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TMCNet:  CONSTELLATION BRANDS, INC. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.

[July 10, 2014]

CONSTELLATION BRANDS, INC. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.

(Edgar Glimpses Via Acquire Media NewsEdge) Introduction This MD&A provides additional information on our businesses, current developments, financial condition, cash flows and results of operations. It should be read in conjunction with our consolidated financial statements and notes thereto included herein (the "Financial Statements") and with our consolidated financial statements and notes included in our 2014 Annual Report.


This MD&A is organized as follows: • Overview. This section provides a general description of our business, which we believe is important in understanding the results of our operations, financial condition and potential future trends.

• Strategy. This section provides a description of our strategy on a business segment basis and a discussion of recent acquisitions.

• Results of operations. This section provides an analysis of our results of operations presented on a business segment basis. In addition, a brief description of transactions and other items that affect the comparability of the results is provided.

• Financial liquidity and capital resources. This section provides an analysis of our cash flows and our outstanding debt and commitments.

Included in the analysis of outstanding debt is a discussion of the amount of financial capacity available to fund our ongoing operations and future commitments, as well as a discussion of other financing arrangements.

Overview We are a leading international beverage alcohol company with a broad portfolio of consumer-preferred premium imported beer, wine and spirits brands complemented by other select beverage alcohol products. We are the third-largest producer and marketer of beer for the U.S. market and the world's leading premium wine company. We are the largest multi-category supplier (beer, wine and spirits) ("Multi-category Supplier") of beverage alcohol in the U.S., the leading producer and marketer of wine in Canada, and a leading producer and exporter of wine from New Zealand and Italy.

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, we have an exclusive perpetual brand license to import, market and sell in the U.S. the Mexican Beer Brands. 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, 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 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 operating performance is evaluated by senior management and the structure of our internal financial reporting.

31-------------------------------------------------------------------------------- Table of Contents Strategy Our business strategy in the Beer segment is twofold: (i) continued focus on growing our premium Mexican beer portfolio in the U.S. through expanding distribution for key brands, as well as new product development and innovation within the existing portfolio of brands, and (ii) completion of the required Brewery expansion in Mexico by December 31, 2016, with a goal to complete the expansion within three years from the date of acquisition (see additional discussion below under "Acquisition - Beer Business Acquisition").

Our business strategy in the Wine and Spirits segment is centered on continued focus on consumer-preferred premium wine brands, complemented by premium spirits. In this segment, we continue to focus on growing premium product categories. We have consolidated our U.S. distribution network in markets where it was feasible, which currently represents about 70% of our branded wine and spirits volume in the U.S., in order to obtain dedicated distributor selling resources which focus on our U.S. wine and spirits portfolio to drive organic growth. Throughout the terms of these contracts, we generally expect shipments on an annual basis to these distributors ("Shipments") to essentially equal the distributors' shipments to retailers ("Depletions"). In addition, we dedicate a large share of our sales and marketing resources to our U.S. Focus Brands (as defined in our 2014 Annual Report) as they represent a majority of our U.S. wine and spirits revenue and profitability, and have strong positions in their respective price segments.

Marketing, sales and distribution of our products are managed on a geographic basis in order to fully leverage leading market positions. In addition, market dynamics and consumer trends vary across each of our markets. Within our primary market in the U.S., we offer a range of beverage alcohol products across the imported beer, branded wine and spirits categories, with separate distribution networks utilized for our imported beer portfolio and our wine and spirits portfolio. Within our next largest market, Canada, we offer a range of beverage alcohol products primarily across the branded wine category. The environment for our products is competitive in each of our markets.

We remain committed to our long-term financial model of growing sales, expanding margins and increasing cash flow in order to achieve earnings per share growth and reduce borrowings.

Acquisition Beer Business Acquisition In June 2013, we completed the Beer Business Acquisition for an aggregate purchase price of $5,226.4 million. The Beer Business Acquisition resulted in the acquisition of: • the remaining 50% equity interest in Crown Imports; • all of the equity interests of a company which owns and operates the Brewery and of a company which provides personnel and services for the operation and maintenance of the Brewery; and • an irrevocable, fully-paid license to produce in Mexico (or worldwide under certain circumstances) and exclusively import, market and sell Modelo's Mexican beer portfolio sold in the U.S. and Guam as of the date of the acquisition, and certain extensions.

