Annual report [Section 13 and 15(d), not S-K Item 405]

Fair Value of Financial Instruments

v3.25.1
Fair Value of Financial Instruments
 12 Months Ended
Feb. 28, 2025
Fair Value Disclosures [Abstract]  
FAIR VALUE OF FINANCIAL INSTRUMENTS FAIR VALUE OF FINANCIAL INSTRUMENTS
Authoritative guidance establishes a framework for measuring fair value, including a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The hierarchy includes three levels:

•Level 1 inputs are quoted prices in active markets for identical assets or liabilities;
•Level 2 inputs include data points that are observable such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) such as volatility, interest rates, and yield curves that are observable for the asset or liability, either directly or indirectly; and
•Level 3 inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.

Fair value methodology
The following methods and assumptions are used to estimate the fair value of our financial instruments:

Foreign currency and commodity derivative contracts
The fair value is estimated using market-based inputs, obtained from independent pricing services, entered into valuation models. These valuation models require various inputs, including contractual terms, market foreign exchange prices, market commodity prices, interest-rate yield curves, and currency volatilities, as applicable (Level 2 fair value measurement).

Interest rate swap and Pre-issuance hedge contracts
The fair value is estimated based on quoted market prices from respective counterparties. Quotes are corroborated by using discounted cash flow models based upon forward interest-rate yield curves, which are obtained from independent pricing services (Level 2 fair value measurement).

Short-term borrowings
Our short-term borrowings consist of our commercial paper program and the revolving credit facility under our senior credit facility. The revolving credit facility is a variable interest rate bearing note with a fixed margin, adjustable based upon our debt rating (as defined in our senior credit facility). For these short-term borrowings the carrying value approximates the fair value.
Long-term debt
The fair value of our fixed interest rate long-term debt is estimated by discounting cash flows using interest rates currently available for debt with similar terms and maturities (Level 2 fair value measurement). As of February 28, 2025, the carrying amount of long-term debt, including the current portion, was $10,691.0 million, compared with an estimated fair value of $9,990.0 million. As of February 29, 2024, the carrying amount of long-term debt, including the current portion, was $11,637.9 million, compared with an estimated fair value of $10,775.8 million.

The carrying amounts of certain of our financial instruments, including cash and cash equivalents, accounts receivable, and accounts payable, approximate fair value as of February 28, 2025, and February 29, 2024, due to the relatively short maturity of these instruments.

Recurring basis measurements
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, 2025
Assets:
Foreign currency contracts $ —  $ 97.0  $ —  $ 97.0 
Commodity derivative contracts $ —  $ 9.6  $ —  $ 9.6 
Pre-issuance hedge contracts
 $ —  $ 2.2  $ —  $ 2.2 
Liabilities:
Foreign currency contracts $ —  $ 76.4  $ —  $ 76.4 
Commodity derivative contracts $ —  $ 12.8  $ —  $ 12.8 
February 29, 2024
Assets:
Foreign currency contracts $ —  $ 311.2  $ —  $ 311.2 
Commodity derivative contracts $ —  $ 6.2  $ —  $ 6.2 
Liabilities:
Foreign currency contracts $ —  $ 5.4  $ —  $ 5.4 
Commodity derivative contracts $ —  $ 36.0  $ —  $ 36.0 
Nonrecurring basis measurements
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:
Fair Value Measurements Using
Balance Sheet Classification
 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, 2025
Goodwill
Goodwill
 $ —  $ —  $ —  $ 2,740.7 
Assets held for sale
Assets held for sale
 —  879.8  —  478.0 
Trademarks
Intangible assets
 —  —  125.8  57.0 
Equity method investments
Other assets
 —  —  —  8.7 
$ —  $ 879.8  $ 125.8  $ 3,284.4 
For the Year Ended February 29, 2024
Equity method investments
Other assets
 $ 56.1  $ 0.6  $ 0.6  $ 136.1 
For the Year Ended February 28, 2023
Equity method investments
Other assets
 $ 398.4  $ —  $ —  $ 1,060.3 
Long-lived assets
Property, plant, and equipment
 —  —  6.3  53.5 
Trademarks
Intangible assets
 —  —  —  13.0 
$ 398.4  $ —  $ 6.3  $ 1,126.8 

