Annual report pursuant to Section 13 and 15(d)

Commitments and Contingencies

v3.19.1
Commitments and Contingencies
 12 Months Ended
Feb. 28, 2019
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES:

Operating leases –
The minimum lease payments for our operating leases are recognized on a straight-line basis over the minimum lease term. Step rent provisions, escalation clauses, capital improvement funding and other lease concessions, when present in our leases, are taken into account in computing the minimum lease payments.

Future payments under noncancelable operating leases having initial or remaining terms of one year or more are as follows for each of the five succeeding fiscal years and thereafter:
(in millions)
 
2020
$
59.0

2021
58.2

2022
51.1

2023
47.9

2024
41.2

Thereafter
302.1

 
$
559.5



Rental expense was $63.5 million, $59.1 million and $59.2 million for the years ended February 28, 2019, February 28, 2018, and February 28, 2017, respectively.

Purchase commitments and contingencies –
We have entered into various long-term contracts in the normal course of business for the purchase of (i)  certain inventory components, (ii)  property, plant and equipment and related contractor and manufacturing services, (iii)  processing and warehousing services, (iv)  transportation services and (v)  certain energy requirements. As of February 28, 2019, the estimated aggregate minimum purchase obligations under these contracts are as follows:
 
Type
 
Length of Commitment
 
Amount
(in millions)
 
 
 
 
 
Raw materials and supplies (1)
Packaging, grapes, hops, malts and other raw materials
 
through May 2034
 
$
5,955.1

In-process inventories
Bulk wine and spirits
 
through February 2027
 
100.4

Capital expenditures (2)
Property, plant and equipment, and contractor and manufacturing services
 
through February 2022
 
649.8

Other
Processing and warehousing services, transportation services, energy contracts
 
through December 2030
 
488.9

 
 
 
 
 
$
7,194.2

(1) 
Certain grape purchasing arrangements include the purchase of grape production yielded from specified blocks of a vineyard. The actual tonnage and price of grapes that we purchase will vary each year depending on certain factors, including weather, time of harvest, overall market conditions and the agricultural practices and location of the vineyard. Amounts included herein for the estimated aggregate minimum grape purchase obligations consist of estimates for the purchase of the grapes and the implicit leases of the land. Upon adoption of the new lease guidance on March 1, 2019, certain grape purchasing arrangements classified as leases will result in the recognition of right-of-use assets and lease liabilities on our balance sheet. However, certain other grape purchasing arrangements classified as leases will not result in the recognition of right-of-use assets and lease liabilities on our balance sheet due to their variable nature.
(2) 
Consists of purchase commitments entered into primarily in connection with the construction of a new, state-of-the-art brewery located in Mexicali, Baja California, Mexico (the “Mexicali Brewery”), and the expansion project for the Obregon Brewery.
Additionally, we have entered into various contractual arrangements with affiliates of Owens-Illinois primarily for the purchase of glass bottles used largely in our imported and craft beer portfolios. Amounts purchased under these arrangements for the years ended February 28, 2019, February 28, 2018, and February 28, 2017, were $238.8 million, $316.6 million and $292.3 million, respectively.

Indemnification liabilities –
In connection with prior divestitures, we have indemnified respective parties against certain liabilities that may arise subsequent to the divestiture. As of February 28, 2019, and February 28, 2018, these liabilities consist primarily of indemnifications related to certain income tax matters. During the year ended February 28, 2019, in connection with the sale of the Accolade Wine Investment, we were released from certain guarantees and we recognized a gain of $3.7 million as part of the net gain on the sale of this business. This net gain is included in income from unconsolidated investments. As of February 28, 2019, and February 28, 2018, the carrying amount of our indemnification liabilities was $9.2 million and $12.8 million, respectively, and is included in deferred income taxes and other liabilities. We do not expect to be required to make material payments under the indemnifications and we believe that the likelihood is remote that the indemnifications could have a material adverse effect on our business, liquidity, financial condition and/or results of operations.

Legal matters –
In the course of our business, we are subject to litigation from time to time. Although the amount of any liability with respect to such litigation cannot be determined, in the opinion of management, such liability will not have a material adverse effect on our financial condition, results of operations or cash flows.

Other –
In connection with the write-down of certain bulk wine inventory as a result of smoke damage sustained during the Fall 2017 California wildfires, we have recognized total losses of $20.6 million, with $1.5 million recognized for the first quarter of fiscal 2019 and $19.1 million recognized for the fourth quarter of 2018. While we are pursuing reimbursement from our insurance carriers, there can be no assurance there will be any potential recoveries.