Annual report pursuant to Section 13 and 15(d)

Equity Method Investments (Tables)

v3.22.1
Equity Method Investments (Tables)
 12 Months Ended
Feb. 28, 2022
Equity Method Investments and Joint Ventures [Abstract]  
Equity method investments
Our equity method investments are as follows:
February 28, 2022 February 28, 2021
Carrying Value Ownership Percentage Carrying Value Ownership Percentage
(in millions)
Canopy Equity Method Investment (1) (2)
$ 2,503.5  36.1  % $ 2,578.8  38.1  %
Other equity method investments 185.2 
20%-50%
 209.6 
20%-50%
$ 2,688.7  $ 2,788.4 
(1)The fair value based on the closing price of the underlying equity security as of February 28, 2022, and February 28, 2021, was $1,014.8 million and $4,679.3 million, respectively. Refer to discussion below on other-than-temporary impairment considerations.
(2)Includes the following:
Common Shares Purchase Price
(in millions)
November 2017 Canopy Investment
 18.9  $ 130.1 
November 2018 Canopy Investment 104.5  2,740.3 
May 2020 Canopy Investment
 18.9  173.9 
142.3  $ 3,044.3 
Amounts included in our consolidated results of operations for each period are as follows:
For the Years Ended
February 28,
2022		 February 28,
2021		 February 29,
2020
(in millions)
Equity in earnings (losses) from Canopy and related activities $ (73.6) $ (679.0) $ (575.9)
The following tables present summarized financial information for Canopy prepared in accordance with U.S. GAAP. We recognize our equity in earnings (losses) for Canopy on a two-month lag. Accordingly, we recognized our share of Canopy’s earnings (losses) for the periods (i) January through December 2021 in our year ended February 28, 2022 results, (ii) January through December 2020 in our year ended February 28, 2021 results, and (iii) January through December 2019 in our year ended February 29, 2020 results. The amounts shown represent 100% of Canopy’s financial position and results of operations, for the respective periods, however, the results of operations for the year ended February 29, 2020, exclude the impact of the June 2019 Warrant Modification Loss because it was recorded by Canopy within equity. The year ended February 28, 2021, includes substantial costs designed to improve Canopy’s organizational focus, streamline operations, and align production capability with projected demand.
February 28, 2022 February 28, 2021
(in millions)
Current assets $ 1,573.3  $ 1,706.6 
Noncurrent assets $ 3,419.2  $ 3,251.5 
Current liabilities $ 189.3  $ 273.7 
Noncurrent liabilities $ 1,470.4  $ 1,308.8 
Noncontrolling interests $ 3.3  $ 179.0 
For the Years Ended
February 28, 2022 February 28, 2021 February 29,
2020
(in millions)
Net sales $ 444.3  $ 378.6  $ 290.2 
Gross profit (loss) $ (18.6) $ (14.1) $ 45.4 
Net income (loss) $ (274.3) $ (1,775.3) $ (327.0)
Net income (loss) attributable to Canopy $ 328.7  $ (1,750.0) $ (312.6)
Fair value measurement inputs The inputs used to estimate the fair value of the November 2018 Canopy Warrants are as follows (1) (2):
February 28, 2022 February 28, 2021
Tranche A Warrants (3)
Tranche B Warrants (4)
Tranche A Warrants (3)
Tranche B Warrants (4)
Exercise price (5)
C$ 50.40  C$ 76.68  C$ 50.40  C$ 76.68 
Valuation date stock price (6)
C$ 9.04  C$ 9.04  C$ 41.90  C$ 41.90 
Remaining contractual term (7)
1.7 years 4.7 years 2.7 years 5.7 years
Expected volatility (8)
75.0  % 75.0  % 70.0  % 70.0  %
Risk-free interest rate (9)
1.4  % 1.7  % 0.5  % 1.1  %
Expected dividend yield (10)
0.0  % 0.0  % 0.0  % 0.0  %
(1)The exercise price for the Tranche C Warrants is based on the VWAP Exercise Price. The Tranche C Warrants are not included in the table as there is no fair value assigned.
(2)In connection with the Acreage Transaction, we obtained other rights which include a share repurchase credit. If Canopy has not purchased the lesser of 27,378,866 Canopy common shares, or C$1,583.0 million worth of Canopy common shares for cancellation between April 18, 2019, and two-years after the full exercise of the Tranche A Warrants, we will be credited an amount that will reduce the aggregate exercise price otherwise payable upon each exercise of the Tranche B Warrants and Tranche C Warrants. The credit will be an amount equal to the difference between C$1,583.0 million and the actual price paid by Canopy in purchasing its common shares for cancellation. The likelihood of receiving the share repurchase credit if we were to fully exercise the Tranche A Warrants is remote, therefore, no fair value has been assigned.
(3)The fair value is estimated using the Black-Scholes option-pricing model (Level 2 fair value measurement).
(4)The fair value is estimated using Monte Carlo simulations (Level 2 fair value measurement).
(5)Based on the exercise price from the applicable underlying agreements.
(6)Based on the closing market price for Canopy common stock on the TSX as of the applicable date.
(7)Based on the expiration date of the warrants.
(8)Based on consideration of historical and/or implied volatility levels of the underlying equity security and limited consideration of historical peer group volatility levels.
(9)Based on the implied yield currently available on Canadian Treasury zero coupon issues with a remaining term equal to the expiration date of the applicable warrants.
(10)Based on historical dividend levels.
The inputs used to estimate the fair value of the Canopy Debt Securities are as follows:
February 28,
2022		 February 28,
2021
Conversion price (1)
C$ 48.17  C$ 48.17 
Valuation date stock price (2)
C$ 9.04  C$ 41.90 
Remaining term (3)
1.4 years 2.4 years
Expected volatility (4)
75.0  % 57.6  %
Risk-free interest rate (5)
1.4  % 0.4  %
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 consideration of historical and/or implied volatility levels of the underlying equity security, adjusted for certain risks associated with debt securities, as appropriate.
(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 Canopy Debt Securities.
(6)Based on historical dividend levels.
The inputs used to estimate the fair value of the November 2018 Canopy Warrants as of the June 27, 2019 modification date, were as follows:
Tranche A Warrants (1)
Tranche B Warrants (1)
Exercise price $ 50.40  $ 76.68 
Valuation date stock price $ 53.36  $ 53.36 
Remaining contractual term 4.3 years 7.3 years
Expected volatility 66.7  % 66.7  %
Risk-free interest rate 1.4  % 1.4  %
Expected dividend yield 0.0  % 0.0  %
(1)Refer to Note 7 for input descriptions.