UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 30, ~~2020~~2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-08495

CONSTELLATION BRANDS, INC.

(Exact name of registrant as specified in its charter)


Delaware			16-0716709
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

207 High Point Drive, Building 100, Victor, New York 14564

(Address of principal executive offices) (Zip code)

(585) 678-7100

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Class A Common Stock	STZ	New York Stock Exchange
Class B Common Stock	STZ.B	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

There were ~~170,029,096~~164,339,182 shares of Class A Common Stock, ~~23,268,443~~23,208,540 shares of Class B Common Stock, and ~~611,186~~2,216,750 shares of Class 1 Common Stock outstanding as of December 31, ~~2020.~~2021.

Table of Contents

TABLE OF CONTENTS


		Page

DEFINED TERMS		i

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets		1
Consolidated Statements of Comprehensive Income (Loss)		2
Consolidated Statements of Changes in Stockholders’ Equity		3
Consolidated Statements of Cash Flows		5
Notes to Consolidated Financial Statements
	1. Basis of Presentation	7
	2. Inventories	7
	3. Acquisitions ~~Divestitures,~~ and ~~Business Transformation~~Divestitures	87
	4. Derivative Instruments	129
	5. Fair Value of Financial Instruments	1512
	6. Goodwill	1916
	7. Intangible Assets	2016
	8. Equity Method Investments	2017

	9. Other Accrued Expenses and Liabilities	18
	10. Borrowings	19
	11. Income Taxes	21


	~~9. Borrowings~~12. Stockholders' Equity	2322
	~~10. Income Taxes~~	27


	~~11. Stockholders' Equity~~	27
	~~12.~~13. Net Income (Loss) Per Common Share Attributable to CBI	2923
	~~13.~~14. Comprehensive Income (Loss) Attributable to CBI	3023
	~~14.~~15. Business Segment Information	3326


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		3730
Item 3. Quantitative and Qualitative Disclosures About Market Risk		6457
Item 4. Controls and Procedures		6558

PART II – OTHER INFORMATION


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		59
Item 4. Mine Safety Disclosures		NA
Item 6. Exhibits		6659

INDEX TO EXHIBITS		6760

SIGNATURES		7264

~~NA = Not Applicable~~

~~Table of Contents~~

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the Company’s control, that could cause actual results to differ materially from those set forth in, or implied by, such forward-looking statements. For further information regarding such forward-looking statements, risks and uncertainties, please see “Information Regarding Forward-Looking Statements” under Part I – Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Table of Contents

Defined Terms

Unless the context otherwise requires, the terms “Company,” “CBI,” “we,” “our,” or “us” refer to Constellation Brands, Inc. and its subsidiaries. ~~Unless otherwise defined herein, refer to the Notes to Consolidated Financial Statements under Item 1. of~~We use terms in this Quarterly Report on Form 10-Q ~~for~~and in our notes to the ~~definition of capitalized terms used herein. All references~~consolidated financial statements that are specific to ~~“Fiscal 2020” refer to our fiscal year ended February 29, 2020. All references to “Fiscal 2021” refer to our fiscal year ending February 28, 2021. All references to “$”~~us or are ~~to U.S. dollars and all references to “C$” are to Canadian dollars~~.abbreviations that may not be commonly known or used.


Term						Meaning

$						U.S. dollars
2.25% July 2021 Senior Notes						$1,000.0 million principal amount of 2.25% senior notes issued in July 2021
2.65% November 2017 Senior Notes						$700.0 million principal amount of 2.65% senior notes issued in November 2017 and redeemed in August 2021, prior to maturity
2.70% May 2017 Senior Notes						$500.0 million principal amount of 2.70% senior notes issued in May 2017 and redeemed in August 2021, prior to maturity
2018 Authorization						authority to repurchase up to $3.0 billion of our Class A Common Stock and Class B Convertible Common Stock, authorized in January 2018 by our Board of Directors


2019 Five-Year Term Facility						a $491.3 million, five-year term loan facility under the June 2021 Term Credit Agreement, originally entered into in June 2019

2020 Credit Agreement						ninth amended and restated credit agreement, dated as of March 26, 2020, provides for an aggregate revolving credit facility of $2.0 billion



2020 U.S. wildfires						significant wildfires that broke out in California, Oregon, and Washington states which affected the 2020 U.S. grape harvest
2021 Annual Report						our Annual Report on Form 10-K for the fiscal year ended February 28, 2021, unless otherwise specified

2021 Authorization						authority to repurchase up to $2.0 billion of our Class A Common Stock and Class B Convertible Common Stock, authorized in January 2021 by our Board of Directors


ABA						alternative beverage alcohol
Acreage						Acreage Holdings, Inc.
Acreage Financial Instrument						a call option for Canopy to acquire 70% of the shares of Acreage, at a fixed exchange ratio and 30% at a floating exchange ratio
Acreage Transaction						Canopy’s intention to acquire Acreage upon U.S. federal cannabis legalization, subject to certain conditions
Administrative Agent						Bank of America, N.A., as administrative agent for the senior credit facility and term credit agreement

AOCI						accumulated other comprehensive income (loss)
ASR						accelerated share repurchase agreement with a third-party financial institution


Ballast Point Divestiture						sale of Ballast Point craft beer business, including a number of its associated production facilities and brewpubs
C$						Canadian dollars
Canopy						we made an investment in Canopy Growth Corporation, an Ontario, Canada-based public company
Canopy Debt Securities						convertible debt securities issued by Canopy
Canopy Equity Method Investment						November 2017 Canopy Investment, November 2018 Canopy Investment, and May 2020 Canopy Investment, collectively
Canopy Strategic Transaction(s)						any potential acquisition, divestiture, investment, or other similar transaction made by Canopy, including but not limited to the Acreage Transaction
CARES Act						Coronavirus Aid, Relief, and Economic Security Act
CBD						cannabidiol, an active ingredient in cannabis
CB International						CB International Finance S.à r.l., a wholly-owned subsidiary of ours


Coca-Cola						The Coca-Cola Company
CODM						chief operating decision maker


Constellation Brands, Inc. Q3 FY 2022 Form 10-Q			#WORTHREACHINGFOR Ii

Table of Contents


Term						Meaning

Comparable Adjustments						certain items affecting comparability that have been excluded by management
Concentrate Business Divestiture						sale of certain brands used in our concentrates and high-color concentrate business, and certain related intellectual property, inventory, interests in certain contracts, and other assets
Copper & Kings						Copper & Kings American Brandy Company, acquired by us


CSR						corporate social responsibility
DE&I						diversity, equity, and inclusion
Depletions						represent U.S. domestic distributor shipments of our respective branded products to retail customers, based on third-party data
DTC						direct-to-consumer
Empathy Wines						Empathy Wines business, including a digitally-native wine brand, acquired by us
ERP						enterprise resource planning system


Financial Statements						our consolidated financial statements and notes thereto included herein


Fiscal 2021						the Company’s fiscal year ended February 28, 2021
Fiscal 2022						the Company’s fiscal year ending February 28, 2022
Fiscal 2023						the Company’s fiscal year ending February 28, 2023
Fiscal 2026						the Company’s fiscal year ending February 28, 2026






GivingTuesday						a global generosity movement to encourage others to give back to their community, occurring each year on the Tuesday following Thanksgiving in the U.S.
June 2021 Term Credit Agreement						March 2020 Term Credit Agreement, inclusive of amendment dated as of June 10, 2021
Lender						Bank of America, N.A., as lender for the term credit agreement
LIBOR						London Interbank Offered Rate
March 2020 Term Credit Agreement						amended and restated term loan credit agreement, dated as of March 26, 2020, that provided for aggregate facilities of $491.3 million, consisting of the 2019 Five-Year Term Facility
May 2020 Canopy Investment						May 2020 exercise of the November 2017 Canopy Warrants at an exercise price of C$12.98 per warrant share
MD&A						Management’s Discussion and Analysis of Financial Condition and Results of Operations under Item 2. of this quarterly report on Form 10-Q
Mexicali Brewery						suspended brewery construction project located in Mexicali, Baja California, Mexico
Mexico Beer Projects						expansion, optimization, and construction activities at the Obregon Brewery, Nava Brewery, and Southeast Mexico Brewery

My Favorite Neighbor						we made an initial investment in My Favorite Neighbor, LLC and subsequently acquired the remaining ownership interest
NA						not applicable
Nava Brewery						brewery located in Nava, Coahuila, Mexico
Net sales						gross sales less promotions, returns and allowances, and excise taxes


Nine Months 2021						the Company’s nine months ended November 30, 2020
Nine Months 2022						the Company’s nine months ended November 30, 2021
NM						not meaningful
Nobilo Wine Divestiture						sale of New Zealand-based Nobilo Wine brand and certain related assets
Note(s)						notes to the consolidated financial statements
November 2017 Canopy Investment						our initial investment for 18.9 million common shares of Canopy
November 2017 Canopy Warrants						warrants which gave us the option to purchase 18.9 million common shares of Canopy, exercised May 1, 2020
November 2018 Canopy Investment						our incremental investment for 104.5 million common shares of Canopy
November 2018 Canopy Transaction						November 2018 Canopy Investment and the purchase by us of the November 2018 Canopy Warrants, collectively


Constellation Brands, Inc. Q3 FY 2022 Form 10-Q			#WORTHREACHINGFOR Iii

Table of Contents


Term						Meaning

November 2018 Canopy Warrants						Tranche A Warrants, Tranche B Warrants, and Tranche C Warrants, collectively