Goodwill
During the three months ended August 31, 2024, in connection with continued negative trends within our Wine and Spirits business primarily attributable to our U.S. wholesale market, driven by declines in both the overall wine market and in our mainstream and premium wine brands, management updated its Fiscal 2025 outlook for this reporting unit. The updated forecast indicated it was more likely than not the fair value of the Wine and Spirits reporting unit might be below its carrying value. Accordingly, we performed an interim quantitative assessment for goodwill impairment. This assessment indicated that the carrying value of the Wine and Spirits reporting unit exceeded its estimated fair value, resulting in a $2,250.0 million goodwill impairment. During the three months ended February 28, 2025, we performed our annual impairment analysis and updated our estimate of the fair value of the Wine and Spirits reporting unit to reflect the latest financial projections and an increase in the discount rate. As a result, we recognized an additional $490.7 million goodwill impairment to write-off the remaining goodwill balance for the Wine and Spirits reporting unit as of February 28, 2025. The $2,740.7 million total loss from impairment was included in goodwill and intangible assets impairment within our consolidated results for the year ended February 28, 2025. See Notes 8, 9, and 13 for further discussion.

When performing a quantitative assessment for impairment of goodwill, we measure the amount of impairment by calculating the amount by which the carrying value exceeds its estimated fair value. The estimated fair value is determined based on the discounted cash flow model. The most significant assumptions used in the discounted cash flow model were: (i) a 9% discount rate (for the interim assessment) and a 10% discount rate (for the annual assessment), (ii) a 1.5% expected long-term growth rate, and (iii) the annual cash flow projections.

Assets held for sale
For the three months ended February 28, 2025, largely in connection with the 2025 Wine Divestitures Transaction, assets held for sale with a $1,357.8 million carrying value, were written down to their current estimated fair value of $879.8 million, less costs to sell, resulting in a $478.0 million loss. This loss from impairment was included within assets held for sale impairment within our consolidated results for the year ended February
28, 2025. These assets consisted primarily of inventory, production facilities, and intangible assets which had satisfied the conditions necessary to be classified as held for sale. Our estimated fair value was largely based on the expected proceeds from the 2025 Wine Divestitures Transaction as of February 28, 2025.

Trademarks
For the year ended February 28, 2025, in connection with the assessment of the same events and circumstances that resulted in the wine and spirits goodwill carrying value being written down to zero, we completed a quantitative assessment of our wine trademarks. We re-evaluated the wine units of account in contemplation of the 2025 Wine Divestitures Transaction and determined it was appropriate to have two reporting units, (i) held for sale brands and (ii) remaining brands. As a result, the held for sale brands trademark unit with a $182.8 million carrying value was written down to its estimated fair value of $125.8 million, resulting in a $57.0 million impairment. This loss was included in goodwill and intangible assets impairment within our consolidated results of operations for the year ended February 28, 2025.

When performing the quantitative assessment, the estimated fair value of the trademarks is calculated based on an income approach using the relief from royalty method. The most significant assumptions used in the relief from royalty method to determine the estimated fair value of intangible assets with indefinite lives in connection with this impairment testing were: (i) a 3% royalty rate (held for sale brands trademark unit) and a 7% royalty rate (remaining brands trademark unit), (ii) an 11% discount rate, (iii) a 1.5% expected long-term growth rate, and (iv) the annual revenue projections.

For the year ended February 28, 2023, in connection with certain continued negative trends within our Beer segment’s Funky Buddha and Four Corners craft beer portfolios, we updated our long-term financial forecasts for these portfolios. As a result, the Funky Buddha and Four Corners craft beer trademark assets with a carrying value of $13.0 million were written-off, resulting in an impairment of $13.0 million. This loss was included in goodwill and intangible assets impairment within our consolidated results of operations for the year ended February 28, 2023. The estimated fair value of these trademark assets was determined based on our updated cash flow projections. Additionally, in June 2023, we completed the Funky Buddha Divestiture and the Four Corners Divestiture.