In connection with the Beer Business Acquisition, we are required to build out and expand the Brewery from 10 million hectoliters to a nominal capacity of at least 20 million hectoliters of packaged beer annually by December 31, 2016. In addition, an interim supply agreement and a transition services agreement were entered into in association with the Beer Business Acquisition. The interim supply agreement obligates the supplier to provide us with a supply of product not produced by the Brewery and the transition services agreement provides for certain specified services and production materials, both for a specified period of time. The associated agreements provide, among other things, that the United States will have approval rights, in its sole discretion, for amendments or modifications to the associated agreements and the United States will have a right of approval, in its sole discretion, of any extension of the term of the interim supply agreement beyond three years. We continue to evaluate future commodity sourcing, including glass, as well as assess available options for longer term capacity expansion beyond our current 20 million hectoliter expansion. The Beer Business Acquisition has positioned us as the third-largest 32-------------------------------------------------------------------------------- Table of Contents producer and marketer of beer for the U.S. market and the largest Multi-category Supplier of beverage alcohol in the U.S.

The results of operations of the Beer Business Acquisition are reported in the Beer segment and are included in our consolidated results of operations from the date of acquisition. It is a significant acquisition that has had and will continue to have a material impact on our future results of operations, financial position and cash flows.

For more information on this acquisition see Note 3 of the Financial Statements.

Results of Operations Financial Highlights Financial Highlights for the three months ended May 31, 2014 ("First Quarter 2015"), and May 31, 2013 ("First Quarter 2014"): • Our Beer Business Acquisition continued to drive significant improvements within our results of operations, financial position and cash flows, including the continued realization of operating efficiencies and the strengthening of relationships with wholesalers and distributors.

• Our net sales increased 127% primarily due to the Beer Business Acquisition and strong consumer demand within the Mexican beer portfolio.

• Operating income increased significantly primarily due to the benefit from the Beer Business Acquisition.

• Net income also increased significantly primarily due to the items discussed above, partially offset by lower equity in earnings (Crown Imports) and an increase in interest expense, net, driven largely by financing for the Beer Business Acquisition.

• The significant increase in our diluted earnings per share resulted largely from the Beer Business Acquisition.

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

33-------------------------------------------------------------------------------- Table of Contents As more fully described herein and in the related notes to the Financial Statements, the Unusual Items that impacted comparability in our results for each period are as follows: First Quarter 2015 First Quarter 2014 (in millions) Cost of Product Sold Amortization of favorable interim supply agreement $ 7.6 $ - Flow through of inventory step-up - 1.5 Other costs 0.3 - Total Cost of Product Sold 7.9 1.5 Selling, General and Administrative Expenses Transaction, integration and other acquisition-related costs 4.5 27.5 Deferred compensation - 7.0 Restructuring charges and other - (2.9 ) Total Selling, General and Administrative Expenses 4.5 31.6 Equity in Losses of Equity Method Investees - 0.1 Unusual Items $ 12.4 $ 33.2 Cost of Product Sold Favorable Interim Supply Agreement In connection with the Beer Business Acquisition, a temporary supply agreement was negotiated under a favorable pricing arrangement for the required volume of beer needed to fulfill expected U.S. demand in excess of the Brewery's capacity.

For First Quarter 2015, amortization of favorable interim supply agreement reflects amounts associated with non-Brewery product purchased from the date of acquisition which has been sold to our U.S. customers during First Quarter 2015.

Inventory Step-Up In connection with acquisitions, the allocation of purchase price in excess of book value for certain inventory on hand at the date of acquisition is referred to as inventory step-up. Inventory step-up represents an assumed manufacturing profit attributable to the acquired company prior to acquisition. For First Quarter 2014, flow through of inventory step-up was primarily associated with the July 2012 acquisition of the Mark West trademark and related inventories.

