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Equity Method Investments
3 Months Ended
Jul. 31, 2024
Equity Method Investments and Joint Ventures [Abstract]  
Equity Method Investments Equity Method Investments
Our equity method investments include a 21.4% ownership of the common stock of The Duckhorn Portfolio, Inc. (“Duckhorn”), which we obtained as partial consideration for our sale of the Sonoma-Cutrer wine business to Duckhorn on April 30, 2024. Our other equity method investments are immaterial.

The carrying amount of our investment in Duckhorn was $267 million as of both April 30, 2024, and July 31, 2024. The $267 million carrying amount reflects the fair value of the common stock, based on its quoted market price at the April 30, 2024 closing date of the transaction. The difference between the carrying amount of the investment and our proportionate share of the net assets of Duckhorn was not material. As of July 31, 2024, the fair value of the investment was $229 million. We concluded that, at July 31, 2024 the decline in fair value of the investment below its carrying value was temporary and, therefore, did not record any impairment.

We will recognize our share of Duckhorn’s earnings on a three-month lag, beginning August 1, 2024. Thus, our operating income for the three months ending October 31, 2024, will reflect our share of Duckhorn’s earnings reported for the three months ended July 31, 2024.

In connection with our sale of the Sonoma-Cutrer wine business to Duckhorn, we agreed to a lock-up provision under which we are restricted from selling or otherwise disposing of our equity investment in Duckhorn. The restriction period will terminate no later than October 31, 2025.

Also, effective April 30, 2024, we entered into a transition services agreement (TSA) with Duckhorn related to the sale of the Sonoma-Cutrer wine business. Our cost of sales for the three months ended July 31, 2024, included $22 million for Sonoma-Cuter products purchased from Duckhorn under the TSA. Fees earned for transition services provided to Duckhorn under the TSA were immaterial.