Obregon Brewery						brewery located in Obregon, Sonora, Mexico
OCI						other comprehensive income (loss)

Paul Masson Divestiture						sale of Paul Masson Grande Amber Brandy brand, related inventory, and interests in certain contracts


SEC						Securities and Exchange Commission





Senior Floating Rate Notes						$650.0 million principal amount of senior floating rate notes issued in October 2018 and redeemed in November 2020, prior to maturity
Southeast Mexico Brewery						a new brewery intended to be located in Southeast Mexico in the state of Veracruz
Third Quarter 2021						the Company’s three months ended November 30, 2020
Third Quarter 2022						the Company’s three months ended November 30, 2021



Tranche A Warrants						warrants which give us the option to purchase 88.5 million common shares of Canopy expiring November 1, 2023
Tranche B Warrants						warrants which give us the option to purchase 38.4 million common shares of Canopy expiring November 1, 2026
Tranche C Warrants						warrants which give us the option to purchase 12.8 million common shares of Canopy expiring November 1, 2026
TSX						Toronto Stock Exchange
U.S.						United States of America
U.S. GAAP						generally accepted accounting principles in the U.S.
VWAP Exercise Price						volume-weighted average of the closing market price of Canopy’s common shares on the TSX for the five trading days immediately preceding the exercise date

Wine and Spirits Divestiture						sale of a portion of our wine and spirits business, including lower-margin, lower-growth wine and spirits brands, related inventory, interests in certain contracts, wineries, vineyards, offices, and facilities
Wine and Spirits Divestitures						Wine and Spirits Divestiture and the Nobilo Wine Divestiture, collectively


Constellation Brands, Inc. Q3 FY 2022 Form 10-Q			#WORTHREACHINGFOR Iiii


FINANCIAL STATEMENTS			Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

CONSTELLATION BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share data)

(unaudited)


		November 30, 2020		February 29, 2020			November 30, 2021		February 28, 2021
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	152.9	$	81.4	Cash and cash equivalents	$	361.3	$	460.6
Accounts receivable	Accounts receivable	915.4		864.8		Accounts receivable	917.8		785.3
Inventories	Inventories	1,376.9		1,373.6		Inventories	1,518.9		1,291.1
Prepaid expenses and other	Prepaid expenses and other	455.5		535.8		Prepaid expenses and other	578.6		507.5
Assets held for sale - current		546.4		628.5

Total current assets	Total current assets	3,447.1		3,484.1		Total current assets	3,376.6		3,044.5
Property, plant, and equipment	Property, plant, and equipment	5,580.7		5,333.0		Property, plant, and equipment	5,519.3		5,821.6
Goodwill	Goodwill	7,789.0		7,757.1		Goodwill	7,848.1		7,793.5
Intangible assets	Intangible assets	2,739.7		2,718.9		Intangible assets	2,756.7		2,732.1
Equity method investments	Equity method investments	2,959.9		3,093.9		Equity method investments	2,756.4		2,788.4
Securities measured at fair value	Securities measured at fair value	1,536.2		1,117.1		Securities measured at fair value	292.9		1,818.1
Deferred income taxes	Deferred income taxes	2,563.0		2,656.3		Deferred income taxes	2,414.2		2,492.5
Assets held for sale		385.5		552.1

Other assets	Other assets	629.5		610.7		Other assets	563.1		614.1
Total assets	Total assets	$	27,630.6	$	27,323.2	Total assets	$	25,527.3	$	27,104.8
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Short-term borrowings	Short-term borrowings	$	40.0	$	238.9	Short-term borrowings	$	243.0	$	—
Current maturities of long-term debt	Current maturities of long-term debt	528.4		734.9		Current maturities of long-term debt	5.7		29.2
Accounts payable	Accounts payable	732.1		557.6		Accounts payable	945.4		460.0
Other accrued expenses and liabilities	Other accrued expenses and liabilities	740.9		780.4		Other accrued expenses and liabilities	1,054.5		779.9
Total current liabilities	Total current liabilities	2,041.4		2,311.8		Total current liabilities	2,248.6		1,269.1
Long-term debt, less current maturities	Long-term debt, less current maturities	10,416.1		11,210.8		Long-term debt, less current maturities	10,083.8		10,413.1

Deferred income taxes and other liabilities	Deferred income taxes and other liabilities	1,520.6		1,326.3		Deferred income taxes and other liabilities	1,648.5		1,493.5
Total liabilities	Total liabilities	13,978.1		14,848.9		Total liabilities	13,980.9		13,175.7
Commitments and contingencies	Commitments and contingencies	0		0		Commitments and contingencies	0		0
CBI stockholders’ equity:	CBI stockholders’ equity:					CBI stockholders’ equity:
Class A Common Stock, $0.01 par value – Authorized, 322,000,000 shares; Issued, 187,196,051 shares and 186,090,745 shares, respectively		1.9		1.9
Class B Convertible Common Stock, $0.01 par value – Authorized, 30,000,000 shares; Issued, 28,277,517 shares and 28,300,206 shares, respectively		0.3		0.3
Class A Common Stock, $0.01 par value – Authorized, 322,000,000 shares; Issued, 187,247,721 shares and 187,204,280 shares, respectively						Class A Common Stock, $0.01 par value – Authorized, 322,000,000 shares; Issued, 187,247,721 shares and 187,204,280 shares, respectively	1.9		1.9
Class B Convertible Common Stock, $0.01 par value – Authorized, 30,000,000 shares; Issued, 28,227,478 shares and 28,270,288 shares, respectively						Class B Convertible Common Stock, $0.01 par value – Authorized, 30,000,000 shares; Issued, 28,227,478 shares and 28,270,288 shares, respectively	0.3		0.3
Additional paid-in capital	Additional paid-in capital	1,580.4		1,514.6		Additional paid-in capital	1,781.8		1,604.2
Retained earnings	Retained earnings	14,879.1		13,695.3		Retained earnings	14,251.6		15,117.8
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	(357.4)		(266.3)		Accumulated other comprehensive income (loss)	(623.1)		(335.5)
		16,104.3		14,945.8			15,412.5		16,388.7
Less: Treasury stock –	Less: Treasury stock –					Less: Treasury stock –
Class A Common Stock, at cost, 17,190,040 shares and 18,256,826 shares, respectively		(2,790.0)		(2,811.8)
Class A Common Stock, at cost, 22,947,122 shares and 17,070,550 shares, respectively						Class A Common Stock, at cost, 22,947,122 shares and 17,070,550 shares, respectively	(4,172.0)		(2,787.6)
Class B Convertible Common Stock, at cost, 5,005,800 shares	Class B Convertible Common Stock, at cost, 5,005,800 shares	(2.2)		(2.2)		Class B Convertible Common Stock, at cost, 5,005,800 shares	(2.2)		(2.2)
		(2,792.2)		(2,814.0)			(4,174.2)		(2,789.8)
Total CBI stockholders’ equity	Total CBI stockholders’ equity	13,312.1		12,131.8		Total CBI stockholders’ equity	11,238.3		13,598.9
Noncontrolling interests	Noncontrolling interests	340.4		342.5		Noncontrolling interests	308.1		330.2
Total stockholders’ equity	Total stockholders’ equity	13,652.5		12,474.3		Total stockholders’ equity	11,546.4		13,929.1
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	27,630.6	$	27,323.2	Total liabilities and stockholders’ equity	$	25,527.3	$	27,104.8

The accompanying notes are an integral part of these statements.


Constellation Brands, Inc. Q3 FY ~~2021~~2022 Form 10-Q			#WORTHREACHINGFOR I 1


FINANCIAL STATEMENTS			Table of Contents

CONSTELLATION BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in millions, except per share data)

(unaudited)


		For the Nine Months Ended November 30,				For the Three Months Ended November 30,					For the Nine Months Ended November 30,				For the Three Months Ended November 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Sales	Sales	$	7,235.1	$	7,037.4	$	2,643.7	$	2,181.5	Sales	$	7,260.3	$	7,235.1	$	2,507.0	$	2,643.7
Excise taxes	Excise taxes	(573.2)		(596.8)		(205.6)		(182.1)		Excise taxes	(542.1)		(573.2)		(186.4)		(205.6)
Net sales	Net sales	6,661.9		6,440.6		2,438.1		1,999.4		Net sales	6,718.2		6,661.9		2,320.6		2,438.1
Cost of product sold	Cost of product sold	(3,189.6)		(3,238.5)		(1,169.9)		(1,011.9)		Cost of product sold	(3,143.5)		(3,189.6)		(1,094.9)		(1,169.9)
Gross profit	Gross profit	3,472.3		3,202.1		1,268.2		987.5		Gross profit	3,574.7		3,472.3		1,225.7		1,268.2
Selling, general, and administrative expenses	Selling, general, and administrative expenses	(1,211.8)		(1,251.7)		(463.8)		(406.3)		Selling, general, and administrative expenses	(1,254.6)		(1,216.5)		(385.8)		(464.1)
Impairment of brewery construction in progress										Impairment of brewery construction in progress	(665.9)		—		—		—
Impairment of assets held for sale										Impairment of assets held for sale	—		(24.0)		—		(21.0)