Other Costs For First Quarter 2015, other costs represent unrealized losses from the mark to fair value of undesignated commodity swap contracts which are reported outside of segment operating results until such time that the underlying exposure is realized in the segment operating results. At that time, the realized gains or losses from the mark to fair value of the undesignated commodity swap contracts are reported in the appropriate operating segment, allowing our operating segments to realize the economic effects of the commodity swap contracts without the resulting unrealized mark to fair value volatility.

Selling, General and Administrative Expenses Transaction, Integration and Other Acquisition-Related Costs For First Quarter 2015 and First Quarter 2014, transaction, integration and other acquisition-related costs were associated primarily with the Beer Business Acquisition.

34-------------------------------------------------------------------------------- Table of Contents Deferred Compensation For First Quarter 2014, deferred compensation relates to a prior period correction of previously unrecognized deferred compensation costs that were associated with certain employment agreements.

Restructuring Charges and Other For First Quarter 2014, restructuring charges and other consist primarily of restructuring and related credits associated with previously announced restructuring plans.

First Quarter 2015 Compared to First Quarter 2014 Net Sales The following table sets forth net sales for each of our reportable segments for First Quarter 2015 and First Quarter 2014.

First Quarter % Increase 2015 First Quarter 2014 (Decrease) (in millions) Beer $ 867.7 $ 761.6 14 % Wine and Spirits: Wine 586.4 597.3 (2 %) Spirits 71.9 76.1 (6 %) Total Wine and Spirits 658.3 673.4 (2 %) Total Reportable Segments 1,526.0 1,435.0 6 % Consolidation and Eliminations - (761.6 ) 100 % Consolidated Net Sales $ 1,526.0 $ 673.4 127 % Net sales increased to $1,526.0 million for First Quarter 2015 from $673.4 million for First Quarter 2014, an increase of $852.6 million, or 127%. This increase resulted primarily from $867.7 million of net sales of products acquired in the Beer Business Acquisition. Prior to the Beer Business Acquisition, the results of operations of the Beer segment were eliminated in consolidation as our preexisting 50% equity interest in Crown Imports was accounted for under the equity method of accounting.

Beer First Quarter First Quarter 2015 2014 % Increase (in millions, branded product, 24 pack, 12 ounce case equivalents) Net Sales $ 867.7 $ 761.6 13.9 % Shipment Volume 54.7 49.5 10.5 % Depletion Volume (1) 7.9 % (1) Depletions are based on third party data.

The increase in net sales for the Beer segment resulted primarily from volume growth within our Mexican beer portfolio which benefited from continued consumer demand and increased advertising spend, combined with a favorable impact from pricing in select markets.

35-------------------------------------------------------------------------------- Table of Contents Wine and Spirits First Quarter First Quarter 2015 2014 % Decrease (in millions, branded product, 9 liter case equivalents) Net Sales $ 658.3 $ 673.4 (2.2 %) Shipment Volume Total 15.1 15.7 (3.8 %) U.S. Domestic 11.4 11.9 (4.2 %) U.S. Domestic Focus Brands 8.1 8.2 (1.2 %) Depletion Volume (1) U.S. Domestic (1.8 %) U.S. Domestic Focus Brands (1.3 %) The decrease in net sales for the Wine and Spirits segment is due primarily to a decrease in wine net sales of $10.9 million, or (2%). This decrease resulted primarily from lower wine volumes (predominantly in the U.S.) due largely to a planned reduction in inventory levels by one of our exclusive distributors. This decrease was partially offset by the recognition of a contractually required payment from the distributor equal to the approximate profit lost on the reduced sales associated with the inventory reduction. In addition, wine net sales benefitted from favorable product mix predominantly within the U.S. branded wine portfolio.

Gross Profit Gross profit increased to $670.1 million for First Quarter 2015 from $256.1 million for First Quarter 2014, an increase of $414.0 million, or 162%. This increase is due to gross profit from the Beer Business Acquisition of $410.2 million and an increase in Wine and Spirits' gross profit of $10.2 million, partially offset by an increase in Unusual Items of $6.4 million.

The Beer segment's gross profit increased $184.6 million, or 82%, primarily due to incremental gross profit from the Brewery Purchase, the volume growth and the favorable impact from pricing in select markets.

Wine and Spirits' gross profit increased $10.2 million, or 4%, primarily due to the favorable product mix.

Gross profit as a percent of net sales increased to 43.9% for First Quarter 2015 compared to 38.0% for First Quarter 2014 primarily due to (i) the benefit from the Beer Business Acquisition; (ii) the contractually required payment associated with the reduction of the exclusive distributor's inventory levels and (iii) the favorable product mix, partially offset by the increase in Unusual Items.

Selling, General and Administrative Expenses Selling, general and administrative expenses increased to $277.9 million for First Quarter 2015 from $185.6 million for First Quarter 2014, an increase of $92.3 million, or 50%. This increase is primarily due to $122.7 million of selling, general and administrative expenses from the Beer Business Acquisition, partially offset by a decrease in Unusual items of $27.1 million and Wine and Spirits of $5.4 million.

The Beer segment's selling, general and administrative expenses increased $31.1 million, or 34%, primarily due to increases in general and administrative expenses of $17.6 million and advertising expenses of $13.1 million. The increase in general and administrative expenses is primarily attributable to higher compensation and benefit costs associated largely with increased headcount and higher allocated information technology expense in the Beer segment (which was offset by a decrease in allocated information technology expense in the Wine and Spirits segment). Information technology expense is allocated to each of our segments to reflect utilization of central support services and costs associated with our information technology systems. The reallocation of information 36-------------------------------------------------------------------------------- Table of Contents technology expense resulted from the Beer Business Acquisition and the associated consolidation of the Beer segment's results of operations. The increase in advertising expenses is due largely to planned investment behind our Mexican beer portfolio.

The decrease in Wine and Spirits' selling, general and administrative expenses is primarily due to a decrease in general and administrative expenses of $5.8 million. The decrease in general and administrative expenses is primarily attributable to lower compensation and benefit costs associated largely with lower annual management incentive expense and the lower allocated information technology expense discussed above.

Selling, general and administrative expenses as a percent of net sales decreased to 18.2% for First Quarter 2015 as compared to 27.6% for First Quarter 2014 primarily due to the Beer Business Acquisition and the associated lower fixed overhead and the decrease in Unusual Items.

Operating Income The following table sets forth operating income (loss) for each of our reportable segments for First Quarter 2015 and First Quarter 2014.

% Increase First Quarter 2015 First Quarter 2014 (Decrease) (in millions) Beer $ 287.5 $ 134.0 115 % Wine and Spirits 143.2 127.6 12 % Corporate Operations and Other (26.1 ) (24.0 ) (9 %) Total Reportable Segments 404.6 237.6 70 % Unusual Items (12.4 ) (33.1 ) NM Consolidation and Eliminations - (134.0 ) 100 % Consolidated Operating Income $ 392.2 $ 70.5 NM NM = Not Meaningful As a result of the factors discussed above, consolidated operating income increased to $392.2 million for First Quarter 2015 from $70.5 million for First Quarter 2014, an increase of $321.7 million.

Equity in Earnings of Equity Method Investees Equity in earnings of equity method investees decreased to $0.5 million for First Quarter 2015 from $66.6 million for First Quarter 2014, a decrease of $66.1 million, or (99%). This decrease is primarily due to lower equity in earnings of Crown Imports as a result of the Beer Business Acquisition and the consolidation of Crown Imports' results of operations from the date of acquisition.

Interest Expense, Net Interest expense, net of interest income of $0.5 million and $1.9 million for First Quarter 2015 and First Quarter 2014, respectively, increased to $86.4 million for First Quarter 2015 from $54.8 million for First Quarter 2014, an increase of $31.6 million, or 58%. The increase was driven largely by higher average borrowings, partially offset by a lower weighted average interest rate on outstanding borrowings, both due primarily to the issuance of the May 2013 Senior Notes and borrowings under our senior credit facility in connection with the financing for the Beer Business Acquisition.

