February 29, February 28, 2004 2003 (in thousands) Raw materials and supplies $ 49,633 $ 26,472 In-process inventories 803,200 534,073 Finished case goods 408,545 259,367 $ 1,261,378 $ 819,912 Inventories – Counterparty credit risk: Counterparty risk relates to losses the Company could incur if a counterparty defaults on a derivative contract. The Company manages exposure to counterparty credit risk by requiring specified minimum credit standards and diversification of counterpar- ties. The Company enters into master agreements with our counterparties that allow netting of certain exposures in order to man- age this risk. All of the Company’s counterpart exposures are with counterparts that have investment grade ratings. The Company has procedures to monitor the credit exposure for both mark to market and future potential exposures. Inventories are stated at the lower of cost (computed in accordance with the first-in, first-out method) or market. Elements of cost include materials, labor and overhead and are classified as follows: A substantial portion of barreled whiskey and brandy will not be sold within one year because of the duration of the aging process. All barreled whiskey and brandy are classified as in-process inventories and are included in current assets, in accordance with industry practice. Bulk wine inventories are also included as in-process inventories within current assets, in accordance with the general practices of the wine industry, although a portion of such inventories may be aged for periods greater than one year. Warehousing, insurance, ad valorem taxes and other carrying charges applicable to barreled whiskey and brandy held for aging are included in inventory costs. The Company assesses the valuation of its inventories and reduces the carrying value of those inventories that are obsolete or in excess of the Company’s forecasted usage to their estimated net realizable value. The Company estimates the net realizable value of such inventories based on analyses and assumptions including, but not limited to, historical usage, future demand and market requirements. Reductions to the carrying value of inventories are recorded in cost of goods sold. If the future demand for the Company’s products is less favorable than the Company’s forecasts, then the value of the inventories may be required to be reduced, which would result in additional expense to the Company and affect its results of operations. Property, plant and equipment is stated at cost. Major additions and betterments are charged to property accounts, while main- tenance and repairs are charged to operations as incurred. The cost of properties sold or otherwise disposed of and the related accu- mulated depreciation are eliminated from the accounts at the time of disposal and resulting gains and losses are included as a com- ponent of operating income. Depreciation is computed primarily using the straight-line method over the following estimated useful lives: Depreciation – Property, plant and equipment – Goodwill and other intangible assets – Effective March 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142 (“SFAS No. 142”), “Goodwill and Other Intangible Assets.” SFAS No. 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes Accounting Principles Board Opinion No. 17, “Intangible Assets.” Under SFAS No. 142, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed at least annually for impairment. Additionally, in the year of adoption, a transitional impairment test is also required. The Company uses December 31 as its annu- al impairment test measurement date. Intangible assets that are not deemed to have an indefinite life will continue to be amortized over their useful lives and are also subject to review for impairment. Upon adoption of SFAS No. 142, the Company determined that certain of its intangible assets met the criteria to be considered indefinite lived and, accordingly, ceased their amortization effec- tive March 1, 2002. These intangible assets consisted principally of trademarks. The Company’s trademarks relate to well estab- lished brands owned by the Company which were previously amortized over 40 years. Intangible assets determined to have a finite life, primarily distribution agreements, continue to be amortized over their estimated useful lives which did not require modifica- tion as a result of adopting SFAS No. 142. Nonamortizable intangible assets are tested for impairment in accordance with the pro- visions of SFAS No. 142 and amortizable intangible assets are tested for impairment in accordance with the provisions of SFAS No. 46 Depreciable Life in Years Land improvements 15 to 32 Vineyards 26 Buildings and improvements 10 to 44 Machinery and equipment 3 to 35 Motor vehicles 3 to 7