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FAIR VALUE MEASUREMENTS | 12 Months Ended
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Sep. 30, 2024
Fair Value Disclosures [Abstract] |
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or the most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: Level 1 — Quoted prices in active markets for identical assets or liabilities. Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. The following describes the valuation methodologies used for financial assets and liabilities measured or disclosed at fair value on a recurring basis, as well as the general classification within the valuation hierarchy. Cash Equivalents Cash equivalents consist of highly liquid financial instruments with original maturities of three months or less. The carrying value of these cash equivalents approximates fair value due to their short-term maturities. Other Investment securities in non-qualified retirement plan assets are valued using observable market prices in active markets. The fair values of convertible debt investments are determined using scenario-based internally developed valuation models that consider a probability-weighted assessment of possible future cash flows related to the debt component and the conversion component of the instruments, discounted to present value using an appropriate discount rate. The probability of amendments to federal laws in the United States to allow for the general cultivation, distribution, and possession of cannabis, and the impact of such amendments on the value of the underlying investments are important assumptions in the fair value estimates. The valuation models and related assumptions require significant judgment. These and other assumptions are impacted by economic conditions and expectations of management and may change in the future based on period specific facts and circumstances. Debt Instruments Debt instruments are recorded at cost. The interest rate on borrowings under the Sixth A&R Credit Agreement fluctuates in accordance with the terms of the Sixth A&R Credit Agreement and thus the carrying value is a reasonable estimate of fair value. The fair values of the 4.000% Senior Notes, 4.375% Senior Notes, 4.500% Senior Notes and 5.250% Senior Notes are determined based on quoted market prices. The following table summarizes the fair value of the Company’s assets and liabilities for which disclosure of fair value is required:
|  |  |  |  | 2024 |  | 2023
|  |  | Fair Value Hierarchy Level |  | Carrying Amount |  | Estimated Fair Value |  | Carrying Amount |  | Estimated Fair Value
Assets |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  |  | Level 1 |  | $ | 51.2 |  |  | $ | 51.2 |  |  | $ | 1.2 |  |  | $ | 1.2 |
Other |  |  |  |  |  |  |  |  |  |  |
Investment securities in non-qualified retirement plan assets |  |  | Level 1 |  | 32.4 |  |  | 32.4 |  |  | 36.3 |  |  | 36.3 |
Convertible debt investments |  |  | Level 3 |  | 45.8 |  |  | 45.8 |  |  | 85.8 |  |  | 85.8 |
Liabilities |  |  |  |  |  |  |  |  |  |  |
Debt instruments |  |  |  |  |  |  |  |  |  |  |
Credit facilities – revolving loans |  |  | Level 2 |  | — |  |  | — |  |  | 88.3 |  |  | 88.3 |
Credit facilities – term loans |  |  | Level 2 |  | 625.0 |  |  | 625.0 |  |  | 925.0 |  |  | 925.0 |
Senior Notes due 2031 – 4.000% |  |  | Level 2 |  | 500.0 |  |  | 456.3 |  |  | 500.0 |  |  | 380.0 |
Senior Notes due 2032 – 4.375% |  |  | Level 2 |  | 400.0 |  |  | 370.0 |  |  | 400.0 |  |  | 304.0 |
Senior Notes due 2029 – 4.500% |  |  | Level 2 |  | 450.0 |  |  | 432.0 |  |  | 450.0 |  |  | 366.8 |
Senior Notes due 2026 – 5.250% |  |  | Level 2 |  | 250.0 |  |  | 248.8 |  |  | 250.0 |  |  | 233.1 |
Other debt |  |  | Level 2 |  | — |  |  | — |  |  | 0.4 |  |  | 0.4 |
Changes in the balance of Level 3 convertible debt investments carried at fair value are presented below. There were no transfers into or out of Level 3.
