Annual report pursuant to Section 13 and 15(d)

Leases

v3.20.1
Leases
12 Months Ended
Feb. 29, 2020
Leases [Abstract]  
LEASES, OPERATING LEASES

General
We primarily lease certain vineyards, office and production facilities, warehouses, production equipment, and vehicles. We assess service arrangements to determine if an asset is explicitly or implicitly specified in the agreement and if we have the right to control the use of the identified asset. We have concluded that certain grape purchasing arrangements associated with the purchase of grape production yielded from a specified block of a vineyard and certain third-party logistics arrangements contain a lease.

The right-of-use asset is initially measured at cost, which is primarily comprised of the initial amount of the lease liability, plus initial direct costs and lease payments at or before the lease commencement date, less any lease incentives received, and is amortized on a straight-line basis over the remaining lease term. All right-of-use assets are reviewed periodically for impairment. The lease liability is initially measured at the present value of lease payments, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, our secured incremental borrowing rate. The incremental borrowing rates are determined using a portfolio approach based on publicly available information in connection with our unsecured borrowing rates adjusted for items including collateral, currency, and the timing in which lease payments are made. We elected to recognize expenses for leases with a term of 12 months or less on a straight-line basis over the lease term and not to recognize these short-term leases on the balance sheet.

Our leases have varying terms with remaining lease terms of up to approximately 30 years. Certain of our lease arrangements provide us with the option to extend or to terminate the lease early.

The right-of-use asset and lease liability are calculated including options to extend or to terminate the lease when we determine that it is reasonably certain that we will exercise those options. In making that determination, we consider various existing economic and market factors, business strategies as well as the nature, length, and terms of the agreement. Based on our evaluation using these factors, we concluded that the exercise of renewal options or early termination options would not be reasonably certain in determining the lease term at commencement for leases we currently have in place. Assumptions made at the commencement date are re-evaluated upon occurrence of certain events such as a lease modification.

Certain of our contractual arrangements may contain both lease and non-lease components. Non-lease components are distinct elements of a contract that are not related to securing the use of the leased asset, such as raw materials, common area maintenance, and other management costs. We elected to measure the lease liability by combining the lease and non-lease components as a single lease component for all asset classes.

Certain of our leases include variable lease payments, including payments that depend on an index or rate, as well as variable payments for items such as raw materials, labor, property taxes, insurance, maintenance, and other operating expenses associated with leased assets. Certain grape purchasing arrangements include variable payments based on actual tonnage and price of grapes that will vary depending on certain factors, including weather, time of harvest, overall market conditions, and the agricultural practices and location of the vineyard. In addition, certain third-party logistics arrangements include variable payments that vary depending on throughput. Such variable lease payments are excluded from the calculation of the right-of-use asset and are recognized in the period in which the obligation is incurred.

Balance sheet location
A summary of lease right-of-use assets and liabilities are as follows:
 
Balance Sheet Classification
February 29,
2020
(in millions)
 
 
Assets
 
 
Operating lease
Other assets
$
481.4

Finance lease
Property, plant, and equipment
26.6

Total right-of-use assets
 
$
508.0

 
 
 
Liabilities
 
 
Current:
 
 
Operating lease
Other accrued expenses and liabilities
$
76.6

Finance lease
Current maturities of long-term debt
11.7

Non-current:
 
 
Operating lease
Deferred income taxes and other liabilities
483.6

Finance lease
Long-term debt, less current maturities
13.6

Total lease liabilities
 
$
585.5



Lease cost
The components of total lease cost are as follows:


For the Year Ended February 29, 2020
(in millions)
 
Operating lease cost
$
98.9

Finance lease cost:
 
Amortization of right-of-use assets
12.2

Interest on lease liabilities
0.7

Short-term lease cost
8.6

Variable lease cost
403.3

Total lease cost
$
523.7



Lease maturities (1) 
As of February 29, 2020, minimum payments due for lease liabilities for each of the five succeeding fiscal years and thereafter are as follows:
 
Operating Leases
 
Finance Leases
(in millions)
 
 
 
2021
$
94.1

 
$
12.2

2022
81.8

 
7.9

2023
68.9

 
4.4

2024
61.3

 
1.7

2025
51.0

 

Thereafter
329.7

 

Total lease payments
686.8

 
26.2

Less: Interest
(126.6
)
 
(0.9
)
Total lease liabilities
$
560.2

 
$
25.3



As of February 28, 2019, future payments were expected to be as follows:
 
Operating Leases
(in millions)
 
2020
$
59.0

2021
58.2

2022
51.1

2023
47.9

2024
41.2

Thereafter
302.1

Total lease payments
$
559.5

(1) 
For leases with terms in excess of 12 months at inception.
Supplemental information
For the Year Ended February 29, 2020
(in millions)
 
Cash paid for amounts included in the measurement of lease liabilities:
 
Operating cash flows from operating leases
$
100.7

Operating cash flows from finance leases
$
0.7

Financing cash flows from finance leases
$
13.8

 
 
Right-of-use assets obtained in exchange for new lease liabilities:
 
Operating leases
$
34.3

Finance leases
$
10.7

 
 
 
February 29, 2020
(in millions)
 
Weighted-average remaining lease term:
 
Operating leases
11.7 years

Finance leases
3.2 years

 
 
Weighted-average discount rate:
 
Operating leases
3.5
%
Finance leases
2.6
%

LEASES, FINANCE LEASES

General
We primarily lease certain vineyards, office and production facilities, warehouses, production equipment, and vehicles. We assess service arrangements to determine if an asset is explicitly or implicitly specified in the agreement and if we have the right to control the use of the identified asset. We have concluded that certain grape purchasing arrangements associated with the purchase of grape production yielded from a specified block of a vineyard and certain third-party logistics arrangements contain a lease.

