowings consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 31, 2016
|
|
February 29,
2016
|
|
Current
|
|
Long-term
|
|
Total
|
|
Total
|
(
in millions)
|
|
|
|
|
|
|
|
Notes payable to banks
|
|
|
|
|
|
|
|
Senior Credit Facility – Revolving Credit Loans
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
92.0
|
|
Other
|
29.8
|
|
|
—
|
|
|
29.8
|
|
|
316.3
|
|
|
$
|
29.8
|
|
|
$
|
—
|
|
|
$
|
29.8
|
|
|
$
|
408.3
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
|
|
|
|
|
Senior Credit Facility – Term Loans
|
$
|
172.5
|
|
|
$
|
3,347.8
|
|
|
$
|
3,520.3
|
|
|
$
|
2,856.8
|
|
Senior Notes
|
1,398.7
|
|
|
3,319.4
|
|
|
4,718.1
|
|
|
4,716.3
|
|
Other
|
16.6
|
|
|
23.4
|
|
|
40.0
|
|
|
99.8
|
|
|
$
|
1,587.8
|
|
|
$
|
6,690.6
|
|
|
$
|
8,278.4
|
|
|
$
|
7,672.9
|
|
Senior credit facility –
In March 2016, the Company, CIH International S.à r.l., a wholly-owned indirect subsidiary of ours (“CIH”), CIH Holdings S.à r.l., a wholly-owned indirect subsidiary of ours (“CIHH”), Bank of America, N.A., as administrative agent (the “Administrative Agent”), and certain other lenders entered into a Restatement Agreement (the “2016 Restatement Agreement”) that amended and restated our prior senior credit facility (as amended and restated by the 2016 Restatement Agreement, the “2016 Credit Agreement”). The principal changes effected by the 2016 Restatement Agreement were:
|
|
•
|
The creation of a new
$700.0 million
European Term A-1 loan facility maturing on March 10, 2021;
|
|
|
•
|
An increase of the European revolving commitment under the revolving credit facility by
$425.0 million
to
$1.0 billion
;
|
|
|
•
|
The addition of CIHH as a new borrower under the new European Term A-1 loan facility and the European revolving commitment; and
|
|
|
•
|
The entry into a cross-guarantee agreement by CIH and CIHH whereby each guarantees the other’s obligations under the 2016 Credit Agreement.
|
In addition, the European obligations under the 2016 Credit Agreement are guaranteed by us and certain of our U.S. subsidiaries. These obligations are also secured by a pledge of (i)
100%
of certain interests in certain of CIH’s subsidiaries, (ii)
100%
of certain interests in certain of CIHH’s subsidiaries and (iii)
100%
of the ownership interests in certain of our U.S. subsidiaries and
65%
of the ownership interests in certain of our foreign subsidiaries.
Proceeds from borrowings under the 2016 Credit Agreement were used to refinance outstanding obligations under our prior senior credit facility and short-term borrowings under our accounts receivable securitization facilities, and for other general corporate purposes.
The 2016 Credit Agreement provides for aggregate credit facilities of
$4,690.5 million
, consisting of the following:
|
|
|
|
|
|
|
|
Amount
|
|
Maturity
|
(in millions)
|
|
|
|
Revolving Credit Facility
(1) (2)
|
$
|
1,150.0
|
|
|
July 16, 2020
|
U.S. Term A Facility
(1) (3)
|
1,223.9
|
|
|
July 16, 2020
|
U.S. Term A-1 Facility
(1) (3)
|
240.1
|
|
|
July 16, 2021
|
European Term A Facility
(1) (3)
|
1,376.5
|
|
|
July 16, 2020
|
European Term A-1 Facility
(1) (3)
|
700.0
|
|
|
March 10, 2021
|
|
$
|
4,690.5
|
|
|
|
|
|
(1)
|
Contractual interest rate varies based on our debt ratio (as defined in the 2016 Credit Agreement) and is a function of LIBOR plus a margin, or the base rate plus a margin.
|
|
|
(2)
|
Provides for credit facilities consisting of a
$150.0 million
U.S. Revolving Credit Facility and a
$1,000.0 million
European Revolving Credit Facility. Includes two sub-facilities for letters of credit of up to
$200.0 million
in the aggregate. We are the borrower under the U.S. Revolving Credit Facility and we and/or CIH and/or CIHH are the borrowers under the European Revolving Credit Facility.
|
|
|
(3)
|
We are the borrower under the U.S. Term A and the U.S. Term A-1 loan facilities. CIH is the borrower under the European Term A loan facility. CIHH is the borrower under the European Term A-1 loan facility.
|
As of
May 31, 2016
, information with respect to borrowings under the 2016 Credit Agreement is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving
Credit
Facility
|
|
U.S.
Term A
Facility
(1)
|
|
U.S.
Term A-1
Facility
(1)
|
|
European
Term A
Facility
(1)
|
|
European
Term A-1
Facility
(1)
|
(in millions)
|
|
|
|
|
|
|
|
|
|
Outstanding borrowings
|
$
|
—
|
|
|
$
|
1,215.0
|
|
|
$
|
239.7
|
|
|
$
|
1,368.9
|
|
|
$
|
696.7
|
|
Interest rate
|
—
|
%
|
|
1.9
|
%
|
|
2.2
|
%
|
|
1.9
|
%
|
|
1.9
|
%
|
Libor margin
|
1.5
|
%
|
|
1.5
|
%
|
|
1.75
|
%
|
|
1.5
|
%
|
|
1.5
|
%
|
Outstanding letters of credit
|
$
|
17.0
|
|
|
|
|
|
|
|
|
|
Remaining borrowing capacity
|
$
|
1,133.0
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Outstanding term loan facility borrowings are net of unamortized debt issuance costs.
|
As of
May 31, 2016
, the required principal repayments of the term loans under the 2016 Credit Agreement (excluding unamortized debt issuance costs of
$20.2 million
) for the remaining nine months of
fiscal 2017
and for each of the five succeeding fiscal years are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Term A
Facility
|
|
U.S.
Term A-1
Facility
|
|
European
Term A
Facility
|
|
European
Term A-1
Facility
|
|
Total
|
(in millions)
|
|
|
|
|
|
|
|
|
|
2017
|
$
|
47.7
|
|
|
$
|
1.8
|
|
|
$
|
53.6
|
|
|
$
|
26.3
|
|
|
$
|
129.4
|
|
2018
|
63.6
|
|
|
2.4
|
|
|
71.5
|
|
|
35.0
|
|
|
172.5
|
|
2019
|
63.6
|
|
|
2.4
|
|
|
71.5
|
|
|
35.0
|
|
|
172.5
|
|
2020
|
63.6
|
|
|
2.4
|
|
|
71.5
|
|
|
35.0
|
|
|
172.5
|
|
2021
|
985.4
|
|
|
2.4
|
|
|
1,108.4
|
|
|
35.0
|
|
|
2,131.2
|
|
2022
|
—
|
|
|
228.7
|
|
|
—
|
|
|
533.7
|
|
|
762.4
|
|
|
$
|
1,223.9
|
|
|
$
|
240.1
|
|
|
$
|
1,376.5
|
|
|
$
|
700.0
|
|
|
$
|
3,540.5
|
|
Interest rate swap contracts –
In April 2012, we entered into interest rate swap agreements which fixed our interest rates on
$500.0 million
of our floating LIBOR rate debt at an average rate of
2.8%
(exclusive of borrowing margins) through
September 1, 2016. We have entered into
$200.0 million
of additional one-month LIBOR base rate delayed-start interest rate swap agreements effective September 1, 2016, which are designated as cash flow hedges for
$200.0 million
of our floating LIBOR rate debt. As a result, we have fixed our interest rates on
$200.0 million
of our floating LIBOR rate debt at an average rate of
1.1%
(exclusive of borrowing margins) from September 1, 2016, through July 1, 2020.
Accounts receivable securitization facilities –
On September 28, 2015, we amended our prior trade accounts receivable securitization facility (as amended, the “CBI Facility”) for an additional
364
-day term. Under the CBI Facility, trade accounts receivable generated by us and certain of our subsidiaries are sold by us to a wholly-owned bankruptcy remote single purpose subsidiary, the CBI SPV, which is consolidated by us for financial reporting purposes. The CBI Facility provides borrowing capacity of
$235.0 million
up to
$330.0 million
structured to account for the seasonality of our business, subject to further limitations based upon various pre-agreed formulas.
Also, on September 28, 2015, Crown Imports amended its prior trade accounts receivable securitization facility (as amended, the “Crown Facility”) for an additional
364
-day term. Under the Crown Facility, trade accounts receivable generated by Crown Imports are sold by Crown Imports to its wholly-owned bankruptcy remote single purpose subsidiary, the Crown SPV, which is consolidated by us for financial reporting purposes. The Crown Facility provides borrowing capacity of
$100.0 million
up to
$190.0 million
structured to account for the seasonality of Crown Imports’ business.
As of
May 31, 2016
, our accounts receivable securitization facilities are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
Borrowings
|
|
Weighted
Average
Interest Rate
|
|
Remaining
Borrowing
Capacity
|
(in millions)
|
|
|
|
|
|
CBI Facility
|
$
|
—
|
|
|
—
|
%
|
|
$
|
300.0
|
|
Crown Facility
|
$
|
—
|
|
|
—
|
%
|
|
$
|
190.0
|
|
8. INCOME TAXES:
Our effective tax rate for the
three months ended
May 31, 2016
, and
May 31, 2015
, was
31.9%
and
31.5%
, respectively. Our effective tax rates for the
three months ended
May 31, 2016
, and
May 31, 2015
, were lower than the federal statutory rate of 35% primarily due to lower effective tax rates applicable to our foreign businesses. Our effective tax rate for the
three months ended
May 31, 2015
, also benefited from a decrease in uncertain tax positions.
During the three months ended August 31, 2015, the Internal Revenue Service (“IRS”) concluded its examination of our fiscal years ended February 28, 2010, and February 28, 2011. We received a Revenue Agent’s Report (“RAR”) from the IRS proposing tax assessments for those years. We disagree with certain assessments in this report and have submitted a written protest stating our formal disagreement with the conclusions presented in the RAR. We believe that our position will be successfully sustained.
9. NET INCOME PER COMMON SHARE ATTRIBUTABLE TO CBI:
For the
three months ended
May 31, 2016
, and
May 31, 2015
, net income per common share – diluted for Class A Common Stock has been computed using the if-converted method and assumes the exercise of stock options using the treasury stock method and the conversion of Class B Convertible Common Stock as this method is more dilutive than the two-class method. For the
three months ended
May 31, 2016
, and
May 31, 2015
, net income per common share – diluted for Class B Convertible Common Stock has been computed using the two-class method and does not assume conversion of Class B Convertible Common Stock into shares of Class A Common Stock.
The computation of basic and diluted net income per common share is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
May 31, 2016
|
|
May 31, 2015
|
|
Common Stock
|
|
Common Stock
|
|
Class A
|
|
Class B
|
|
Class A
|
|
Class B
|
(in millions, except per share data)
|
|
|
|
|
|
|
|
Net income attributable to CBI allocated – basic
|
$
|
284.2
|
|
|
$
|
34.1
|
|
|
$
|
212.3
|
|
|
$
|
26.3
|
|
Conversion of Class B common shares into Class A common shares
|
34.1
|
|
|
—
|
|
|
26.3
|
|
|
—
|
|
Effect of stock-based awards on allocated net income
|
—
|
|
|
(0.7
|
)
|
|
—
|
|
|
(0.8
|
)
|
Net income attributable to CBI allocated – diluted
|
$
|
318.3
|
|
|
$
|
33.4
|
|
|
$
|
238.6
|
|
|
$
|
25.5
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding – basic
|
176.542
|
|
|
23.353
|
|
|
171.370
|
|
|
23.376
|
|
Conversion of Class B common shares into Class A common shares
|
23.353
|
|
|
—
|
|
|
23.376
|
|
|
—
|
|
Stock-based awards, primarily stock options
|
5.472
|
|
|
—
|
|
|
8.109
|
|
|
—
|
|
Weighted average common shares outstanding – diluted
|
205.367
|
|
|
23.353
|
|
|
202.855
|
|
|
23.376
|
|
|
|
|
|
|
|
|
|
Net income per common share attributable to CBI – basic
|
$
|
1.61
|
|
|
$
|
1.46
|
|
|
$
|
1.24
|
|
|
$
|
1.12
|
|
Net income per common share attributable to CBI – diluted
|
$
|
1.55
|
|
|
$
|
1.43
|
|
|
$
|
1.18
|
|
|
$
|
1.09
|
|
10. COMPREHENSIVE INCOME ATTRIBUTABLE TO CBI:
Comprehensive income consists of net income, foreign currency translation adjustments, net unrealized gains (losses) on derivative instruments, net unrealized gains (losses) on AFS debt securities and pension/postretirement adjustments. The reconciliation of net income attributable to CBI to comprehensive income attributable to CBI is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before Tax
Amount
|
|
Tax (Expense)
Benefit
|
|
Net of Tax
Amount
|
(in millions)
|
|
|
|
|
|
For the Three Months Ended May 31, 2016
|
|
|
|
|
|
Net income attributable to CBI
|
|
|
|
|
$
|
318.3
|
|
Other comprehensive income (loss) attributable to CBI:
|
|
|
|
|
|
Foreign currency translation adjustments:
|
|
|
|
|
|
Net losses
|
$
|
(7.4
|
)
|
|
$
|
(1.8
|
)
|
|
(9.2
|
)
|
Reclassification adjustments
|
—
|
|
|
—
|
|
|
—
|
|
Net loss recognized in other comprehensive loss
|
(7.4
|
)
|
|
(1.8
|
)
|
|
(9.2
|
)
|
Unrealized loss on cash flow hedges:
|
|
|
|
|
|
Net derivative losses
|
(3.2
|
)
|
|
1.8
|
|
|
(1.4
|
)
|
Reclassification adjustments
|
10.1
|
|
|
(3.4
|
)
|
|
6.7
|
|
Net gain recognized in other comprehensive loss
|
6.9
|
|
|
(1.6
|
)
|
|
5.3
|
|
Unrealized gain on AFS debt securities:
|
|
|
|
|
|
Net AFS debt securities gains
|
0.1
|
|
|
—
|
|
|
0.1
|
|
Reclassification adjustments
|
—
|
|
|
—
|
|
|
—
|
|
Net gain recognized in other comprehensive loss
|
0.1
|
|
|
—
|
|
|
0.1
|
|
Pension/postretirement adjustments:
|
|
|
|
|
|
Net actuarial losses
|
(0.6
|
)
|
|
0.2
|
|
|
(0.4
|
)
|
Reclassification adjustments
|
0.2
|
|
|
—
|
|
|
0.2
|
|
Net loss recognized in other comprehensive loss
|
(0.4
|
)
|
|
0.2
|
|
|
(0.2
|
)
|
Other comprehensive loss attributable to CBI
|
$
|
(0.8
|
)
|
|
$
|
(3.2
|
)
|
|
(4.0
|
)
|
Comprehensive income attributable to CBI
|
|
|
|
|
$
|
314.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before Tax
Amount
|
|
Tax (Expense)
Benefit
|
|
Net of Tax
Amount
|
(in millions)
|
|
|
|
|
|
For the Three Months Ended May 31, 2015
|
|
|
|
|
|
Net income attributable to CBI
|
|
|
|
|
$
|
238.6
|
|
Other comprehensive loss attributable to CBI:
|
|
|
|
|
|
Foreign currency translation adjustments:
|
|
|
|
|
|
Net losses
|
$
|
(50.7
|
)
|
|
$
|
(0.6
|
)
|
|
(51.3
|
)
|
Reclassification adjustments
|
—
|
|
|
—
|
|
|
—
|
|
Net loss recognized in other comprehensive loss
|
(50.7
|
)
|
|
(0.6
|
)
|
|
(51.3
|
)
|
Unrealized loss on cash flow hedges:
|
|
|
|
|
|
Net derivative losses
|
(10.5
|
)
|
|
2.9
|
|
|
(7.6
|
)
|
Reclassification adjustments
|
7.6
|
|
|
(2.5
|
)
|
|
5.1
|
|
Net loss recognized in other comprehensive loss
|
(2.9
|
)
|
|
0.4
|
|
|
(2.5
|
)
|
Unrealized loss on AFS debt securities:
|
|
|
|
|
|
Net AFS debt securities losses
|
(0.1
|
)
|
|
—
|
|
|
(0.1
|
)
|
Reclassification adjustments
|
—
|
|
|
—
|
|
|
—
|
|
Net loss recognized in other comprehensive loss
|
(0.1
|
)
|
|
—
|
|
|
(0.1
|
)
|
Pension/postretirement adjustments:
|
|
|
|
|
|
Net actuarial losses
|
(0.1
|
)
|
|
—
|
|
|
(0.1
|
)
|
Reclassification adjustments
|
0.1
|
|
|
—
|
|
|
0.1
|
|
Net loss recognized in other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