Impairment of assets held for sale		(24.0)		(417.0)		(21.0)		(390.0)
Gain (loss) on sale of business		(4.7)		76.0		(0.3)		76.0
Operating income (loss)	Operating income (loss)	2,231.8		1,609.4		783.1		267.2		Operating income (loss)	1,654.2		2,231.8		839.9		783.1
Income (loss) from unconsolidated investments	Income (loss) from unconsolidated investments	130.5		(2,711.8)		782.4		(456.5)		Income (loss) from unconsolidated investments	(1,541.8)		130.5		(171.8)		782.4
Interest expense	Interest expense	(295.9)		(329.3)		(95.7)		(103.1)		Interest expense	(270.5)		(295.9)		(88.0)		(95.7)
Loss on extinguishment of debt	Loss on extinguishment of debt	(8.8)		(2.4)		(1.2)		0		Loss on extinguishment of debt	(29.4)		(8.8)		—		(1.2)
Income (loss) before income taxes	Income (loss) before income taxes	2,057.6		(1,434.1)		1,468.6		(292.4)		Income (loss) before income taxes	(187.5)		2,057.6		580.1		1,468.6
(Provision for) benefit from income taxes	(Provision for) benefit from income taxes	(416.4)		1,046.5		(176.6)		658.9		(Provision for) benefit from income taxes	(217.1)		(416.4)		(99.3)		(176.6)
Net income (loss)	Net income (loss)	1,641.2		(387.6)		1,292.0		366.5		Net income (loss)	(404.6)		1,641.2		480.8		1,292.0
Net income (loss) attributable to noncontrolling interests		(26.1)		(22.6)		(11.1)		(6.1)
Net (income) loss attributable to noncontrolling interests										Net (income) loss attributable to noncontrolling interests	(31.2)		(26.1)		(10.0)		(11.1)
Net income (loss) attributable to CBI	Net income (loss) attributable to CBI	$	1,615.1	$	(410.2)	$	1,280.9	$	360.4	Net income (loss) attributable to CBI	$	(435.8)	$	1,615.1	$	470.8	$	1,280.9

Comprehensive income (loss)	Comprehensive income (loss)	$	1,544.4	$	(419.6)	$	1,776.1	$	466.6	Comprehensive income (loss)	$	(708.6)	$	1,544.4	$	130.0	$	1,776.1
Comprehensive (income) loss attributable to noncontrolling interests	Comprehensive (income) loss attributable to noncontrolling interests	(20.4)		(20.5)		(37.1)		(13.4)		Comprehensive (income) loss attributable to noncontrolling interests	(14.8)		(20.4)		8.1		(37.1)
Comprehensive income (loss) attributable to CBI	Comprehensive income (loss) attributable to CBI	$	1,524.0	$	(440.1)	$	1,739.0	$	453.2	Comprehensive income (loss) attributable to CBI	$	(723.4)	$	1,524.0	$	138.1	$	1,739.0

Net income (loss) per common share attributable to CBI:	Net income (loss) per common share attributable to CBI:									Net income (loss) per common share attributable to CBI:
Basic – Class A Common Stock	Basic – Class A Common Stock	$	8.44	$	(2.17)	$	6.68	$	1.90	Basic – Class A Common Stock	$	(2.31)	$	8.44	$	2.53	$	6.68
Basic – Class B Convertible Common Stock	Basic – Class B Convertible Common Stock	$	7.67	$	(1.98)	$	6.07	$	1.73	Basic – Class B Convertible Common Stock	$	(2.10)	$	7.67	$	2.30	$	6.07

Diluted – Class A Common Stock	Diluted – Class A Common Stock	$	8.28	$	(2.17)	$	6.55	$	1.85	Diluted – Class A Common Stock	$	(2.31)	$	8.28	$	2.48	$	6.55
Diluted – Class B Convertible Common Stock	Diluted – Class B Convertible Common Stock	$	7.62	$	(1.98)	$	6.03	$	1.71	Diluted – Class B Convertible Common Stock	$	(2.10)	$	7.62	$	2.29	$	6.03

Weighted average common shares outstanding:	Weighted average common shares outstanding:									Weighted average common shares outstanding:
Basic – Class A Common Stock	Basic – Class A Common Stock	170.083		168.258		170.571		168.346		Basic – Class A Common Stock	167.692		170.083		164.999		170.571
Basic – Class B Convertible Common Stock	Basic – Class B Convertible Common Stock	23.284		23.316		23.274		23.314		Basic – Class B Convertible Common Stock	23.230		23.284		23.222		23.274

Diluted – Class A Common Stock	Diluted – Class A Common Stock	195.101		168.258		195.444		194.856		Diluted – Class A Common Stock	167.692		195.101		189.939		195.444
Diluted – Class B Convertible Common Stock	Diluted – Class B Convertible Common Stock	23.284		23.316		23.274		23.314		Diluted – Class B Convertible Common Stock	23.230		23.284		23.222		23.274

Cash dividends declared per common share:	Cash dividends declared per common share:									Cash dividends declared per common share:
Class A Common Stock	Class A Common Stock	$	2.25	$	2.25	$	0.75	$	0.75	Class A Common Stock	$	2.28	$	2.25	$	0.76	$	0.75
Class B Convertible Common Stock	Class B Convertible Common Stock	$	2.04	$	2.04	$	0.68	$	0.68	Class B Convertible Common Stock	$	2.07	$	2.04	$	0.69	$	0.68

The accompanying notes are an integral part of these statements.


Constellation Brands, Inc. Q3 FY ~~2021~~2022 Form 10-Q			#WORTHREACHINGFOR I 2


FINANCIAL STATEMENTS			Table of Contents


CONSTELLATION BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (in millions) (unaudited)	CONSTELLATION BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (in millions) (unaudited)																	CONSTELLATION BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (in millions) (unaudited)
		Common Stock				Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Non-controlling Interests		Total			Common Stock				Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Non-controlling Interests		Total
		Class A		Class B															Class A		Class B
Balance at February 29, 2020		$	1.9	$	0.3	$	1,514.6	$	13,695.3	$	(266.3)	$	(2,814.0)	$	342.5	$	12,474.3
Balance at February 28, 2021																		Balance at February 28, 2021	$	1.9	$	0.3	$	1,604.2	$	15,117.8	$	(335.5)	$	(2,789.8)	$	330.2	$	13,929.1

Comprehensive income (loss):	Comprehensive income (loss):																	Comprehensive income (loss):
Net income (loss)	Net income (loss)	—		—		—		(177.9)		—		—		5.3		(172.6)		Net income (loss)	—		—		—		(908.1)		—		—		10.8		(897.3)
Other comprehensive income (loss), net of income tax effect	Other comprehensive income (loss), net of income tax effect	—		—		—		—		(756.1)		—		(36.2)		(792.3)		Other comprehensive income (loss), net of income tax effect	—		—		—		—		98.9		—		5.6		104.5
Comprehensive income (loss)	Comprehensive income (loss)															(964.9)		Comprehensive income (loss)															(792.8)

Repurchase of shares																		Repurchase of shares	—		—		—		—		—		(400.8)		—		(400.8)
Dividends declared	Dividends declared	—		—		—		(143.3)		—		—		—		(143.3)		Dividends declared	—		—		—		(146.1)		—		—		—		(146.1)
Noncontrolling interest distributions																		Noncontrolling interest distributions	—		—		—		—		—		—		(10.6)		(10.6)
Shares issued under equity compensation plans	Shares issued under equity compensation plans	0		0		(6.0)		—		—		2.8		—		(3.2)		Shares issued under equity compensation plans	—		—		(0.9)		—		—		3.8		—		2.9
Stock-based compensation	Stock-based compensation	—		—		14.7		—		—		—		—		14.7		Stock-based compensation	—		—		15.9		—		—		—		—		15.9
Balance at May 31, 2020		1.9		0.3		1,523.3		13,374.1		(1,022.4)		(2,811.2)		311.6		11,377.6
Balance at May 31, 2021																		Balance at May 31, 2021	1.9		0.3		1,619.2		14,063.6		(236.6)		(3,186.8)		336.0		12,597.6
Comprehensive income (loss):																		Comprehensive income (loss):
Net income (loss)																		Net income (loss)	—		—		—		1.5		—		—		10.4		11.9
Other comprehensive income (loss), net of income tax effect																		Other comprehensive income (loss), net of income tax effect	—		—		—		—		(53.8)		—		(3.9)		(57.7)
Comprehensive income (loss)																		Comprehensive income (loss)															(45.8)
Repurchase of shares																		Repurchase of shares	—		—		—		—		—		(904.2)		—		(904.2)
Dividends declared																		Dividends declared	—		—		—		(142.9)		—		—		—		(142.9)

Noncontrolling interest distributions																		Noncontrolling interest distributions	—		—		—		—		—		—		(10.6)		(10.6)
Shares issued under equity compensation plans																		Shares issued under equity compensation plans	—		—		8.9		—		—		1.4		—		10.3
Stock-based compensation																		Stock-based compensation	—		—		20.2		—		—		—		—		20.2
Balance at August 31, 2021																		Balance at August 31, 2021	1.9		0.3		1,648.3		13,922.2		(290.4)		(4,089.6)		331.9		11,524.6
Comprehensive income (loss):	Comprehensive income (loss):																	Comprehensive income (loss):
Net income (loss)	Net income (loss)	—		—		—		512.1		—		—		9.7		521.8		Net income (loss)	—		—		—		470.8		—		—		10.0		480.8
Other comprehensive income (loss), net of income tax effect	Other comprehensive income (loss), net of income tax effect	—		—		—		—		206.9		—		4.5		211.4		Other comprehensive income (loss), net of income tax effect	—		—		—		—		(332.7)		—		(18.1)		(350.8)
Comprehensive income (loss)	Comprehensive income (loss)															733.2		Comprehensive income (loss)															130.0

Dividends declared		—		—		—		(144.0)		—		—		—		(144.0)

Noncontrolling interest distributions		—		—		—		—		—		—		(10.0)		(10.0)
Shares issued under equity compensation plans		0		0		10.9		—		—		16.7		—		27.6
Stock-based compensation		—		—		19.4		—		—		—		—		19.4
Balance at August 31, 2020		1.9		0.3		1,553.6		13,742.2		(815.5)		(2,794.5)		315.8		12,003.8
Comprehensive income (loss):
Net income (loss)		—		—		—		1,280.9		—		—		11.1		1,292.0
Other comprehensive income (loss), net of income tax effect		—		—		—		—		458.1		—		26.0		484.1
Comprehensive income (loss)																1,776.1

Repurchase of shares																		Repurchase of shares	—		—		—		—		—		(85.5)		—		(85.5)
Dividends declared	Dividends declared	—		—		—		(144.0)		—		—		—		(144.0)		Dividends declared	—		—		—		(141.4)		—		—		—		(141.4)
Noncontrolling interest distributions	Noncontrolling interest distributions	—		—		—		—		—		—		(12.5)		(12.5)		Noncontrolling interest distributions	—		—		—		—		—		—		(15.7)		(15.7)
Shares issued under equity compensation plans	Shares issued under equity compensation plans	0		0		8.8		—		—		2.3		—		11.1		Shares issued under equity compensation plans	—		—		135.8		—		—		0.9		—		136.7
Stock-based compensation	Stock-based compensation	—		—		18.0		—		—		—		—		18.0		Stock-based compensation	—		—		(2.3)		—		—		—		—		(2.3)
Balance at November 30, 2020		$	1.9	$	0.3	$	1,580.4	$	14,879.1	$	(357.4)	$	(2,792.2)	$	340.4	$	13,652.5
Balance at November 30, 2021																		Balance at November 30, 2021	$	1.9	$	0.3	$	1,781.8	$	14,251.6	$	(623.1)	$	(4,174.2)	$	308.1	$	11,546.4


Constellation Brands, Inc. Q3 FY ~~2021~~2022 Form 10-Q			#WORTHREACHINGFOR I 3


FINANCIAL STATEMENTS			Table of Contents


CONSTELLATION BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (in millions) (unaudited)	CONSTELLATION BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (in millions) (unaudited)																	CONSTELLATION BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (in millions) (unaudited)
		Common Stock				Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Non-controlling Interests		Total			Common Stock				Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Non-controlling Interests		Total
		Class A		Class B															Class A		Class B
Balance at February 28, 2019		$	1.9	$	0.3	$	1,410.8	$	14,276.2	$	(353.9)	$	(2,784.3)	$	286.2	$	12,837.2
Balance at February 29, 2020																		Balance at February 29, 2020	$	1.9	$	0.3	$	1,514.6	$	13,695.3	$	(266.3)	$	(2,814.0)	$	342.5	$	12,474.3

Comprehensive income (loss):	Comprehensive income (loss):																	Comprehensive income (loss):
Net income (loss)	Net income (loss)	—		—		—		(245.4)		—		—		8.3		(237.1)		Net income (loss)	—		—		—		(177.9)		—		—		5.3		(172.6)
Other comprehensive income (loss), net of income tax effect	Other comprehensive income (loss), net of income tax effect	—		—		—		—		(1.6)		—		(1.1)		(2.7)		Other comprehensive income (loss), net of income tax effect	—		—		—		—		(756.1)		—		(36.2)		(792.3)
Comprehensive income (loss)	Comprehensive income (loss)															(239.8)		Comprehensive income (loss)															(964.9)

Dividends declared	Dividends declared	—		—		—		(141.9)		—		—		—		(141.9)		Dividends declared	—		—		—		(143.3)		—		—		—		(143.3)
Initial recognition of non-controlling interest		—		—		—		—		—		—		20.2		20.2

Shares issued under equity compensation plans	Shares issued under equity compensation plans	0		0		(9.3)		—		—		6.3		—		(3.0)		Shares issued under equity compensation plans	—		—		(6.0)		—		—		2.8		—		(3.2)
Stock-based compensation	Stock-based compensation	—		—		15.5		—		—		—		—		15.5		Stock-based compensation	—		—		14.7		—		—		—		—		14.7
Balance at May 31, 2019		1.9		0.3		1,417.0		13,888.9		(355.5)		(2,778.0)		313.6		12,488.2
Balance at May 31, 2020																		Balance at May 31, 2020	1.9		0.3		1,523.3		13,374.1		(1,022.4)		(2,811.2)		311.6		11,377.6
Comprehensive income (loss):	Comprehensive income (loss):																	Comprehensive income (loss):
Net income (loss)	Net income (loss)	—		—		—		(525.2)		—		—		8.2		(517.0)		Net income (loss)	—		—		—		512.1		—		—		9.7		521.8
Other comprehensive income (loss), net of income tax effect	Other comprehensive income (loss), net of income tax effect	—		—		—		—		(121.1)		—		(8.3)		(129.4)		Other comprehensive income (loss), net of income tax effect	—		—		—		—		206.9		—		4.5		211.4
Comprehensive income (loss)	Comprehensive income (loss)															(646.4)		Comprehensive income (loss)															733.2
Repurchase of shares		—		—		—		—		—		(50.0)		—		(50.0)

Dividends declared	Dividends declared	—		—		—		(142.3)		—		—		—		(142.3)		Dividends declared	—		—		—		(144.0)		—		—		—		(144.0)

Noncontrolling interest distributions																		Noncontrolling interest distributions	—		—		—		—		—		—		(10.0)		(10.0)
Shares issued under equity compensation plans	Shares issued under equity compensation plans	0		0		17.4		—		—		6.4		—		23.8		Shares issued under equity compensation plans	—		—		10.9		—		—		16.7		—		27.6
Stock-based compensation	Stock-based compensation	—		—		17.7		—		—		—		—		17.7		Stock-based compensation	—		—		19.4		—		—		—		—		19.4
Balance at August 31, 2019		1.9		0.3		1,452.1		13,221.4		(476.6)		(2,821.6)		313.5		11,691.0
Balance at August 31, 2020																		Balance at August 31, 2020	1.9		0.3		1,553.6		13,742.2		(815.5)		(2,794.5)		315.8		12,003.8
Comprehensive income (loss):	Comprehensive income (loss):																	Comprehensive income (loss):
Net income (loss)	Net income (loss)	—		—		—		360.4		—		—		6.1		366.5		Net income (loss)	—		—		—		1,280.9		—		—		11.1		1,292.0
Other comprehensive income (loss), net of income tax effect	Other comprehensive income (loss), net of income tax effect	—		—		—		—		92.8		—		7.3		100.1		Other comprehensive income (loss), net of income tax effect	—		—		—		—		458.1		—		26.0		484.1
Comprehensive income (loss)	Comprehensive income (loss)															466.6		Comprehensive income (loss)															1,776.1

Dividends declared	Dividends declared	—		—		—		(142.4)		—		—		—		(142.4)		Dividends declared	—		—		—		(144.0)		—		—		—		(144.0)
Noncontrolling interest distributions																		Noncontrolling interest distributions	—		—		—		—		—		—		(12.5)		(12.5)
Shares issued under equity compensation plans	Shares issued under equity compensation plans	0		0		3.0		—		—		0.9		—		3.9		Shares issued under equity compensation plans	—		—		8.8		—		—		2.3		—		11.1
Stock-based compensation	Stock-based compensation	—		—		17.2		—		—		—		—		17.2		Stock-based compensation	—		—		18.0		—		—		—		—		18.0
Balance at November 30, 2019		$	1.9	$	0.3	$	1,472.3	$	13,439.4	$	(383.8)	$	(2,820.7)	$	326.9	$	12,036.3
Balance at November 30, 2020																		Balance at November 30, 2020	$	1.9	$	0.3	$	1,580.4	$	14,879.1	$	(357.4)	$	(2,792.2)	$	340.4	$	13,652.5

The accompanying notes are an integral part of these statements.


Constellation Brands, Inc. Q3 FY ~~2021~~2022 Form 10-Q			#WORTHREACHINGFOR I 4


FINANCIAL STATEMENTS			Table of Contents

CONSTELLATION BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)


		For the Nine Months Ended November 30,					For the Nine Months Ended November 30,
		2020		2019			2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES	CASH FLOWS FROM OPERATING ACTIVITIES					CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	Net income (loss)	$	1,641.2	$	(387.6)	Net income (loss)	$	(404.6)	$	1,641.2
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:						Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Unrealized net (gain) loss on securities measured at fair value	Unrealized net (gain) loss on securities measured at fair value	(524.7)		2,200.9		Unrealized net (gain) loss on securities measured at fair value	1,534.8		(524.7)
Deferred tax provision (benefit)	Deferred tax provision (benefit)	287.0		(1,192.8)		Deferred tax provision (benefit)	58.5		287.0
Depreciation	Depreciation	219.2		248.9		Depreciation	248.6		219.2
Stock-based compensation	Stock-based compensation	52.0		50.6		Stock-based compensation	33.8		52.0
Equity in (earnings) losses of equity method investees and related activities, net of distributed earnings	Equity in (earnings) losses of equity method investees and related activities, net of distributed earnings	403.0		512.5		Equity in (earnings) losses of equity method investees and related activities, net of distributed earnings	6.0		403.0
Noncash lease expense	Noncash lease expense	63.0		66.6		Noncash lease expense	60.9		63.0
Impairment and amortization of intangible assets		4.0		15.3

Amortization of debt issuance costs and loss on extinguishment of debt	Amortization of debt issuance costs and loss on extinguishment of debt	17.7		13.0		Amortization of debt issuance costs and loss on extinguishment of debt	37.5		17.7

Impairment of brewery construction in progress						Impairment of brewery construction in progress	665.9		—
Impairment of assets held for sale						Impairment of assets held for sale	—		24.0

Impairment of assets held for sale		24.0		417.0
(Gain) loss on sale of business		4.7		(76.0)
Loss on inventory and related contracts		25.8		122.7
Loss on inventory and related contracts associated with business optimization						Loss on inventory and related contracts associated with business optimization	—		25.8
Loss on settlement of treasury lock contracts	Loss on settlement of treasury lock contracts	(29.3)		0		Loss on settlement of treasury lock contracts	—		(29.3)

Change in operating assets and liabilities, net of effects from purchases of businesses:
Change in operating assets and liabilities, net of effects from purchase and sale of business:						Change in operating assets and liabilities, net of effects from purchase and sale of business:
Accounts receivable	Accounts receivable	(44.1)		41.3		Accounts receivable	(134.8)		(44.1)
Inventories	Inventories	75.2		(134.5)		Inventories	(218.4)		75.2
Prepaid expenses and other current assets	Prepaid expenses and other current assets	67.4		40.1		Prepaid expenses and other current assets	(114.7)		67.4
Accounts payable	Accounts payable	146.8		135.6		Accounts payable	340.5		146.8

Deferred revenue						Deferred revenue	124.3		3.6
Other accrued expenses and liabilities	Other accrued expenses and liabilities	(29.7)		(20.1)		Other accrued expenses and liabilities	200.9		(29.7)
Other	Other	(39.6)		22.8		Other	4.9		(34.5)
Total adjustments	Total adjustments	722.4		2,463.9		Total adjustments	2,848.7		722.4
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	2,363.6		2,076.3		Net cash provided by (used in) operating activities	2,444.1		2,363.6

CASH FLOWS FROM INVESTING ACTIVITIES	CASH FLOWS FROM INVESTING ACTIVITIES					CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant, and equipment		(467.7)		(538.3)
Purchase of property, plant, and equipment						Purchase of property, plant, and equipment	(598.7)		(467.7)

Purchases of businesses, net of cash acquired		(19.9)		(36.2)
Purchase of business, net of cash acquired						Purchase of business, net of cash acquired	(53.5)		(19.9)
Investments in equity method investees and securities	Investments in equity method investees and securities	(217.4)		(33.7)		Investments in equity method investees and securities	(28.6)		(217.4)
Proceeds from sales of assets		18.3		0.7
Proceeds from sale of assets						Proceeds from sale of assets	4.0		18.3

Proceeds from sale of business	Proceeds from sale of business	42.9		269.7		Proceeds from sale of business	4.6		42.9
Other investing activities	Other investing activities	0.6		1.9		Other investing activities	(2.0)		0.6
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	(643.2)		(335.9)		Net cash provided by (used in) investing activities	(674.2)		(643.2)


Constellation Brands, Inc. Q3 FY ~~2021~~2022 Form 10-Q			#WORTHREACHINGFOR I 5


FINANCIAL STATEMENTS			Table of Contents

CONSTELLATION BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)


		For the Nine Months Ended November 30,					For the Nine Months Ended November 30,
		2020		2019			2021		2020
CASH FLOWS FROM FINANCING ACTIVITIES	CASH FLOWS FROM FINANCING ACTIVITIES					CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt	Proceeds from issuance of long-term debt	1,194.7		1,291.3		Proceeds from issuance of long-term debt	995.6		1,194.7
Principal payments of long-term debt	Principal payments of long-term debt	(2,214.0)		(2,061.0)		Principal payments of long-term debt	(1,363.5)		(2,214.0)
Net proceeds from (repayments of) short-term borrowings	Net proceeds from (repayments of) short-term borrowings	(198.9)		(510.0)		Net proceeds from (repayments of) short-term borrowings	243.0		(198.9)
Dividends paid	Dividends paid	(431.2)		(427.0)		Dividends paid	(430.5)		(431.2)
Purchases of treasury stock	Purchases of treasury stock	0		(50.0)		Purchases of treasury stock	(1,390.5)		—
Proceeds from shares issued under equity compensation plans	Proceeds from shares issued under equity compensation plans	43.2		38.9		Proceeds from shares issued under equity compensation plans	159.7		43.2
Payments of minimum tax withholdings on stock-based payment awards	Payments of minimum tax withholdings on stock-based payment awards	(7.7)		(14.2)		Payments of minimum tax withholdings on stock-based payment awards	(9.8)		(7.7)
Payments of debt issuance, debt extinguishment, and other financing costs	Payments of debt issuance, debt extinguishment, and other financing costs	(18.3)		(8.2)		Payments of debt issuance, debt extinguishment, and other financing costs	(35.0)		(18.3)
Distributions to noncontrolling interests	Distributions to noncontrolling interests	(22.5)		0		Distributions to noncontrolling interests	(36.9)		(22.5)

Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	(1,654.7)		(1,740.2)		Net cash provided by (used in) financing activities	(1,867.9)		(1,654.7)

Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	5.8		(0.1)		Effect of exchange rate changes on cash and cash equivalents	(1.3)		5.8

Net increase (decrease) in cash and cash equivalents	Net increase (decrease) in cash and cash equivalents	71.5		0.1		Net increase (decrease) in cash and cash equivalents	(99.3)		71.5
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	81.4		93.6		Cash and cash equivalents, beginning of period	460.6		81.4
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	152.9	$	93.7	Cash and cash equivalents, end of period	$	361.3	$	152.9

Supplemental disclosures of noncash investing and financing activities	Supplemental disclosures of noncash investing and financing activities					Supplemental disclosures of noncash investing and financing activities

Additions to property, plant, and equipment	Additions to property, plant, and equipment	$	120.4	$	25.4	Additions to property, plant, and equipment	$	223.1	$	120.4

The accompanying notes are an integral part of these statements.


Constellation Brands, Inc. Q3 FY ~~2021~~2022 Form 10-Q			#WORTHREACHINGFOR I 6


FINANCIAL STATEMENTS			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			Table of Contents

CONSTELLATION BRANDS, INC. AND SUBSIDIARIES

NOVEMBER 30, ~~2020~~2021

(unaudited)

1. BASIS OF PRESENTATION

~~Unless the context otherwise requires, the terms “Company,” “CBI,” “we,” “our,” or “us” refer to Constellation Brands, Inc. and its subsidiaries.~~ We have prepared the ~~consolidated financial statements included herein,~~Financial Statements, without audit, pursuant to the rules and regulations of the ~~Securities and Exchange Commission~~SEC applicable to quarterly reporting on Form 10-Q and reflect, in our opinion, all adjustments necessary to present fairly our financial information. All such adjustments are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements, prepared in accordance with generally accepted accounting principles, have been condensed or omitted as permitted by such rules and regulations. These ~~consolidated financial statements and related notes~~Financial Statements should be read in conjunction with the consolidated financial statements and related notes included in ~~our~~the 2021 Annual ~~Report on Form 10-K for the fiscal year ended February 29, 2020 (the “2020 Annual Report”).~~Report. Results of operations for interim periods are not necessarily indicative of annual results.

2. INVENTORIES

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:


		November 30, 2020		February 29, 2020			November 30, 2021		February 28, 2021
(in millions)	(in millions)					(in millions)
Raw materials and supplies	Raw materials and supplies	$	133.6	$	171.7	Raw materials and supplies	$	157.9	$	151.1
In-process inventories	In-process inventories	815.6		814.7		In-process inventories	821.7		735.9
Finished case goods	Finished case goods	427.7		387.2		Finished case goods	539.3		404.1
		$	1,376.9	$	1,373.6		$	1,518.9	$	1,291.1

~~The~~We assess the valuation of our inventories ~~balance at November 30, 2020,~~ and ~~February 29, 2020, exclude amounts reclassified~~reduce the carrying value of those inventories that are obsolete or in excess of our forecasted usage to ~~assets held for sale (see Note 3).~~their estimated net realizable value based on analyses and assumptions including, but not limited to, historical usage, future demand, and market requirements. We evaluatedthe carrying value of certain inventories and recognized the following in cost of product sold within our consolidated results of operations:


	For the Nine Months Ended November 30,				For the Three Months Ended November 30,
	2021 (1)		2020 (2)		2021		2020 (2)
(in millions)
Loss on inventory write-down	$	85.2	$	38.1	$	2.6	$	29.5

(1)

~~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~~recognized a loss predominantly from excess inventory of ~~Owens-Illinois primarily for~~hard seltzers, within the ~~purchase of glass bottles used largely~~Beer segment, resulting from a slowdown in ~~our imported beer portfolio. Amounts purchased under these arrangements were $115.5 million and $155.2 million for~~ the nine months ended November 30, 2020, and November 30, 2019, respectively, and $46.0 million and $28.8 million for the three months ended November 30, 2020, and November 30, 2019, respectively. The decrease in amounts purchased for the nine months ended November 30, 2020, was largely driven by reduced production activityoverall category which occurred in early fiscal 2021 at our Mexican breweries in response to COVID-19 containment measures. The increase in amounts purchased for the three months ended November 30, 2020, was largely driven by efforts to replenish inventory levels in our distribution channels following the reduced production activity in early fiscal 2021.Fiscal 2022.

(2)

~~2020 U.S. wildfires~~

~~In August 2020, significant wildfires broke out in California, Oregon, and Washington states which affected the U.S. grape harvest (“2020 U.S. wildfires”). None~~We recognized of our facilities were damaged. At this time, we continue to expect no material impact to our ability to meet customer demand. 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. For the third quarter of fiscal 2021, we recognized a ~~$26.5 million~~ loss primarily in connection with the write-down of certaingrapes, within the Wine and Spirits segment, as a result of smoke damage sustained during the 2020 U.S. wildfires.

3. ACQUISITIONS AND DIVESTITURES

Acquisitions

My Favorite Neighbor

In November 2021, we acquired the remaining 65% ownership interest in My Favorite Neighbor, a super-luxury, DTC focused wine business. This ~~loss was~~transaction primarily included ~~in cost~~the acquisition of ~~product sold within our~~goodwill, trademarks, inventory, and property, plant, and equipment. In addition, the My Favorite Neighbor transaction includes an earn-out over 10 years based on performance, with a 50% minimum guarantee due at the end of the earn-out


Constellation Brands, Inc. Q3 FY ~~2021~~2022 Form 10-Q			#WORTHREACHINGFOR I 7


FINANCIAL STATEMENTS			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			Table of Contents

~~consolidated~~period. The results of ~~operations. We have insurance coverage that partially covers losses for grapes in our own vineyards. While we~~operations of My Favorite Neighbor are pursuing reimbursement from our insurance carriers, there can be no assurance there will be any recoveries. We test the grapes acquired under our supply contracts for smoke damage and other issues prior to accepting them. During the production process, previously undetected smoke damage could create quality issues that may result in additional write-downs of certain bulk wine inventory in future periods. Additionally, for the third quarter of fiscal 2021, we recognized $20.0 million in unfavorable fixed cost absorption from decreased production levels at certain facilities as period costs in cost of product sold within our consolidated results of operationsreported in the Wine and Spirits segment ~~rather than capitalized~~and have been included in ~~inventories.~~our consolidated results of operations from the date of acquisition.

~~3. ACQUISITIONS, DIVESTITURES, AND BUSINESS TRANSFORMATION~~We recognized a gain of $13.5 million for the nine months and three months ended November 30, 2021, related to the remeasurement of our previously held 35% equity interest in My Favorite Neighbor to the acquisition-date fair value. This gain is included in selling, general, and administrative expenses within our consolidated results of operations. See Note 8 for further discussion.

~~Acquisitions~~

Copper ~~and~~& Kings

In September 2020, we acquired the remaining ownership interest in Copper ~~and Kings American Brandy Company (“Copper and Kings”).~~& Kings. This acquisition included a collection of traditional and craft batch-distilled American brandies and other select spirits. The transaction primarily included the acquisition of ~~inventories~~inventory and property, plant, and equipment. The results of operations of Copper ~~and~~& Kings are reported in the Wine and Spirits segment and have been included in our consolidated results of operations from the date of acquisition.

Empathy Wines

In June 2020, we acquired ~~the~~ Empathy Wines, ~~business,~~ including the acquisition of a digitally-native wine brand ~~(“Empathy Wines”)~~ which ~~strengthens~~strengthened our position in the ~~direct-to-consumer~~DTC and other eCommerce markets. This transaction primarily included the acquisition of goodwill, trademarks, and inventory. In addition, the purchase price for Empathy Wines includes an earn-out over five years based on performance. The results of operations of Empathy Wines are reported in the Wine and Spirits segment and have been included in our consolidated results of operations from the date of acquisition.

~~Nelson’s Green Brier~~

In May 2019, we increased our ownership interest in Nelson’s Green Brier Distillery, LLC (“Nelson’s Green Brier”) to 75%, resulting in consolidation of the business and recognition of a 25% noncontrolling interest. This acquisition included a portfolio of award-winning, Tennessee-based craft bourbon and whiskey products. The fair value of the business combination was allocated primarily to goodwill, trademarks, inventory, and property, plant, and equipment. The results of operations of Nelson’s Green Brier are reported in the Wine and Spirits segment and have been included in our consolidated results of operations from the date of acquisition.

We recognized a gain of $11.8 million for the nine months ended November 30, 2019, related to the remeasurement of our previously held 20% equity interest in Nelson’s Green Brier to the acquisition-date fair value. This gain is included in selling, general, and administrative expenses within our consolidated results of operations.

Divestitures

~~Ballast Point~~Paul Masson Divestiture

On ~~March 2, 2020,~~January 12, 2021, we sold the ~~Ballast Point craft beer business, including a number of its associated production facilities~~Paul Masson Grande Amber Brandy brand, related inventory, and ~~brewpubs (the “Ballast Point Divestiture”).~~interests in certain contracts. The cash proceeds were used for general corporate purposes. Prior to the ~~Ballast Point~~Paul Masson Divestiture, we recorded the results of operations of ~~the Ballast Point craft beer~~our Paul Masson Grande Amber Brandy business in the ~~Beer~~Wine and Spirits segment. The following table summarizes the net gain recognized in connection with this divestiture:


(in millions)
Cash received from buyer	$	272.0
Net assets sold	(206.4)
Contract termination	(4.0)
Direct costs to sell	(3.2)

Gain on sale of business	$	58.4

Wine and Spirits Divestitures

On January 5, 2021, we sold a portion of our wine and spirits business, including lower-margin, lower-growth wine and spirits brands, related inventory, interests in certain contracts, wineries, vineyards, offices, and facilities. We ~~received~~have the potential to earn an incremental $250 million of contingent consideration if certain brand performance targets are met over a two-year period after closing. Also on January 5, 2021, in a separate, but related transaction with the same buyer, we sold the New Zealand-based Nobilo Wine brand and certain related assets. The cash proceeds ~~of $41.1 million, which~~ were ~~primarily~~ utilized to reduce outstanding ~~borrowings.~~debt and for other general corporate purposes.


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FINANCIAL STATEMENTS			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			Table of Contents

~~Black Velvet Divestiture~~

~~On November 1, 2019, we sold~~Prior to the Black Velvet Canadian Whisky business and the brand’s associated production facility, along with a subset of Canadian whisky brands produced at that facility, and related inventory at a transaction value of $266.3 million (the “Black Velvet Divestiture”). We received cash proceeds of $266.7 million, net of post-closing adjustments. The cash proceeds were utilized to partially repay the 2.00% November 2017 senior notes. In total, our Wine and Spirits ~~segment recognized a $70.5 million net gain associated with~~Divestitures, we recorded the ~~Black Velvet Divestiture, with a $74.1 million net gain recognized~~results of operations for this portion of our business in the ~~year ended February 29, 2020,~~Wine and ~~a $3.6 million net loss recognized for the nine months ended November 30, 2020.~~Spirits segment. The following table summarizes the net ~~gain~~loss recognized in connection with ~~this divestiture:~~

these divestitures:


(in millions)
Cash received from buyer ~~net of post-closing adjustments paid~~				$	~~266.7~~667.4
Net assets sold	(669.1)
Transition services agreements	~~(213.3)~~(13.0)
Direct costs to sell	(8.5)
AOCI reclassification adjustments, primarily foreign currency translation			~~20.9~~ (5.1)
~~Direct costs to sell~~Other			~~(3.8)~~(5.2)


~~Gain~~Loss on sale of business		$	~~70.5~~ (33.5)

Concentrate Business ~~transformation~~Divestiture

On December 29, 2020, we sold certain brands used in our concentrates and high-color concentrate business, and certain related intellectual property, inventory, interests in certain contracts, and other ~~updates~~

~~We have committed~~assets. Prior to athe Concentrate Business Divestiture, we recorded the results of operations of our concentrates and high-color concentrate business ~~transformation strategy which aligns our portfolio with consumer-led premiumization trends and growing segments of~~in the Wine and Spirits ~~and Beer markets.~~segment.

~~Original Wine~~Ballast Point Divestiture

On March 2, 2020, we sold the Ballast Point craft beer business, including a number of its associated production facilities and ~~Spirits Transaction~~brewpubs. Prior to the Ballast Point Divestiture, we recorded the results of operations of the Ballast Point craft beer business in the Beer segment. We received cash proceeds of $41.1 million, which were primarily utilized to reduce outstanding borrowings.

Subsequent event

Other acquisition

In ~~April 2019,~~December 2021, we ~~entered into~~acquired a ~~definitive agreement to sell a portion of our~~previously leased wine and spirits ~~business, including approximately 30 lower-margin, lower-growth wine and spirits brands, wineries, vineyards, offices, and facilities (the “Original Wine and Spirits Transaction”).~~distribution facility located in Lodi, California.