Provision for Income Taxes Our effective tax rate for First Quarter 2015 and First Quarter 2014 was 32.5% and 35.7%, respectively. Our effective tax rate for First Quarter 2015 benefitted from the integration of the Beer Business Acquisition.

37-------------------------------------------------------------------------------- Table of Contents Net Income As a result of the above factors, net income increased to $206.7 million for First Quarter 2015 from $52.9 million for First Quarter 2014, an increase of $153.8 million.

Financial Liquidity and Capital Resources General Our principal use of cash in our operating activities is for purchasing and carrying inventories and carrying seasonal accounts receivable. Our primary source of liquidity has historically been cash flow from operations, except during annual grape harvests when we have relied on short-term borrowings.

However, we expect our reliance on short-term borrowings to fund our annual grape harvests to be reduced given the historical cash flow from operations from the Beer segment. Historically, we have used cash flow from operating activities to repay our short-term borrowings and fund capital expenditures. We will continue to use our short-term borrowings, including our accounts receivable securitization facilities (see additional discussion below under "Accounts Receivable Securitization Facilities"), to support our working capital requirements.

We have maintained adequate liquidity to meet working capital requirements, fund capital expenditures and repay scheduled principal and interest payments on debt. Absent deterioration of market conditions, we believe that cash flows from operating activities and financing activities, primarily short-term borrowings, will provide adequate resources to satisfy our working capital, scheduled principal and interest payments on debt, and anticipated capital expenditure requirements for both our short-term and long-term capital needs.

As of June 30, 2014, we had a borrowing capacity of $685.9 million available under our 2014 Credit Agreement. The member financial institutions participating in our 2014 Credit Agreement have complied with prior funding requests and we believe the member financial institutions will comply with ongoing funding requests. However, there can be no assurances that any particular financial institution will continue to do so in the future. In addition, we have borrowing capacity available under our accounts receivable securitization facilities.

Cash Flows Cash and cash investments increased $314.1 million and $277.8 million for First Quarter 2015 and First Quarter 2014, respectively. Components of these changes are discussed in more detail below.

Operating Activities First Quarter 2015 First Quarter 2014 (in millions) Net income $ 206.7 $ 52.9 Net non-cash 103.6 28.8 Change in operating assets and liabilities (85.4 ) (92.4 ) Other, net 7.4 14.0 Net cash provided by operating activities $ 232.3 $ 3.3 First Quarter 2015 The net noncash items consisted primarily of deferred tax provision and depreciation expense. The net cash used in the net change in our operating assets and liabilities resulted primarily from a decrease in other accrued expenses and liabilities of $44.1 million combined with increases in inventories and accounts receivable, net, of $31.8 million and $24.3 million, respectively, partially offset by an increase in accounts payable of $32.5 million.

38-------------------------------------------------------------------------------- Table of Contents The decrease in other accrued expenses and liabilities is largely due to a decrease in accrued salaries and benefits partially offset by an increase in income taxes payable. The decrease in accrued salaries and benefits is primarily due to payments under our annual management incentive plan during First Quarter 2015. The increase in income taxes payable is primarily due to higher taxable income driven by the Beer Business Acquisition, partially offset by the realization of current tax benefits on employee equity award exercise and vesting activity. The increase in inventories is primarily due to an increase in beer inventory levels to support the Beer segment's strong summer selling season. The increase in accounts receivable, net, is also due largely to seasonality within the Beer segment, partially offset by the lower sales within the Wine and Spirits segment in connection with the reduction of the exclusive distributor's inventory levels. The increase in accounts payable is primarily due to the timing of payments.