| Year Ended September 30,
| 2024 |  | 2023
Fair value at beginning of year | $ | 85.8 |  |  | $ | 117.0 |
Total realized / unrealized gains (losses) included in net earnings | (64.2) |  |  | (97.6) |
Total realized / unrealized gains / losses included in / reclassified from OCI | 24.2 |  |  | 66.4 |
Fair value at end of year | $ | 45.8 |  |  | $ | 85.8 |
Convertible debt investments include, among other minority non-equity investments, convertible notes issued to The Hawthorne Collective, Inc. (“THC”), a wholly-owned subsidiary of the Company, by RIV Capital (CSE: RIV) (OTC: CNPOF). Assuming full conversion of the RIV Capital convertible notes, THC would be entitled to receive approximately 123.0 million common shares of RIV Capital, representing approximately 47% of RIV Capital’s outstanding shares as of September 30, 2024. The RIV Capital convertible notes are convertible into common shares of RIV Capital either (i) at the election of THC or (ii) at the election of RIV Capital after the date on which federal laws in the United States are amended to allow for the general cultivation, distribution, and possession of cannabis. In connection with issuance of the RIV Capital convertible notes, the Company entered into an investor rights agreement with RIV Capital providing for, among other things, customary registration rights, participation rights, as well as certain standstill and transfer restrictions. In addition, THC is entitled to designate three nominees to the RIV Capital board of directors for so long as the board is comprised of seven directors, and will be entitled to designate four nominees to the RIV Capital board of directors if the size of the board is increased to nine directors. The Company or THC will not have control of or an active day-to-day role in any entity in which THC has a convertible debt investment. The convertible notes include restrictions that the funds received from the Company will be used for general corporate and other lawful purposes, which could include acquisitions, and that the funds will not be used in connection with or for any cannabis or cannabis-related operations in the U.S. unless and until such operations comply with all applicable U.S. federal laws. During fiscal 2023, the Company recognized a non-cash, pre-tax other-than-temporary impairment charge related to its convertible debt investments of $101.3 in the “Impairment, restructuring and other” line in the Consolidated Statements of Operations. This charge was driven by revisions to the Company’s internal forecasts of cash flows expected to be collected from its convertible debt investments resulting from the accumulation of adverse conditions impacting the cannabis market, including both federal and state level regulatory considerations and persistent industry oversupply conditions. On May 30, 2024, RIV Capital and Cansortium Inc. (“Cansortium”) (CSE: TIUM.U) (OTCQB: CNTMF) announced they have entered into a definitive agreement pursuant to which Cansortium will acquire all of the issued and outstanding common shares of RIV Capital in exchange for Cansortium shares (the “Transaction”). The closing of the Transaction is subject to various conditions, including shareholder and court approvals, the receipt of all required regulatory approvals, and the exchange of THC’s existing convertible debt investment in RIV Capital for a new class of non-voting exchangeable shares of Cansortium. These exchangeable shares would be convertible, at THC’s discretion, into approximately 23% of the common shares of Cansortium on a pro forma basis as of the closing of the Transaction. During the fourth quarter of fiscal 2024, the shareholders of RIV Capital and Cansortium voted in favor of the resolutions associated with the Transaction. At September 30, 2024, the Company concluded it had the intent to exchange its RIV Capital convertible notes for non-voting exchangeable shares of Cansortium in connection with the Transaction, and remeasured the investment at the fair value of the non-voting exchangeable shares that the Company expects to receive. This resulted in the recognition of a non-cash, pre-tax other-than-temporary impairment charge of $64.6 in the “Impairment, restructuring and other” line in the Consolidated Statements of Operations. In addition, the previously recorded allowance for credit losses associated with the RIV Capital convertible notes of $99.4 was written off and the amortized cost basis was written down to the investment’s fair value. The amortized cost basis of convertible debt investments was $62.1 and $225.8 at September 30, 2024 and 2023, respectively. At September 30, 2024 and 2023, gross unrealized losses on convertible debt investments were $16.4 and $140.0, respectively, and there were no gross unrealized gains. These investments have been in a continuous unrealized loss position for greater than 12 months as of September 30, 2024. The allowance for expected credit losses was $1.9 and $101.3 at September 30, 2024 and 2023, respectively. At September 30, 2024, the period until scheduled maturity of the Company’s convertible debt investments was between 2.9 and 5.0 years. Credit losses on convertible debt investments are measured based on the present value of expected future cash flows compared to amortized cost. Impairment losses are recognized through an allowance and recoveries of previously impaired amounts are recorded as an immediate reversal of all or a portion of the allowance. In addition, the allowance for expected credit losses cannot cause the amortized cost net of the allowance to be below fair value. A progression of the allowance for expected credit losses on convertible debt investments is shown below:
| Year Ended September 30,
| 2024 |  | 2023
Balance at beginning of year | $ | 101.3 |  |  | $ | — |
Provision for expected credit losses on securities with no previous allowance | — |  |  | 101.3 |
Reductions for securities intended to be sold / exchanged | (99.4) |  |  | — |
Balance at end of year | $ | 1.9 |  |  | $ | 101.3 |

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- Definition The entire disclosure of the fair value measurement of assets and liabilities, which includes financial instruments measured at fair value that are classified in shareholders' equity, which may be measured on a recurring or nonrecurring basis. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 820 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/820/tableOfContent + Details
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