Constellation Brands, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Fair Value of Financial Instruments (Tables)

Fair Value of Financial Instruments (Tables)

12 Months Ended

Feb. 28, 2019

As of February 28, 2019, the inputs used to estimate the fair value of the Canopy Debt Securities are as follows:



Conversion price⁽¹⁾	C$	48.17	Expected volatility ⁽²⁾	45.9	%
Valuation date stock price⁽³⁾	C$	62.38	Risk-free interest rate ⁽⁴⁾	1.8	%
Remaining term ⁽⁵⁾	4.4 years		Expected dividend yield ⁽⁶⁾	0.0	%


⁽¹⁾	Based on the rate which the Canopy Debt Securities may be converted into equity shares, or the equivalent amount of cash, at the option of the issuer.


⁽²⁾	Based on historical volatility levels of the underlying equity security reduced to account for certain risks not incorporated into the option-pricing model.


⁽³⁾	Based on the closing market price for Canopy common stock on the TSX as of the applicable date.


⁽⁴⁾	Based on the implied yield currently available on Canadian Treasury zero coupon issues with a term equal to the remaining contractual term of the debt securities.


⁽⁵⁾	Based on the contractual maturity date of the notes.


⁽⁶⁾	Based on historical dividend levels.

The inputs used to estimate the fair value of the warrants are as follows:



	February 28, 2019						February 28, 2018
	November 2018 Canopy Warrants			November 2017 Canopy Warrants			November 2017 Canopy Warrants
Issue date exercise price⁽¹⁾	C$	50.40		C$	12.98		C$	12.98
Valuation date stock price⁽¹⁾	C$	62.38		C$	62.38		C$	27.35
Expected life⁽²⁾	2.7 years			1.2 years			2.2 years
Expected volatility ⁽³⁾	79.3		%	87.8		%	70.9		%
Risk-free interest rate ⁽⁴⁾	1.8		%	1.8		%	1.8		%
Expected dividend yield ⁽⁵⁾	0.0		%	0.0		%	0.0		%


⁽¹⁾	Based on the closing market price for Canopy common stock on the Toronto Stock Exchange (“TSX”) as of the applicable date.


⁽²⁾	Based on the expiration date of the warrants.


⁽³⁾	Based on historical volatility levels of the underlying equity security.


⁽⁴⁾	Based on the implied yield currently available on Canadian Treasury zero coupon issues with a remaining term equal to the expected life.


⁽⁵⁾	Based on historical dividend levels.

The inputs used to estimate the fair value of the November 2018 Canopy Warrants as of November 1, 2018, are as follows:



Issue date exercise price	C$	50.40	Expected volatility	75.9	%
Valuation date stock price	C$	48.43	Risk-free interest rate	2.4	%
Expected life	3.0 years		Expected dividend yield	0.0	%

Financial assets and liabilities measured at fair value on a recurring basis

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)
February 28, 2019
Assets:
Foreign currency contracts	$	—	$	38.2	$	—	$	38.2
Commodity derivative contracts	$	—	$	8.7	$	—	$	8.7
Equity securities ^{(1) (2)}	$	—	$	3,023.2	$	—	$	3,023.2
Canopy Debt Securities ⁽²⁾	$	—	$	211.5	$	—	$	211.5
Liabilities:
Foreign currency contracts	$	—	$	15.7	$	—	$	15.7
Commodity derivative contracts	$	—	$	11.6	$	—	$	11.6

February 28, 2018
Assets:
Foreign currency contracts	$	—	$	40.3	$	—	$	40.3
Commodity derivative contracts	$	—	$	9.1	$	—	$	9.1
Equity securities ^{(1) (2)}	$	402.4	$	253.2	$	—	$	655.6
Debt securities, AFS	$	—	$	—	$	16.6	$	16.6
Liabilities:
Foreign currency contracts	$	—	$	19.9	$	—	$	19.9
Commodity derivative contracts	$	—	$	5.6	$	—	$	5.6



⁽¹⁾	Equity securities consist of:	February 28, 2019		February 28, 2018
	(in millions)
	November 2017 Canopy Investment ⁽ⁱ⁾	$	—	$	402.4
	November 2017 Canopy Warrants	718.7		253.2
	November 2018 Canopy Warrants	2,304.5		—
		$	3,023.2	$	655.6



⁽²⁾	Unrealized net gain from the changes in fair value of our securities measured at fair value recognized in income from unconsolidated investments, are as follows:
			February 28, 2019		February 28, 2018
	(in millions)
	November 2017 Canopy Investment ⁽ⁱ⁾		$	292.5	$	272.3
	November 2017 Canopy Warrants		465.5		192.0
	November 2018 Canopy Warrants		1,157.7		—
	Canopy Debt Securities		55.5		—
			$	1,971.2	$	464.3
	⁽ⁱ⁾	Accounted for at fair value from the date of investment in November 2017 through October 31, 2018. Accounted for under the equity method from November 1, 2018.

Assets and liabilities measured at fair value on a nonrecurring basis

The following table presents our assets and liabilities measured at estimated fair value on a nonrecurring basis for which an impairment assessment was performed for the periods presented. Impairment losses are included in selling, general and administrative for the periods presented:



	Fair Value Measurements Using
	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Losses
(in millions)
For the Year Ended February 28, 2019
Trademarks	$	—	$	—	$	28.0	$	108.0

For the Year Ended February 28, 2018
Trademarks	$	—	$	—	$	136.0	$	86.8

For the Year Ended February 28, 2017
Trademarks	$	—	$	—	$	—	$	46.0