The right-of-use asset is initially measured at cost, which is primarily comprised of the initial amount of the lease liability, plus initial direct costs and lease payments at or before the lease commencement date, less any lease incentives received, and is amortized on a straight-line basis over the remaining lease term. All right-of-use assets are reviewed periodically for impairment. The lease liability is initially measured at the present value of lease payments, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, our secured incremental borrowing rate. The incremental borrowing rates are determined using a portfolio approach based on publicly available information in connection with our unsecured borrowing rates adjusted for items including collateral, currency, and the timing in which lease payments are made. We elected to recognize expenses for leases with a term of 12 months or less on a straight-line basis over the lease term and not to recognize these short-term leases on the balance sheet.

Our leases have varying terms with remaining lease terms of up to approximately 30 years. Certain of our lease arrangements provide us with the option to extend or to terminate the lease early.

The right-of-use asset and lease liability are calculated including options to extend or to terminate the lease when we determine that it is reasonably certain that we will exercise those options. In making that determination, we consider various existing economic and market factors, business strategies as well as the nature, length, and terms of the agreement. Based on our evaluation using these factors, we concluded that the exercise of renewal options or early termination options would not be reasonably certain in determining the lease term at commencement for leases we currently have in place. Assumptions made at the commencement date are re-evaluated upon occurrence of certain events such as a lease modification.

Certain of our contractual arrangements may contain both lease and non-lease components. Non-lease components are distinct elements of a contract that are not related to securing the use of the leased asset, such as raw materials, common area maintenance, and other management costs. We elected to measure the lease liability by combining the lease and non-lease components as a single lease component for all asset classes.

Certain of our leases include variable lease payments, including payments that depend on an index or rate, as well as variable payments for items such as raw materials, labor, property taxes, insurance, maintenance, and other operating expenses associated with leased assets. Certain grape purchasing arrangements include variable payments based on actual tonnage and price of grapes that will vary depending on certain factors, including weather, time of harvest, overall market conditions, and the agricultural practices and location of the vineyard. In addition, certain third-party logistics arrangements include variable payments that vary depending on throughput. Such variable lease payments are excluded from the calculation of the right-of-use asset and are recognized in the period in which the obligation is incurred.

Balance sheet location
A summary of lease right-of-use assets and liabilities are as follows:
 
Balance Sheet Classification
February 29,
2020
(in millions)
 
 
Assets
 
 
Operating lease
Other assets
$
481.4

Finance lease
Property, plant, and equipment
26.6

Total right-of-use assets
 
$
508.0

 
 
 
Liabilities
 
 
Current:
 
 
Operating lease
Other accrued expenses and liabilities
$
76.6

Finance lease
Current maturities of long-term debt
11.7

Non-current:
 
 
Operating lease
Deferred income taxes and other liabilities
483.6

Finance lease
Long-term debt, less current maturities
13.6

Total lease liabilities
 
$
585.5



Lease cost
The components of total lease cost are as follows:


For the Year Ended February 29, 2020
(in millions)
 
Operating lease cost
$
98.9

Finance lease cost:
 
Amortization of right-of-use assets
12.2

Interest on lease liabilities
0.7

Short-term lease cost
8.6

Variable lease cost
403.3

Total lease cost
$
523.7



Lease maturities (1) 
As of February 29, 2020, minimum payments due for lease liabilities for each of the five succeeding fiscal years and thereafter are as follows:
 
Operating Leases
 
Finance Leases
(in millions)
 
 
 
2021
$
94.1

 
$
12.2

2022
81.8

 
7.9

2023
68.9

 
4.4

2024
61.3

 
1.7

2025
51.0

 

Thereafter
329.7

 

Total lease payments
686.8

 
26.2

Less: Interest
(126.6
)
 
(0.9
)
Total lease liabilities
$
560.2

 
$
25.3



As of February 28, 2019, future payments were expected to be as follows:
 
Operating Leases
(in millions)
 
2020
$
59.0

2021
58.2

2022
51.1

2023
47.9

2024
41.2

Thereafter
302.1

Total lease payments
$
559.5

(1) 
For leases with terms in excess of 12 months at inception.
Supplemental information
For the Year Ended February 29, 2020
(in millions)
 
Cash paid for amounts included in the measurement of lease liabilities:
 
Operating cash flows from operating leases
$
100.7

Operating cash flows from finance leases
$
0.7

Financing cash flows from finance leases
$
13.8

 
 
Right-of-use assets obtained in exchange for new lease liabilities:
 
Operating leases
$
34.3

Finance leases
$
10.7

 
 
 
February 29, 2020
(in millions)
 
Weighted-average remaining lease term:
 
Operating leases
11.7 years

Finance leases
3.2 years

 
 
Weighted-average discount rate:
 
Operating leases
3.5
%
Finance leases
2.6
%