~~Wine~~

4. DERIVATIVE INSTRUMENTS

Overview

Our risk management and ~~Spirits Transactions~~

~~In December 2019, we agreed to revise~~derivative accounting policies are presented in Notes 1 and ~~supersede~~6 of our consolidated financial statements included in our 2021 Annual Report and have not changed significantly for the ~~Original Wine~~nine months and Spirits Transaction. The revisions to the transaction were intended to address competitive concerns raised by the U.S. Federal Trade Commission (the “FTC”) specifically related to the sparkling wine, brandy, dessert wine, and concentrate categories. As a result, the brands Cook’s California Champagne, J. Roget American Champagne, Paul Masson Grande Amber Brandy, and our concentrate business were excluded from the Original Wine and Spirits Transaction (the “Revised Wine and Spirits Transaction”). In May 2020, we further amended the Revised Wine and Spirits Transaction to also exclude the Mission Bell Winery in Madera, California and certain related real estate, equipment, contracts, and employees, resulting in an adjusted base transaction price of approximately $783 million, subject to purchase price and closing adjustments, with the potential to earn an incremental $250 million of contingent consideration if certain brand performance targets are met over a two-year period after closing (the “Further Revised Wine and Spirits Transaction”). Additionally, in a separate, but related, transaction with the same buyer, we entered into a definitive agreement to sell the New Zealand-based Nobilo Wine brand and certain related assets and liabilities for a base transaction price of $130 million, subject to purchase price and closing adjustments (the “Nobilo Wine Transaction”). For additional information on the Further Revised Wine and Spirits Transaction and the Nobilo Wine Transaction (collectively, the “Wine and Spirits Transactions”) refer to “Subsequent events - Wine and Spirits Transactions” below.three months ended November 30, 2021.

We have ~~communicated our intent~~an investment in certain equity securities and other rights which provide us with the option to ~~retain the brands Cook’s California Champagne and J. Roget American Champagne and the Mission Bell Winery contemplated to be sold~~purchase an additional ownership interest in the ~~Original Wine~~equity securities of Canopy (see Note 8). This investment is included in securities measured at fair value and ~~Spirits Transaction. The Mission Bell Winery has~~is accounted for at fair value, with the ~~production capability to support these retained brands.~~net gain (loss) from the changes in fair value of this investment recognized in income (loss) from unconsolidated investments (see Note 5).

~~Paul Masson Transaction~~The aggregate notional value of outstanding derivative instruments is as follows:

In June 2020, we entered into a definitive agreement to sell the Paul Masson Grande Amber Brandy brand, related inventory, and interests in certain contracts with a current estimated aggregate purchase price of approximately $265 million, subject to certain purchase price and closing adjustments (the “Paul Masson Transaction”). For additional information refer to “Subsequent events - Paul Masson Transaction” below.


	November 30, 2021		February 28, 2021
(in millions)
Derivative instruments designated as hedging instruments
Foreign currency contracts	$	1,722.7	$	1,558.0




Derivative instruments not designated as hedging instruments
Foreign currency contracts	$	522.1	$	704.7
Commodity derivative contracts	$	243.5	$	221.6


Constellation Brands, Inc. Q3 FY ~~2021~~2022 Form 10-Q			#WORTHREACHINGFOR I 9


FINANCIAL STATEMENTS			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			Table of Contents

~~Concentrate Business Transaction~~

In June 2020, we entered into a definitive agreement to sell certain brands used in our concentrates and high-color concentrate business, and certain intellectual property, inventory, goodwill, interests in certain contracts, assets, and liabilities of our concentrates and high-color concentrate business (the “Concentrate Business Transaction”). For additional information refer to “Subsequent events - Concentrate Business Transaction” below.

~~Assets held for sale~~

Primarily in contemplation of the Wine and Spirits segment transactions noted above, certain net assets met the held for sale criteria as of November 30, 2020, and February 29, 2020. For the nine months and three months ended November 30, 2020, long-lived asset impairments of $24.0 million and $21.0 million were recognized, respectively. For the nine months and three months ended November 30, 2019, long-lived asset impairments of $417.0 million and $390.0 million were recognized, respectively. For additional information refer to Note 5.

~~The carrying value of assets held for sale consist of the following:~~

November 30,
2020 February 29, 2020
Wine and Spirits
Beer (1)
Wine and Spirits Consolidated
(in millions)
Assets
Accounts receivable $ 0 $ 2.4 $ 0 $ 2.4
Inventories 526.7 13.7 576.9 590.6
Prepaid expenses and other 19.7 2.8 32.7 35.5
Assets held for sale - current 546.4 18.9 609.6 628.5
Property, plant, and equipment 134.0 55.9 172.6 228.5
Goodwill 274.0 4.7 304.3 309.0
Intangible assets 378.9 28.2 384.0 412.2
Equity method investments 0.3 0 1.0 1.0
Other assets 29.3 24.8 26.3 51.1
Less: Reserve for assets held for sale (431.0) (42.7) (407.0) (449.7)
Assets held for sale 385.5 70.9 481.2 552.1
Liabilities
Accounts payable 0.1 0.2 0.6 0.8
Other accrued expenses and liabilities 20.0 11.0 17.8 28.8
Deferred income taxes and other liabilities 1.1 33.3 0 33.3
Liabilities held for sale (2)
21.2 44.5 18.4 62.9
Net assets held for sale $ 910.7 $ 45.3 $ 1,072.4 $ 1,117.7

~~(1)In March 2020, we completed the Ballast Point Divestiture.~~

~~(2)Liabilities held for sale are included in the Consolidated Balance Sheets at November 30, 2020, and February 29, 2020, within the respective liability line items noted above.~~


~~Constellation Brands, Inc. Q3 FY 2021 Form 10-Q~~			~~#WORTHREACHINGFOR~~ I10


~~FINANCIAL STATEMENTS~~			~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~			~~Table of Contents~~

~~Wine and spirits optimization~~

~~We recognized charges in connection with our business transformation strategy which aligns our portfolio with consumer-led premiumization trends within the Wine and Spirits segment as follows:~~

For the Nine Months
Ended November 30, For the Three Months
Ended November 30,
Results of Operations Location 2020 2019 2020 2019
(in millions)
Loss on inventory write-downs Cost of product sold $ 4.7 $ 102.6 $ 0.7 $ 61.7
Contract termination costs Cost of product sold 16.9 20.1 0 0
Employee termination costs Selling, general, and administrative expenses 3.5 12.3 1.0 0.2
Other costs Selling, general, and administrative expenses 9.7 8.0 8.7 1.7
Impairment of long-lived assets Impairment of assets held for sale 24.0 367.0 21.0 340.0
$ 58.8 $ 510.0 $ 31.4 $ 403.6

~~Mexicali Brewery~~

In fiscal 2017, we began construction of a new, state-of-the-art brewery located in Mexicali, Baja California, Mexico (the “Mexicali Brewery”). In March 2020, a public consultation was held on the construction of the Mexicali Brewery. We are in discussions with government officials in Mexico regarding next steps for our brewery construction project and options elsewhere in the country following the negative result of the public consultation. These discussions have been positive and we intend to continue working with government officials to mutually agree upon a path forward. At this time, we have paused all Mexicali Brewery construction activities. In the medium-term, we have ample capacity, based on current growth forecasts and production capabilities, under normal operating conditions, at the Nava and Obregon breweries, to meet consumer needs. We are continuing to evaluate a variety of alternatives for the Mexicali Brewery and related assets, including transferring certain assets to different locations in Mexico, where possible. Future impairments may result for any capitalized amounts that are not deemed recoverable based upon our plans for these assets. As of November 30, 2020, we have approximately $710 million of capitalized fixed assets remaining at the Mexicali Brewery. In addition to the capitalized costs, we have incurred other expenses in establishing the Mexicali Brewery.

~~Subsequent events~~

~~Wine and Spirits Transactions~~

In January 2021, we sold a portion of our wine and spirits business, including lower-margin, lower-growth wine and spirits brands, wineries, vineyards, offices, and facilities. We received cash proceeds of $559.5 million, ~~subject to certain post-closing~~ adjustments from the Further Revised Wine and Spirits Transaction. In addition, we have the potential to earn an incremental $250 million of contingent consideration if certain brand performance targets are met over a two-year period after closing. The cash proceeds received in January 2021 from the Further Revised Wine and Spirits Transaction were less than the adjusted base transaction price largely due to delayed timing of the transaction and subsequent changes in inventory originally intended to transfer in the sale. In January 2021, in a separate but related transaction, we also sold the New Zealand-based Nobilo Wine brand and certain related assets. We received cash proceeds of $129.1 million, ~~subject to certain post-closing~~ adjustments from the Nobilo Wine Transaction. The cash proceeds from these transactions will be utilized to repay the 3.75% May 2013 Senior Notes (as defined in Note 9) and for other general corporate purposes. A gain or loss in connection with the Wine and Spirits Transactions is not expected to be material and will be subject to final adjustments, including the allocation of goodwill. If a gain or loss is determined, it will be recognized in the fourth quarter of fiscal 2021.

~~Paul Masson Transaction~~

In December 2020, we received FTC clearance to close the Paul Masson Transaction. In the fourth quarter of fiscal 2021, we currently expect to receive cash proceeds of approximately $265 million, subject to certain closing and post-closing adjustments. The net cash proceeds will be used for other general corporate purposes.