First Quarter 2014 The net noncash items consisted primarily of depreciation expense, deferred tax provision and stock-based compensation expense, partially offset by equity in earnings of equity method investees, net of distributed earnings. Other, net consists primarily of an increase in deferred revenue. The net cash used in the net change in our operating assets and liabilities resulted primarily from decreases in other accrued expenses and liabilities and accounts payable of $78.7 million and $55.1 million, respectively, partially offset by decreases in inventories and accounts receivable, net, of $30.7 million and $18.2 million, respectively. The decrease in other accrued expenses and liabilities is primarily due to decreases in bonus, interest and advertising and promotion accruals due to the timing of payments combined with a decrease in income taxes payable due to the realization of current tax benefits on employee equity award exercise and vesting activity. The decrease in accounts payable and inventories are both primarily due to seasonality as the U.S. wine business generally experiences lower levels of accounts payable and inventory before the fall grape harvest. The decrease in accounts receivable, net, is primarily due to the timing of sales.

Investing Activities First Quarter 2015 First Quarter 2014 (in millions) Purchases of property, plant and equipment $ (131.4 ) $ (22.0 ) Other (4.9 ) 2.0 Net cash used in investing activities $ (136.3 ) $ (20.0 ) Purchases of property, plant and equipment increased significantly in First Quarter 2015 primarily due to the Brewery expansion associated with the Beer Business Acquisition.

Financing Activities First Quarter 2015 First Quarter 2014 (in millions) Net proceeds from notes payable $ 178.1 $ 221.1 Excess tax benefits from stock-based payment awards 57.4 47.3 Proceeds from exercises of employee stock options 10.8 62.4 Payments of minimum tax withholdings on stock-based payment awards (28.4 ) (17.2 ) Other (4.8 ) (18.1 ) Net cash provided by financing activities $ 213.1 $ 295.5 Share Repurchase Program Our Board of Directors authorized the repurchase of up to $1.0 billion of our Class A Common Stock and Class B Convertible Common Stock in April 2012 (the "2013 Authorization"). As of May 31, 2014, we have 39-------------------------------------------------------------------------------- Table of Contents $703.3 million remaining under the 2013 Authorization for future stock repurchases. There have been no repurchases in the First Quarter 2015.

Debt Our total debt outstanding as of May 31, 2014, amounted to $7,195.2 million, an increase of $174.7 million from February 28, 2014.

Senior Credit Facility In connection with the Beer Business Acquisition, in May 2013, we, together with our wholly-owned subsidiary, CIH, and certain lenders, entered into a 2013 Restatement Agreement that amended and restated our then existing senior credit facility. The 2013 Restatement Agreement was entered into to arrange a portion of the debt to finance the Beer Business Acquisition. In May 2014, the respective parties entered into a 2014 Restatement Agreement that amended and restated the 2013 Credit Agreement. Our 2014 Credit Agreement is our 2013 Credit Agreement as amended and restated by the 2014 Restatement Agreement. The principal change to the 2013 Credit Agreement effected by the 2014 Credit Agreement was the conversion of the pre-existing $850.0 million revolving credit facility into two tranches, a $425.0 million U.S. Revolving Credit Facility and a $425.0 million European Revolving Credit Facility. We are the borrower under the U.S. Revolving Credit Facility and we and/or CIH is the borrower under the European Revolving Credit Facility.

The 2014 Credit Agreement provides for aggregate credit facilities of $3,714.8 million, consisting of the following: Amount Maturity (in millions) U.S. Term A Facility (1) $ 496.3 June 7, 2018 U.S. Term A-1 Facility (1) 245.0 June 7, 2019 U.S. Term A-2 Facility (1) 649.7 June 7, 2018 European Term A Facility (1) 481.3 June 7, 2018 European Term B Facility (2) 992.5 June 7, 2020 Revolving Credit Facility (3) 850.0 June 7, 2018 $ 3,714.8 (1) Contractual interest rate varies based on our debt ratio and is a function of LIBOR plus a margin; or the base rate plus a margin.

(2) Contractual interest rate varies based on our debt ratio and is a function of LIBOR, subject to a minimum rate of 0.75%, plus a margin; or the base rate, subject to a minimum rate of 1.75%, plus a margin.

(3) Includes two sub-facilities for letters of credit of up to $200.0 million in the aggregate.