Other comprehensive loss attributable to CBI
|
$
|
(53.7
|
)
|
|
$
|
(0.2
|
)
|
|
(53.9
|
)
|
Comprehensive income attributable to CBI
|
|
|
|
|
$
|
184.7
|
|
Accumulated other comprehensive loss, net of income tax effect, includes the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
Currency
Translation
Adjustments
|
|
Net
Unrealized
Losses on
Derivative
Instruments
|
|
Net
Unrealized
Gains (Losses)
on AFS Debt
Securities
|
|
Pension/
Postretirement
Adjustments
|
|
Accumulated
Other
Comprehensive
Loss
|
(in millions)
|
|
|
|
|
|
|
|
|
|
Balance, February 29, 2016
|
$
|
(390.5
|
)
|
|
$
|
(46.1
|
)
|
|
$
|
(2.8
|
)
|
|
$
|
(13.1
|
)
|
|
$
|
(452.5
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) before reclassification adjustments
|
(9.2
|
)
|
|
(1.4
|
)
|
|
0.1
|
|
|
(0.4
|
)
|
|
(10.9
|
)
|
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
6.7
|
|
|
—
|
|
|
0.2
|
|
|
6.9
|
|
Other comprehensive income (loss)
|
(9.2
|
)
|
|
5.3
|
|
|
0.1
|
|
|
(0.2
|
)
|
|
(4.0
|
)
|
Balance, May 31, 2016
|
$
|
(399.7
|
)
|
|
$
|
(40.8
|
)
|
|
$
|
(2.7
|
)
|
|
$
|
(13.3
|
)
|
|
$
|
(456.5
|
)
|
11. CONDENSED CONSOLIDATING FINANCIAL INFORMATION:
The following information sets forth the condensed consolidating balance sheets as of
May 31, 2016
, and
February 29, 2016
, the
condensed consolidating statements of comprehensive income
for the
three months ended
May 31, 2016
, and
May 31, 2015
, and the condensed consolidating statements of cash flows for the
three months ended
May 31, 2016
, and
May 31, 2015
, for the parent company, our combined subsidiaries which guarantee our senior notes (“Subsidiary Guarantors”), our combined subsidiaries which are not Subsidiary Guarantors (primarily foreign subsidiaries) (“Subsidiary Nonguarantors”) and the Company. The Subsidiary Guarantors are
100%
owned, directly or indirectly, by the parent company and the guarantees are joint and several obligations of each of the Subsidiary Guarantors. The guarantees are full and unconditional, as those terms are used in Rule 3-10 of Regulation S-X, except that a Subsidiary Guarantor can be automatically released and relieved of its obligations under certain customary
circumstances contained in the indentures governing our senior notes. These customary circumstances include, so long as other applicable provisions of the indentures are adhered to, the termination or release of a Subsidiary Guarantor’s guarantee of other indebtedness or upon the legal defeasance or covenant defeasance or satisfaction and discharge of our senior notes. Separate financial information for our Subsidiary Guarantors is not presented because we have determined that such financial information would not be material to investors. The accounting policies of the parent company, the Subsidiary Guarantors and the Subsidiary Nonguarantors are the same as those described for the Company in Note
1
of our consolidated financial statements included in our 2016 Annual Report. There are no restrictions on the ability of the Subsidiary Guarantors to transfer funds to us in the form of cash dividends, loans or advances.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Company
|
|
Subsidiary
Guarantors
|
|
Subsidiary
Nonguarantors
|
|
Eliminations
|
|
Consolidated
|
(in millions)
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Balance Sheet at May 31, 2016
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
21.2
|
|
|
$
|
6.9
|
|
|
$
|
139.2
|
|
|
$
|
—
|
|
|
$
|
167.3
|
|
Accounts receivable
|
0.3
|
|
|
19.2
|
|
|
753.8
|
|
|
—
|
|
|
773.3
|
|
Inventories
|
157.5
|
|
|
1,520.7
|
|
|
400.5
|
|
|
(159.9
|
)
|
|
1,918.8
|
|
Intercompany receivable
|
18,583.3
|
|
|
25,167.6
|
|
|
10,053.6
|
|
|
(53,804.5
|
)
|
|
—
|
|
Prepaid expenses and other
|
38.4
|
|
|
65.7
|
|
|
276.8
|
|
|
(21.8
|
)
|
|
359.1
|
|
Total current assets
|
18,800.7
|
|
|
26,780.1
|
|
|
11,623.9
|
|
|
(53,986.2
|
)
|
|
3,218.5
|
|
Property, plant and equipment
|
62.3
|
|
|
880.6
|
|
|
2,564.3
|
|
|
—
|
|
|
3,507.2
|
|
Investments in subsidiaries
|
13,055.7
|
|
|
20.6
|
|
|
—
|
|
|
(13,076.3
|
)
|
|
—
|
|
Goodwill
|
—
|
|
|
6,581.0
|
|
|
769.2
|
|
|
—
|
|
|
7,350.2
|
|
Intangible assets
|
—
|
|
|
1,006.3
|
|
|
2,434.1
|
|
|
—
|
|
|
3,440.4
|
|
Intercompany notes receivable
|
5,044.3
|
|
|
86.9
|
|
|
270.0
|
|
|
(5,401.2
|
)
|
|
—
|
|
Other assets
|
19.6
|
|
|
73.1
|
|
|
21.0
|
|
|
—
|
|
|
113.7
|
|
Total assets
|
$
|
36,982.6
|
|
|
$
|
35,428.6
|
|
|
$
|
17,682.5
|
|
|
$
|
