|6 Months Ended|
Aug. 31, 2020
|Inventory Disclosure [Abstract]|
Inventories are stated at the lower of cost (primarily computed in accordance with the first-in, first-out method) or net realizable value. Elements of cost include materials, labor, and overhead and consist of the following:
The inventories balance at August 31, 2020, and February 29, 2020, exclude amounts reclassified to assets held for sale (see Note 3).
Related party transactions and arrangements
We have an equally-owned glass production plant joint venture with Owens-Illinois. We have entered into various contractual arrangements with affiliates of Owens-Illinois primarily for the purchase of glass bottles used largely in our imported beer portfolio. Amounts purchased under these arrangements were $20.2 million and $126.4 million for the six months ended August 31, 2020, and August 31, 2019, respectively, and $11.1 million and $37.9 million for the three months ended August 31, 2020, and August 31, 2019, respectively. The decrease in amounts purchased for the six months and three months ended August 31, 2020, was largely driven by reduced production activity at our Mexican breweries in response to COVID-19 containment measures.
U.S. West Coast wildfires
In August 2020, significant wildfires broke out in California, Oregon, and Washington states which are affecting the U.S. grape harvest. Currently, none of our facilities have been damaged, however, we may take protective actions including temporarily closing certain facilities. At this time, we expect no material impact to our ability to meet customer demand. We are monitoring the impact of the smoke damage from the wildfires as we progress through our harvest season. Most of our annual grape requirements are satisfied by supply contracts from independent growers which, in many cases, allow for us to reject grapes that do not meet required quality specifications, including from smoke damage. We continue to assess when to use our rights under law and our supply contracts to reject grapes that are damaged from wildfires. We also have insurance coverage that partially covers losses for grapes in our own vineyards. However, we expect that decreased production levels at certain facilities will result in unfavorable fixed cost absorption, which will be recognized in cost of product sold within our consolidated results of operations rather than capitalized in inventories.
The entire disclosure for inventory. Includes, but is not limited to, the basis of stating inventory, the method of determining inventory cost, the classes of inventory, and the nature of the cost elements included in inventory.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef