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

Annual report pursuant to Section 13 and 15(d)

Equity Method Investments (Tables)

Equity Method Investments (Tables)

12 Months Ended

Feb. 28, 2019

Equity Method Investments and Joint Ventures [Abstract]

The following table presents summarized financial information for Canopy presented in accordance with U.S. GAAP. The amounts shown represent 100% of Canopy’s financial position as of December 31, 2018, and results of operations from the date of our investment on November 1, 2018, through December 31, 2018. We recognize our equity in earnings (losses) for Canopy on a two-month lag. Accordingly, we recognized our share of Canopy’s losses from November and December 2018, which was included in Canopy’s third quarter fiscal 2019 results, in our fourth quarter fiscal 2019 results.



	February 28, 2019			For the Year Ended February 28, 2019
(in millions)
Current assets	$	3,800.7	Net sales	$	48.6
Noncurrent assets	$	2,466.0	Gross profit	$	11.2
Current liabilities	$	216.8	Net loss	$	(39.6	)
Noncurrent liabilities	$	668.2	Net loss attributable to Canopy	$	(27.8	)
Noncontrolling interests	$	143.3

Our equity method investments are as follows:



	February 28, 2019				February 28, 2018
	Carrying Value		Ownership Percentage		Carrying Value		Ownership Percentage
(in millions)
Canopy Equity Method Investment	$	3,332.1	36.0	%	$	—	—	%
Other equity method investments	133.5		20%-50%		121.5		20%-50%
	$	3,465.6			$	121.5

Fair value measurement inputs

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	%