(72,463.7
|
)
|
|
$
|
17,630.0
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Notes payable to banks
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
29.8
|
|
|
$
|
—
|
|
|
$
|
29.8
|
|
Current maturities of long-term debt
|
1,464.7
|
|
|
16.0
|
|
|
107.1
|
|
|
—
|
|
|
1,587.8
|
|
Accounts payable
|
34.4
|
|
|
111.2
|
|
|
412.9
|
|
|
—
|
|
|
558.5
|
|
Accrued excise taxes
|
14.5
|
|
|
19.3
|
|
|
5.9
|
|
|
—
|
|
|
39.7
|
|
Intercompany payable
|
23,373.8
|
|
|
20,165.9
|
|
|
10,264.8
|
|
|
(53,804.5
|
)
|
|
—
|
|
Other accrued expenses and liabilities
|
223.5
|
|
|
185.3
|
|
|
148.1
|
|
|
(74.0
|
)
|
|
482.9
|
|
Total current liabilities
|
25,110.9
|
|
|
20,497.7
|
|
|
10,968.6
|
|
|
(53,878.5
|
)
|
|
2,698.7
|
|
Long-term debt, less current maturities
|
4,708.1
|
|
|
22.4
|
|
|
1,960.1
|
|
|
—
|
|
|
6,690.6
|
|
Deferred income taxes
|
14.7
|
|
|
766.8
|
|
|
310.7
|
|
|
—
|
|
|
1,092.2
|
|
Intercompany notes payable
|
270.0
|
|
|
5,114.0
|
|
|
17.2
|
|
|
(5,401.2
|
)
|
|
—
|
|
Other liabilities
|
30.9
|
|
|
34.0
|
|
|
95.0
|
|
|
—
|
|
|
159.9
|
|
Total liabilities
|
30,134.6
|
|
|
26,434.9
|
|
|
13,351.6
|
|
|
(59,279.7
|
)
|
|
10,641.4
|
|
Total CBI stockholders’ equity
|
6,848.0
|
|
|
8,993.7
|
|
|
4,190.3
|
|
|
(13,184.0
|
)
|
|
6,848.0
|
|
Noncontrolling interests
|
—
|
|
|
—
|
|
|
140.6
|
|
|
—
|
|
|
140.6
|
|
Total stockholders’ equity
|
6,848.0
|
|
|
8,993.7
|
|
|
4,330.9
|
|
|
(13,184.0
|
)
|
|
6,988.6
|
|
Total liabilities and stockholders’ equity
|
$
|
36,982.6
|
|
|
$
|
35,428.6
|
|
|
$
|
17,682.5
|
|
|
$
|
(72,463.7
|
)
|
|
$
|
17,630.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Company
|
|
Subsidiary
Guarantors
|
|
Subsidiary
Nonguarantors
|
|
Eliminations
|
|
Consolidated
|
(in millions)
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Balance Sheet at February 29, 2016
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
6.0
|
|
|
$
|
4.2
|
|
|
$
|
72.9
|
|
|
$
|
—
|
|
|
$
|
83.1
|
|
Accounts receivable
|
0.4
|
|
|
22.3
|
|
|
709.8
|
|
|
—
|
|
|
732.5
|
|
Inventories
|
151.6
|
|
|
1,483.5
|
|
|
344.0
|
|
|
(127.5
|
)
|
|
1,851.6
|
|
Intercompany receivable
|
17,459.3
|
|
|
23,758.9
|
|
|
9,393.5
|
|
|
(50,611.7
|
)
|
|
—
|
|
Prepaid expenses and other
|
29.6
|
|
|
67.8
|
|
|
281.1
|
|
|
(68.1
|
)
|
|
310.4
|
|
Total current assets
|
17,646.9
|
|
|
25,336.7
|
|
|
10,801.3
|
|
|
(50,807.3
|
)
|
|
2,977.6
|
|
Property, plant and equipment
|
63.2
|
|
|
879.8
|
|
|
2,390.4
|
|
|
—
|
|
|
3,333.4
|
|
Investments in subsidiaries
|
13,047.2
|
|
|
19.0
|
|
|
—
|
|
|
(13,066.2
|
)
|
|
—
|
|
Goodwill
|
—
|
|
|
6,376.4
|
|
|
762.2
|
|
|
—
|
|
|
7,138.6
|
|
Intangible assets
|
—
|
|
|
970.9
|
|
|
2,430.8
|
|
|
2.1
|
|
|
3,403.8
|
|
Intercompany notes receivable
|
4,705.9
|
|
|
86.6
|
|
|
—
|
|
|
(4,792.5
|
)
|
|
—
|
|
Other assets
|
20.0
|
|
|
69.6
|
|
|
22.0
|
|
|
—
|
|
|
111.6
|
|
Total assets
|
$
|
35,483.2
|
|
|
$
|
33,739.0
|
|
|
$
|
16,406.7
|
|
|
$
|
(68,663.9
|
)
|
|
$
|
16,965.0
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Notes payable to banks
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
408.3
|
|
|
$
|
—
|
|
|
$
|
408.3
|
|
Current maturities of long-term debt
|
765.6
|
|
|
18.0
|
|
|
73.1
|
|
|
—
|
|
|
856.7
|
|
Accounts payable
|
37.7
|
|
|
100.7
|
|
|
290.9
|
|
|
—
|
|
|
429.3
|
|
Accrued excise taxes
|
14.7
|
|
|
14.7
|
|
|
4.2
|
|
|
—
|
|
|
33.6
|
|
Intercompany payable
|
22,293.3
|
|
|
19,018.6
|
|
|
9,299.8
|
|
|
(50,611.7
|
)
|
|
—
|
|
Other accrued expenses and liabilities
|
349.1
|
|
|
185.1
|
|
|
119.4
|
|
|
(109.2
|
)
|
|
544.4
|
|
Total current liabilities
|
23,460.4
|
|
|
19,337.1
|
|
|
10,195.7
|
|
|
(50,720.9
|
)
|
|
2,272.3
|
|
Long-term debt, less current maturities
|
5,421.4
|
|
|
26.3
|
|
|
1,368.5
|
|
|
—
|
|
|
6,816.2
|
|
Deferred income taxes
|
11.9
|
|
|
734.8
|
|
|
275.5
|
|
|
—
|
|
|
1,022.2
|
|
Intercompany notes payable
|
—
|
|
|
4,776.6
|
|
|
15.9
|
|
|
(4,792.5
|
)
|
|
—
|
|
Other liabilities
|
29.9
|
|
|
39.1
|
|
|
93.5
|
|
|
—
|
|
|
162.5
|
|
Total liabilities
|
28,923.6
|
|
|
24,913.9
|
|
|
11,949.1
|
|
|
(55,513.4
|
)
|
|
10,273.2
|
|
Total CBI stockholders’ equity
|
6,559.6
|
|
|
8,825.1
|
|
|
4,325.4
|
|
|
(13,150.5
|
)
|
|
6,559.6
|
|
Noncontrolling interests
|
—
|
|
|
—
|
|
|
132.2
|
|
|
—
|
|
|
132.2
|
|
Total stockholders’ equity
|
6,559.6
|
|
|
8,825.1
|
|
|
4,457.6
|
|
|
(13,150.5
|
)
|
|
6,691.8
|
|
Total liabilities and stockholders’ equity
|
$
|
35,483.2
|
|
|
$
|
33,739.0
|
|
|
$
|
16,406.7
|
|
|
$
|
(68,663.9
|
)
|
|
$