Equity method investments
As of February 28, 2025, August 31, 2024, November 30, 2023, and August 31, 2023, we evaluated certain equity method investments, made through our corporate venture capital function within the Corporate Operations and Other segment, and determined there were other-than-temporary impairments due to business underperformance. These losses from impairment were included in income (loss) from unconsolidated investments within our consolidated results for the respective periods. The estimated fair values for the equity method investments evaluated as of February 28, 2025, August 31, 2024, and November 30, 2023, were based largely on the cash flows expected to be generated by the investment using unobservable data points. The estimated fair value for the equity method investments evaluated as of August 31, 2023, was based largely on observable prices for similar assets. In October 2023, we exited one of these equity method investments in exchange for a note receivable.

We evaluated our then-existing Canopy Equity Method Investment as of May 31, 2023, and determined there was an other-than-temporary impairment. Our conclusion was based on several contributing factors, including: (i) the fair value being less than the carrying value and the uncertainty surrounding Canopy’s stock price recovering in the near-term, (ii) Canopy recorded significant costs in its fourth quarter of fiscal 2023 results designed to align its Canadian cannabis operations and resources in response to continued unfavorable market trends, (iii) the substantial doubt about Canopy’s ability to continue as a going concern, as disclosed by Canopy, and (iv) Canopy’s identification of material misstatements in certain of its previously reported financial results related to sales in its BioSteel Sports Nutrition Inc. reporting unit that were accounted for incorrectly, including the recording of a goodwill impairment during its restated second quarter of fiscal 2023. As a result, the Canopy Equity Method Investment with a carrying value of $266.2 million was written down to its estimated fair value of $142.7 million, resulting in an impairment of $123.5 million. This loss from impairment was included in income (loss) from unconsolidated investments within our consolidated results for the year ended February 29, 2024. The estimated fair value was determined based on the closing price of the underlying equity security as of May 31,
2023. Additionally, we no longer apply the equity method to our investment in Canopy following the April 2024 conversion of our Canopy common shares to Exchangeable Shares. For additional information, refer to Note 10.

As of August 31, 2022, we evaluated our then-existing Canopy Equity Method Investment and determined there was an other-than-temporary impairment based on several contributing factors, including: (i) the period of time for which the fair value had been less than the carrying value and the uncertainty surrounding Canopy’s stock price recovering in the near-term, (ii) Canopy recording a significant impairment of goodwill related to its cannabis operations during its first quarter of fiscal 2023, and (iii) the uncertainty of U.S. federal cannabis permissibility. As a result, the Canopy Equity Method Investment with a carrying value of $1,695.1 million was written down to its estimated fair value of $634.8 million, resulting in an impairment of $1,060.3 million. This loss from impairment was included in income (loss) from unconsolidated investments within our consolidated results for the year ended February 28, 2023. The estimated fair value was determined based on the closing price of the underlying equity security as of August 31, 2022.

Long-lived assets
For the year ended February 28, 2023, in connection with certain continued negative trends within our Beer segment’s craft beer business, management updated its long-term financial forecasts for this business and determined it was no longer part of the beer asset group. This change in financial forecasts indicated it was more likely than not the fair value of our long-lived assets associated with the craft beer business might be below its carrying value. Accordingly, we performed a quantitative assessment for impairment. As a result, certain long-lived assets with a carrying value of $59.8 million were written down to their estimated fair value of $6.3 million, resulting in a loss of $53.5 million. This loss was included in selling, general, and administrative expenses within our consolidated results of operations for the year ended February 28, 2023. These assets consisted primarily of property, plant, and equipment, including the Daleville Facility. Our estimated fair value was primarily based on the cash flows expected to be generated by the assets. Additionally, in May 2023, we sold the Daleville Facility in connection with our decision to exit the craft beer business.