As of May 31, 2014, and June 30, 2014, information with respect to the Revolving Credit Facility under the 2014 Credit Agreement is as follows: Outstanding Outstanding Remaining Borrowings Interest Rate Letters of Credit Availability (in millions) May 31, 2014 $ - - % $ 14.2 $ 835.8 June 30, 2014 $ 150.0 1.9 % $ 14.1 $ 685.9 Subsequent to May 31, 2014, we paid the Final EBITDA Amount associated with the Beer Business Acquisition of $558.0 million with $150.0 million in borrowings under our Revolving Credit Facility under the 40-------------------------------------------------------------------------------- Table of Contents 2014 Credit Agreement, $100.0 million in proceeds of borrowings under our accounts receivable securitization facilities and $308.0 million of cash on hand.

In April 2012, we transitioned our interest rate swap agreement to a one-month LIBOR base rate versus the then existing three-month LIBOR base rate by entering into a new interest rate swap agreement which was designated as a cash flow hedge for $500.0 million of our floating LIBOR rate debt. In addition, the then existing interest rate swap agreement was dedesignated as a hedge. We also entered into an additional interest rate swap agreement for $500.0 million that was not designated as a hedge to offset the prospective impact of the newly undesignated interest rate swap agreement. As a result of these hedges, we have 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.

The unrealized losses in AOCI related to the dedesignated interest rate swap agreement are being reclassified from AOCI ratably into earnings in the same period in which the original hedged item is recorded in income. For First Quarter 2015 and First Quarter 2014, we reclassified net losses of $2.0 million and $2.1 million, net of income tax effect, respectively, from AOCI to interest expense, net.

Accounts Receivable Securitization Facilities In October 2013, we entered into the CBI Facility, an amended and restated 364-day revolving trade accounts receivable securitization facility. Under the CBI Facility, trade accounts receivable generated by us and certain of our subsidiaries are sold by us to our 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 $190.0 million up to $290.0 million to account for the seasonality of our business, subject to further limitations based upon various pre-agreed formulas.

Also, in October 2013, Crown Imports entered into the Crown Facility, a 364-day revolving trade accounts receivable securitization facility. Under the Crown Facility, trade accounts receivable generated by Crown Imports are sold 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 $160.0 million to account for the seasonality of Crown Imports' business.

As of May 31, 2014, information with respect to our accounts receivable securitization facilities is as follows: Weighted Aggregate Average Outstanding Interest Remaining Borrowings Rate Availability (in millions) CBI Facility $ 54.0 1.1 % $ 216.0 Crown Facility $ 38.0 1.1 % $ 122.0 Accounting Guidance Not Yet Adopted We are currently assessing the financial impact to our consolidated financial statements of accounting guidance not yet adopted. For further information on accounting guidance not yet adopted, refer to Note 17 of the Financial Statements.

Information Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those set forth in, or implied by, such forward-looking statements. All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q, 41-------------------------------------------------------------------------------- Table of Contents including without limitation (I) the statements under Part I - Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding (i) our business strategy, future financial position, prospects, plans and objectives of management, (ii) information concerning expected or potential actions of third parties, (iii) the expected impact upon results of operations resulting from the consolidation of our U.S. distributor network, (iv) timing and source of funds for operating activities, and (v) the duration of the share repurchase implementation, and (II) the statements regarding the expansion of our Brewery and timeframe for completion are forward-looking statements. When used in this Quarterly Report on Form 10-Q, the words "anticipate," "intend," "expect," and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. All forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. In addition to the risks and uncertainties of ordinary business operations and conditions in the general economy and markets in which we compete, our forward-looking statements contained in this Quarterly Report on Form 10-Q are also subject to the risk and uncertainty that (i) the actual demand for our products will vary from current expectations due to, among other reasons, actual shipments to distributors and actual consumer demand, (ii) the amount and timing of any share repurchases may vary due to market conditions, our cash and debt position, the impact of the Beer Business Acquisition and other factors as determined by management from time to time, and (iii) the timeframe and actual costs associated with the expansion of our Brewery may vary from management's current expectations due to market conditions, our cash and debt position, and other factors as determined by management. For additional information about risks and uncertainties that could adversely affect our forward-looking statements, please refer to Item 1A "Risk Factors" of our 2014 Annual Report.

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