|
16,965.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Company
|
|
Subsidiary
Guarantors
|
|
Subsidiary
Nonguarantors
|
|
Eliminations
|
|
Consolidated
|
(in millions)
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Comprehensive Income for the Three Months Ended May 31, 2016
|
Sales
|
$
|
623.7
|
|
|
$
|
1,686.8
|
|
|
$
|
966.1
|
|
|
$
|
(1,223.6
|
)
|
|
$
|
2,053.0
|
|
Less – excise taxes
|
(78.0
|
)
|
|
(86.9
|
)
|
|
(16.3
|
)
|
|
—
|
|
|
(181.2
|
)
|
Net sales
|
545.7
|
|
|
1,599.9
|
|
|
949.8
|
|
|
(1,223.6
|
)
|
|
1,871.8
|
|
Cost of product sold
|
(451.4
|
)
|
|
(1,151.5
|
)
|
|
(564.8
|
)
|
|
1,177.2
|
|
|
(990.5
|
)
|
Gross profit
|
94.3
|
|
|
448.4
|
|
|
385.0
|
|
|
(46.4
|
)
|
|
881.3
|
|
Selling, general and administrative expenses
|
(91.3
|
)
|
|
(193.1
|
)
|
|
(55.2
|
)
|
|
11.0
|
|
|
(328.6
|
)
|
Operating income
|
3.0
|
|
|
255.3
|
|
|
329.8
|
|
|
(35.4
|
)
|
|
552.7
|
|
Equity in earnings of equity method investees and subsidiaries
|
368.9
|
|
|
2.3
|
|
|
—
|
|
|
(370.5
|
)
|
|
0.7
|
|
Interest income
|
0.1
|
|
|
—
|
|
|
0.3
|
|
|
—
|
|
|
0.4
|
|
Intercompany interest income
|
57.4
|
|
|
73.3
|
|
|
—
|
|
|
(130.7
|
)
|
|
—
|
|
Interest expense
|
(74.3
|
)
|
|
(0.4
|
)
|
|
(10.3
|
)
|
|
—
|
|
|
(85.0
|
)
|
Intercompany interest expense
|
(73.1
|
)
|
|
(57.4
|
)
|
|
(0.2
|
)
|
|
130.7
|
|
|
—
|
|
Income before income taxes
|
282.0
|
|
|
273.1
|
|
|
319.6
|
|
|
(405.9
|
)
|
|
468.8
|
|
(Provision for) benefit from income taxes
|
36.3
|
|
|
(105.9
|
)
|
|
(91.5
|
)
|
|
11.4
|
|
|
(149.7
|
)
|
Net income
|
318.3
|
|
|
167.2
|
|
|
228.1
|
|
|
(394.5
|
)
|
|
319.1
|
|
Net income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
(0.8
|
)
|
|
—
|
|
|
(0.8
|
)
|
Net income attributable to CBI
|
$
|
318.3
|
|
|
$
|
167.2
|
|
|
$
|
227.3
|
|
|
$
|
(394.5
|
)
|
|
$
|
318.3
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to CBI
|
$
|
314.3
|
|
|
$
|
168.7
|
|
|
$
|
221.5
|
|
|
$
|
(390.2
|
)
|
|
$
|
314.3
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Comprehensive Income for the Three Months Ended May 31, 2015
|
Sales
|
$
|
558.6
|
|
|
$
|
1,424.9
|
|
|
$
|
825.2
|
|
|
$
|
(1,010.7
|
)
|
|
$
|
1,798.0
|
|
Less – excise taxes
|
(76.2
|
)
|
|
(75.1
|
)
|
|
(15.4
|
)
|
|
—
|
|
|
(166.7
|
)
|
Net sales
|
482.4
|
|
|
1,349.8
|
|
|
809.8
|
|
|
(1,010.7
|
)
|
|
1,631.3
|
|
Cost of product sold
|
(390.8
|
)
|
|
(1,003.6
|
)
|
|
(486.1
|
)
|
|
986.3
|
|
|
(894.2
|
)
|
Gross profit
|
91.6
|
|
|
346.2
|
|
|
323.7
|
|
|
(24.4
|
)
|
|
737.1
|
|
Selling, general and administrative expenses
|
(102.8
|
)
|
|
(177.2
|
)
|
|
(33.5
|
)
|
|
3.7
|
|
|
(309.8
|
)
|
Operating income (loss)
|
(11.2
|
)
|
|
169.0
|
|
|
290.2
|
|
|
(20.7
|
)
|
|
427.3
|
|
Equity in earnings of equity method investees and subsidiaries
|
304.2
|
|
|
2.2
|
|
|
0.2
|
|
|
(305.6
|
)
|
|
1.0
|
|
Interest income
|
0.1
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
0.3
|
|
Intercompany interest income
|
45.8
|
|
|
63.9
|
|
|
—
|
|
|
(109.7
|
)
|
|
—
|
|
Interest expense
|
(69.3
|
)
|
|
(0.3
|
)
|
|
(8.2
|
)
|
|
—
|
|
|
(77.8
|
)
|
Intercompany interest expense
|
(63.6
|
)
|
|
(45.9
|
)
|
|
(0.2
|
)
|
|
109.7
|
|
|
—
|
|
Income before income taxes
|
206.0
|
|
|
188.9
|
|
|
282.2
|
|
|
(326.3
|
)
|
|
350.8
|
|
(Provision for) benefit from income taxes
|
32.6
|
|
|
(73.1
|
)
|
|
(76.7
|
)
|
|
6.6
|
|
|
(110.6
|
)
|
Net income
|
238.6
|
|
|
115.8
|
|
|
205.5
|
|
|
(319.7
|
)
|
|
240.2
|
|
Net income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
(1.6
|
)
|
|
—
|
|
|
(1.6
|
)
|
Net income attributable to CBI
|
$
|
238.6
|
|
|
$
|
115.8
|
|
|
$
|
203.9
|
|
|
$
|
(319.7
|
)
|
|
$
|
238.6
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to CBI
|
$
|
184.7
|
|
|
$
|
115.1
|
|
|
$
|
149.6
|
|
|
$
|
(264.7
|
)
|
|
$
|
184.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Company
|
|
Subsidiary
Guarantors
|
|
Subsidiary
Nonguarantors
|
|
Eliminations
|
|
Consolidated
|
(in millions)
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Cash Flows for the Three Months Ended May 31, 2016
|
Net cash provided by (used in) operating activities
|
$
|
(221.8
|
)
|
|
$
|
1.0
|
|
|
$
|
566.7
|
|
|
$
|
—
|
|
|
$
|
345.9
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Purchase of business
|
—
|
|
|
(284.9
|
)
|
|
—
|
|
|
—
|
|
|
(284.9
|
)
|
Purchases of property, plant and equipment
|
(4.1
|
)
|
|
(27.5
|
)
|
|
(137.8
|
)
|
|
—
|
|
|
(169.4
|
)
|
Net repayments of intercompany notes
|
(377.2
|
)
|
|
(0.1
|
)
|
|
—
|
|
|
377.3
|
|
|
