Constellation Brands, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Fair Value of Financial Instruments (Tables)

Fair Value of Financial Instruments (Tables)

3 Months Ended

May 31, 2020

The inputs used to estimate the fair value of the Canopy warrants (all as defined in Note 8) are as follows:


	May 31, 2020 ^{(1) (2)}									February 29, 2020 ⁽²⁾
	New Tranche A Warrants⁽³⁾			New Tranche B Warrants ⁽⁴⁾			New Tranche A Warrants ⁽³⁾			New Tranche B Warrants ⁽⁴⁾			November 2017 Canopy Warrants ⁽³⁾
Exercise price ⁽⁵⁾	C$	50.40		C$	76.68		C$	50.40		C$	76.68		C$	12.98
Valuation date stock price ⁽⁶⁾	C$	24.21		C$	24.21		C$	25.17		C$	25.17		C$	25.17
Remaining contractual term⁽⁷⁾	3.4 years			6.4 years			3.7 years			6.7 years			0.2 years
Expected volatility ⁽⁸⁾	70.0		%	70.0		%	70.0		%	70.0		%	105.3		%
Risk-free interest rate ⁽⁹⁾	0.3		%	0.4		%	1.1		%	1.1		%	1.5		%
Expected dividend yield ⁽¹⁰⁾	0.0		%	0.0		%	0.0		%	0.0		%	0.0		%

⁽¹⁾The November 2017 Canopy Warrants were exercised on May 1, 2020 and as such are not included in the table as of May 31, 2020.

⁽²⁾The exercise price for the New Tranche C Warrants is based on the volume-weighted average of the closing market price of Canopy’s common shares on the Toronto Stock Exchange (“TSX”) for the five trading days immediately preceding the exercise date (“VWAP Exercise Price”) and are not included in the table as there is no fair value assigned.

⁽³⁾The fair value is estimated using the Black-Scholes option-pricing model (Level 2 fair value measurement).

⁽⁴⁾The fair value is estimated using Monte Carlo simulations (Level 2 fair value measurement).

⁽⁵⁾Based on the exercise price from the applicable underlying agreements.

⁽⁶⁾Based on the closing market price for Canopy common stock on the TSX as of the applicable date.

⁽⁷⁾Based on the expiration date of the warrants.

⁽⁸⁾Based on consideration of historical and/or implied volatility levels of the underlying equity security and limited consideration of historical peer group volatility levels.

⁽⁹⁾Based on the implied yield currently available on Canadian Treasury zero coupon issues with a remaining term equal to the expiration date of the applicable warrants.

⁽¹⁰⁾Based on historical dividend levels.

The inputs used to estimate the fair value of the Canopy Debt Securities are as follows:


	May 31, 2020			February 29, 2020
Conversion price ⁽¹⁾	C$	48.17		C$	48.17
Valuation date stock price ⁽²⁾	C$	24.21		C$	25.17
Remaining term⁽³⁾	3.1 years			3.4 years
Expected volatility ⁽⁴⁾	60.3		%	58.2		%
Risk-free interest rate ⁽⁵⁾	0.3		%	1.1		%
Expected dividend yield ⁽⁶⁾	0.0		%	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 the closing market price for Canopy common stock on the TSX as of the applicable date.

⁽³⁾Based on the contractual maturity date of the notes.

⁽⁴⁾Based on historical volatility levels of the underlying equity security reduced to account for certain risks not incorporated into the option-pricing model.

⁽⁵⁾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.

⁽⁶⁾Based on historical dividend levels.

Financial assets and liabilities measured at estimated 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)
May 31, 2020
Assets:
Foreign currency contracts	$	—	$	11.2	$	—	$	11.2
Commodity derivative contracts	$	—	$	1.6	$	—	$	1.6

Equity securities ⁽¹⁾	$	—	$	693.4	$	—	$	693.4
Canopy Debt Securities ⁽¹⁾	$	—	$	116.1	$	—	$	116.1

Liabilities:
Foreign currency contracts	$	—	$	113.2	$	—	$	113.2
Commodity derivative contracts	$	—	$	57.8	$	—	$	57.8
Interest rate swap contracts	$	—	$	0.6	$	—	$	0.6


February 29, 2020
Assets:
Foreign currency contracts	$	—	$	96.3	$	—	$	96.3
Commodity derivative contracts	$	—	$	0.6	$	—	$	0.6
Equity securities ⁽¹⁾	$	—	$	991.5	$	—	$	991.5
Canopy Debt Securities ⁽¹⁾	$	—	$	125.6	$	—	$	125.6
Liabilities:
Foreign currency contracts	$	—	$	34.4	$	—	$	34.4
Commodity derivative contracts	$	—	$	40.9	$	—	$	40.9
Interest rate swap contracts	$	—	$	0.8	$	—	$	0.8
Treasury lock contracts	$	—	$	7.6	$	—	$	7.6


⁽¹⁾	Unrealized net gain (loss) from the changes in fair value of our securities measured at fair value recognized in income (loss) from unconsolidated investments, are as follows:
		For the Three Months Ended May 31,
		2020		2019
	(in millions)
	November 2017 Canopy Warrants⁽ⁱ⁾	$	(61.8)	$	(134.1)
	November 2018 Canopy Warrants ⁽ⁱⁱ⁾	(123.0)		(660.8)
	Canopy Debt Securities	(12.5)		(32.6)
		$	(197.3)	$	(827.5)

⁽ⁱ⁾	The November 2017 Canopy Warrants were exercised in May 2020. For additional information on the November 2017 Canopy Warrants and the related exercise, refer to Note 8.
⁽ⁱⁱ⁾	The terms of the November 2018 Canopy Warrants were modified in June 2019. For additional information on the November 2018 Canopy Warrants and the related modification, refer to Note 8.

Assets and liabilities measured at estimated 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 period presented:


	Fair Value Measurements Using								Total Losses
	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		For the Three Months Ended May 31, 2020
(in millions)
Long-lived assets held for sale	$	—	$	—	$	784.0	$	25.0