—
|
|
Net returns of capital from equity affiliates
|
354.8
|
|
|
—
|
|
|
—
|
|
|
(354.8
|
)
|
|
—
|
|
Other investing activities
|
0.1
|
|
|
—
|
|
|
0.3
|
|
|
—
|
|
|
0.4
|
|
Net cash used in investing activities
|
(26.4
|
)
|
|
(312.5
|
)
|
|
(137.5
|
)
|
|
22.5
|
|
|
(453.9
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Dividends paid to parent company
|
—
|
|
|
—
|
|
|
(357.0
|
)
|
|
357.0
|
|
|
—
|
|
Net contributions from equity affiliates
|
—
|
|
|
0.1
|
|
|
2.1
|
|
|
(2.2
|
)
|
|
—
|
|
Net proceeds from (repayments of) intercompany notes
|
275.5
|
|
|
362.6
|
|
|
(260.8
|
)
|
|
(377.3
|
)
|
|
—
|
|
Proceeds from issuance of long-term debt
|
—
|
|
|
—
|
|
|
700.0
|
|
|
—
|
|
|
700.0
|
|
Excess tax benefits from stock-based payment awards
|
68.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
68.8
|
|
Proceeds from shares issued under equity compensation plans
|
15.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15.9
|
|
Proceeds from noncontrolling interests
|
—
|
|
|
—
|
|
|
9.5
|
|
|
—
|
|
|
9.5
|
|
Net repayments of notes payable
|
—
|
|
|
—
|
|
|
(379.1
|
)
|
|
—
|
|
|
(379.1
|
)
|
Principal payments of long-term debt
|
(16.5
|
)
|
|
(6.0
|
)
|
|
(71.7
|
)
|
|
—
|
|
|
(94.2
|
)
|
Dividends paid
|
(79.3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(79.3
|
)
|
Payments of minimum tax withholdings on stock-based payment awards
|
—
|
|
|
(42.5
|
)
|
|
(3.0
|
)
|
|
—
|
|
|
(45.5
|
)
|
Payments of debt issuance costs
|
—
|
|
|
—
|
|
|
(3.2
|
)
|
|
—
|
|
|
(3.2
|
)
|
Purchases of treasury stock
|
(1.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.0
|
)
|
Net cash provided by (used in) financing activities
|
263.4
|
|
|
314.2
|
|
|
(363.2
|
)
|
|
(22.5
|
)
|
|
191.9
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
—
|
|
|
0.3
|
|
|
—
|
|
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
15.2
|
|
|
2.7
|
|
|
66.3
|
|
|
—
|
|
|
84.2
|
|
Cash and cash equivalents, beginning of period
|
6.0
|
|
|
4.2
|
|
|
72.9
|
|
|
—
|
|
|
83.1
|
|
Cash and cash equivalents, end of period
|
$
|
21.2
|
|
|
$
|
6.9
|
|
|
$
|
139.2
|
|
|
$
|
—
|
|
|
$
|
167.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Company
|
|
Subsidiary
Guarantors
|
|
Subsidiary
Nonguarantors
|
|
Eliminations
|
|
Consolidated
|
(in millions)
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Cash Flows for the Three Months Ended May 31, 2015
|
Net cash provided by (used in) operating activities
|
$
|
(214.6
|
)
|
|
$
|
213.1
|
|
|
$
|
207.2
|
|
|
$
|
—
|
|
|
$
|
205.7
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
(2.9
|
)
|
|
(8.2
|
)
|
|
(118.6
|
)
|
|
—
|
|
|
(129.7
|
)
|
Net proceeds from intercompany notes
|
205.1
|
|
|
—
|
|
|
—
|
|
|
(205.1
|
)
|
|
—
|
|
Net investments in equity affiliates
|
(279.9
|
)
|
|
—
|
|
|
—
|
|
|
279.9
|
|
|
—
|
|
Other investing activities
|
—
|
|
|
—
|
|
|
(1.6
|
)
|
|
—
|
|
|
(1.6
|
)
|
Net cash used in investing activities
|
(77.7
|
)
|
|
(8.2
|
)
|
|
(120.2
|
)
|
|
74.8
|
|
|
(131.3
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Net contributions from equity affiliates
|
—
|
|
|
4.4
|
|
|
275.5
|
|
|
(279.9
|
)
|
|
—
|
|
Net proceeds from (repayments of) intercompany notes
|
304.1
|
|
|
(168.8
|
)
|
|
(340.4
|
)
|
|
205.1
|
|
|
—
|
|
Excess tax benefits from stock-based payment awards
|
63.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
63.6
|
|
Proceeds from shares issued under equity compensation plans
|
9.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9.6
|
|
Net proceeds from notes payable
|
—
|
|
|
—
|
|
|
50.9
|
|
|
—
|
|
|
50.9
|
|
Principal payments of long-term debt
|
(15.8
|
)
|
|
(4.4
|
)
|
|
(59.2
|
)
|
|
—
|
|
|
(79.4
|
)
|
Dividends paid
|
(59.8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(59.8
|
)
|
Payments of minimum tax withholdings on stock-based payment awards
|
—
|
|
|
(35.6
|
)
|
|
(2.7
|
)
|
|
—
|
|
|
(38.3
|
)
|
Net cash provided by (used in) financing activities
|
301.7
|
|
|
(204.4
|
)
|
|
(75.9
|
)
|
|
(74.8
|
)
|
|
(53.4
|
)
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
and cash equivalents
|
—
|
|
|
—
|
|
|
(0.4
|
)
|
|
—
|
|
|
(0.4
|
)
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
9.4
|
|
|
0.5
|
|
|
10.7
|
|
|
—
|
|
|
20.6
|
|
Cash and cash equivalents, beginning of period
|
24.5
|
|
|
0.7
|
|
|
84.9
|
|
|
—
|
|
|
110.1
|
|
Cash and cash equivalents, end of period
|
$
|
33.9
|
|
|
$
|
1.2
|
|
|
$
|
95.6
|
|
|
$
|
—
|
|
|
$
|
130.7
|
|
12. 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 items.
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:
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended May 31,
|
|
2016
|
|
2015
|
(in millions)
|
|
|
|
Cost of product sold
|
|
|
|
Net gain (loss) on undesignated commodity derivative contracts
|
$
|
13.1
|
|
|
$
|
(5.2
|
)
|
Settlements of undesignated commodity derivative contracts
|
8.3
|
|
|
5.5
|
|
Flow through of inventory step-up
|
(8.1
|
)
|
|
—
|
|
Amortization of favorable interim supply agreement
|
(2.2
|
)
|
|
(8.9
|
)
|
Total cost of product sold
|
11.1
|
|
|
(8.6
|
)
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
|
Costs associated with a potential initial public offering
|
(3.7
|
)
|
|
—
|
|
Transaction, integration and other acquisition-related costs
|
(2.3
|
)
|
|
(5.3
|
)
|
Restructuring and related charges
|
(1.1
|
)
|
|
(13.0
|
)
|
Total selling, general and administrative expenses
|
(7.1
|
)
|
|
(18.3
|
)
|
Comparable Adjustments, Operating income (loss)
|
$
|
4.0
|
|
|
$
|
(26.9
|
)
|
The accounting policies of the segments are the same as those described for the Company in Note
1
of our consolidated financial statements included in our 2016 Annual Report. Segment information is as follows:
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended May 31,
|
|
2016
|
|
2015
|
(in millions)
|
|
|
|
Beer
|
|
|
|
Net sales
|
$
|
1,151.0
|
|
|
$
|
965.8
|
|
Segment operating income
|
$
|
409.3
|
|
|
$
|
336.5
|
|
Long-lived tangible assets
|
$
|
2,362.3
|
|
|
$
|
1,570.7
|
|
Total assets
|
$
|
10,276.3
|
|
|
$
|
8,409.2
|
|
Capital expenditures
|
$
|
145.0
|
|
|
$
|
111.5
|
|
Depreciation and amortization
|
$
|
25.9
|
|
|
$
|
14.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended May 31,
|
|
2016
|
|
2015
|
(in millions)
|
|
|
|
Wine and Spirits
|
|
|
|
Net sales:
|
|
|
|
Wine
|
$
|
643.1
|
|
|
$
|
587.8
|
|
Spirits
|
77.7
|
|
|
77.7
|
|
Net sales
|
$
|
720.8
|
|
|
$
|
665.5
|
|
Segment operating income
|
$
|
168.0
|
|
|
$
|
144.2
|
|
Equity in earnings of equity method investees
|
$
|
0.8
|
|
|
$
|
1.0
|
|
Long-lived tangible assets
|
$
|
1,035.3
|
|
|
$
|
1,053.6
|
|
Investments in equity method investees
|
$
|
76.5
|
|
|
$
|
73.7
|
|
Total assets
|
$
|
6,984.8
|
|
|
$
|
6,425.1
|
|
Capital expenditures
|
$
|
12.5
|
|
|
$
|
16.7
|
|
Depreciation and amortization
|
$
|
24.9
|
|
|
$
|
24.2
|
|
|
|
|
|
Corporate Operations and Other
|
|
|
|
Segment operating loss
|
$
|
(28.6
|
)
|
|
$
|
(26.5
|
)
|
Equity in losses of equity method investees
|
$
|
(0.1
|
)
|
|
$
|
—
|
|
Long-lived tangible assets
|
$
|
109.6
|
|
|
$
|
117.8
|
|
Investments in equity method investees
|
$
|
5.9
|
|
|
$
|
—
|
|
Total assets
|
$
|
368.9
|
|
|
$
|
364.3
|
|
Capital expenditures
|
$
|
11.9
|
|
|
$
|
1.5
|
|
Depreciation and amortization
|
$
|
7.0
|
|
|
$
|
7.3
|
|
|
|
|
|
Comparable Adjustments
|
|
|
|
Operating income (loss)
|
$
|
4.0
|
|
|
$
|
(26.9
|
)
|
Depreciation and amortization
|
$
|
2.2
|
|
|
$
|
8.9
|
|
|
|
|
|
Consolidated
|
|
|
|
Net sales
|
$
|
1,871.8
|
|
|
$
|
1,631.3
|
|
Operating income
|
$
|
552.7
|
|
|
$
|
427.3
|
|
Equity in earnings of equity method investees
|
$
|
0.7
|
|
|
$
|
1.0
|
|
Long-lived tangible assets
|
$
|
3,507.2
|
|
|
$
|
2,742.1
|
|
Investments in equity method investees
|
$
|
82.4
|
|
|
$
|
73.7
|
|
Total assets
|
$
|
17,630.0
|
|
|
$
|
15,198.6
|
|
Capital expenditures
|
$
|
169.4
|
|
|
$
|
129.7
|
|
Depreciation and amortization
|
$
|
60.0
|
|
|
$
|
54.7
|
|
13. ACCOUNTING GUIDANCE NOT YET ADOPTED:
Revenue recognition –
In May 2014, the FASB issued guidance regarding the recognition of revenue from contracts with customers. Under this guidance, an entity will recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. A five step process will be utilized to recognize revenue, as follows: (i) identify the contract with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) the entity satisfies a performance obligation. Additionally, this guidance requires improved disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. We are required to adopt this guidance for our annual and interim periods beginning March 1, 2018,
utilizing one of two methods: retrospective restatement for each reporting period presented at time of adoption, or retrospectively with the cumulative effect of initially applying this guidance recognized at the date of initial application. We are currently assessing the financial impact of this guidance on our consolidated financial statements.
Leases –
In February 2016, the FASB issued guidance for the accounting for leases. Under this guidance, a lessee will recognize assets and liabilities for most leases, but will recognize expense similar to current lease accounting guidance. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election not to recognize lease assets and lease liabilities. We are required to adopt this guidance for our annual and interim periods beginning March 1, 2019, using a modified retrospective approach. We are currently assessing the financial impact of this guidance on our consolidated financial statements.
Stock compensation –
In March 2016, the FASB issued guidance for the accounting for certain aspects of share-based payment transactions. The guidance requires, among other things, the recognition of the income tax effect of awards in the income statement when the awards vest or are settled, thereby eliminating the recording of the income tax effect in additional paid-in capital. The guidance also requires cash flows from excess tax benefits along with other income tax cash flows to be classified as cash flows from operating activities. We are required to adopt this guidance for our annual and interim periods beginning March 1, 2017. We are currently assessing the financial impact of this guidance on our consolidated financial statements.