~~Constellation Brands, Inc. Q3 FY 2021 Form 10-Q~~			~~#WORTHREACHINGFOR~~ I11


~~FINANCIAL STATEMENTS~~			~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~			~~Table of Contents~~

~~Concentrate Business Transaction~~

In December 2020, we sold certain brands used in our concentrates and high-color concentrate business, and certain intellectual property, inventory, goodwill, interests in certain contracts, and assets of our concentrates and high-color concentrate business. Prior to the completion of the Concentrate Business Transaction, we recorded the results of operations of our concentrates and high-color concentrate business in the Wine and Spirits segment.

~~4. DERIVATIVE INSTRUMENTS~~

~~Overview~~

Our risk management and derivative accounting policies are presented in Notes 1 and 6 of our consolidated financial statements included in our 2020 Annual Report and have not changed significantly for the nine months and three months ended November 30, 2020.

We have investments in certain equity securities and other rights which provide us with the option to purchase an additional ownership interest in the equity securities of Canopy (see Note 8). These investments are included in securities measured at fair value and are accounted for at fair value, with the net gain (loss) from the changes in fair value of these investments recognized in income (loss) from unconsolidated investments (see Note 5).

~~The aggregate notional value of outstanding derivative instruments is as follows:~~

November 30,
2020 February 29,
2020
(in millions)
Derivative instruments designated as hedging instruments
Foreign currency contracts $ 1,608.5 $ 1,831.0
Interest rate swap contracts $ 0 $ 375.0
Treasury lock contracts $ 0 $ 300.0
Derivative instruments not designated as hedging instruments
Foreign currency contracts $ 405.1 $ 1,180.2
Commodity derivative contracts $ 226.9 $ 282.8

Credit risk

We are exposed to credit-related losses if the counterparties to our derivative contracts default. This credit risk is limited to the fair value of the derivative contracts. To manage this risk, we contract only with major financial institutions that have earned investment-grade credit ratings and with whom we have standard International Swaps and Derivatives Association agreements which allow for net settlement of the derivative contracts. We have also established counterparty credit guidelines that are regularly monitored. Because of these safeguards, we believe the risk of loss from counterparty default to be immaterial.

In addition, our derivative instruments are not subject to credit rating contingencies or collateral requirements. As of November 30, ~~2020,~~2021, the estimated fair value of derivative instruments in a net liability position due to counterparties was ~~$0.9~~$20.1 million. If we were required to settle the net liability position under these derivative instruments on November 30, ~~2020,~~2021, we would have had sufficient available liquidity on hand to satisfy this obligation.

Results of period derivative activity

The estimated fair value and location of our derivative instruments on our balance sheets are as follows (see Note 5):


Assets					Liabilities
	November 30, 2021		February 28, 2021			November 30, 2021		February 28, 2021
(in millions)
Derivative instruments designated as hedging instruments
Foreign currency contracts:
Prepaid expenses and other	$	8.8	$	32.0	Other accrued expenses and liabilities	$	18.6	$	3.5
Other assets	$	6.7	$	41.3	Deferred income taxes and other liabilities	$	42.7	$	2.7









Derivative instruments not designated as hedging instruments
Foreign currency contracts:
Prepaid expenses and other	$	5.5	$	3.3	Other accrued expenses and liabilities	$	10.5	$	3.5
Commodity derivative contracts:
Prepaid expenses and other	$	28.2	$	13.4	Other accrued expenses and liabilities	$	2.9	$	3.9
Other assets	$	17.6	$	7.8	Deferred income taxes and other liabilities	$	1.2	$	1.4

The principal effect of our derivative instruments designated in cash flow hedging relationships on our results of operations, as well as OCI, net of income tax effect, is as follows:


Derivative Instruments in Designated Cash Flow Hedging Relationships	Net Gain (Loss) Recognized in OCI		Location of Net Gain (Loss) Reclassified from AOCI to Income (Loss)	Net Gain (Loss) Reclassified from AOCI to Income (Loss)
(in millions)
For the Nine Months Ended November 30, 2021
Foreign currency contracts	$	(75.7)	Sales	$	(0.8)
			Cost of product sold	30.4


Treasury lock contracts	—		Interest expense	(1.8)
	$	(75.7)		$	27.8


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FINANCIAL STATEMENTS			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			Table of Contents

~~Results of period derivative activity~~

~~The estimated fair value and location of our derivative instruments on our balance sheets are as follows (see Note 5):~~

Assets Liabilities
November 30,
2020 February 29,
2020 November 30,
2020 February 29,
2020
(in millions)
Derivative instruments designated as hedging instruments
Foreign currency contracts:
Prepaid expenses and other $ 37.7 $ 47.8 Other accrued expenses and liabilities $ 3.6 $ 13.0
Other assets $ 52.6 $ 39.5 Deferred income taxes and other liabilities $ 1.1 $ 7.1
Interest rate swap contracts:
Prepaid expenses and other $ 0 $ 0 Other accrued expenses and liabilities $ 0 $ 0.8
Treasury lock contracts:
Prepaid expenses and other $ 0 $ 0 Other accrued expenses and liabilities $ 0 $ 7.6
Derivative instruments not designated as hedging instruments
Foreign currency contracts:
Prepaid expenses and other $ 3.9 $ 9.0 Other accrued expenses and liabilities $ 1.7 $ 14.3
Commodity derivative contracts:
Prepaid expenses and other $ 6.2 $ 0.5 Other accrued expenses and liabilities $ 12.3 $ 25.4
Other assets $ 4.2 $ 0.1 Deferred income taxes and other liabilities $ 8.0 $ 15.5

The principal effect of our derivative instruments designated in cash flow hedging relationships on our results of operations, as well as Other Comprehensive Income (Loss) (“OCI”), net of income tax effect, is as follows:

Derivative Instruments in
Designated Cash Flow
Hedging Relationships Net
Gain (Loss)
Recognized
in OCI Location of Net Gain (Loss)
Reclassified from
AOCI to Income (Loss) Net
Gain (Loss)
Reclassified
from AOCI
to Income (Loss)
(in millions)
For the Nine Months Ended November 30, 2020
Foreign currency contracts $ (21.3) Sales $ 1.1
Cost of product sold (32.2)
Interest rate swap contracts (0.6) Interest expense (1.1)
Treasury lock contracts (16.1) Interest expense (1.3)
$ (38.0) $ (33.5)
For the Nine Months Ended November 30, 2019
Foreign currency contracts $ 25.7 Sales $ 0
Cost of product sold 11.6
Interest rate swap contracts (0.4) Interest expense 0
$ 25.3 $ 11.6


~~Constellation Brands, Inc. Q3 FY 2021 Form 10-Q~~			~~#WORTHREACHINGFOR~~ I13


~~FINANCIAL STATEMENTS~~			~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~			~~Table of Contents~~


Derivative Instruments in Designated Cash Flow Hedging Relationships	Derivative Instruments in Designated Cash Flow Hedging Relationships	Net Gain (Loss) Recognized in OCI		Location of Net Gain (Loss) Reclassified from AOCI to Income (Loss)	Net Gain (Loss) Reclassified from AOCI to Income (Loss)		Derivative Instruments in Designated Cash Flow Hedging Relationships	Net Gain (Loss) Recognized in OCI		Location of Net Gain (Loss) Reclassified from AOCI to Income (Loss)	Net Gain (Loss) Reclassified from AOCI to Income (Loss)
(in millions)	(in millions)						(in millions)
For the Nine Months Ended November 30, 2020							For the Nine Months Ended November 30, 2020
Foreign currency contracts							Foreign currency contracts	$	(21.3)	Sales	$	1.1
										Cost of product sold	(32.2)
Interest rate swap contracts							Interest rate swap contracts	(0.6)		Interest expense	(1.1)
Treasury lock contracts							Treasury lock contracts	(16.1)		Interest expense	(1.3)
								$	(38.0)		$	(33.5)

For the Three Months Ended November 30, 2021							For the Three Months Ended November 30, 2021
Foreign currency contracts							Foreign currency contracts	$	(87.4)	Sales	$	(0.4)
										Cost of product sold	8.8

Treasury lock contracts							Treasury lock contracts	—		Interest expense	(0.3)
								$	(87.4)		$	8.1

For the Three Months Ended November 30, 2020	For the Three Months Ended November 30, 2020						For the Three Months Ended November 30, 2020
Foreign currency contracts	Foreign currency contracts	$	134.7	Sales	$	0.2	Foreign currency contracts	$	134.7	Sales	$	0.2
				Cost of product sold	(5.0)					Cost of product sold	(5.0)

Treasury lock contracts	Treasury lock contracts	0		Interest expense	(0.6)		Treasury lock contracts	—		Interest expense	(0.6)
		$	134.7		$	(5.4)		$	134.7		$	(5.4)

For the Three Months Ended November 30, 2019
Foreign currency contracts		$	61.3	Sales	$	0
				Cost of product sold	3.8
Interest rate swap contracts		0.2		Interest expense	0
		$	61.5		$	3.8

We expect ~~$32.5~~$10.5 million of net ~~gains,~~losses, net of income tax effect, to be reclassified from ~~accumulated other comprehensive income (loss) (“AOCI”)~~AOCI to our results of operations within the next 12 months.

The effect of our undesignated derivative instruments on our results of operations is as follows:

Derivative Instruments Not
Designated as Hedging Instruments

Location of Net Gain (Loss)
Recognized in Income (Loss)

Net
Gain (Loss)
Recognized
in Income (Loss)

(in millions)

For the Nine Months Ended November 30, 2021

Commodity derivative contracts

Cost of product sold

48.1

Foreign currency contracts

Selling, general, and administrative expenses

(19.4)

28.7

For the Nine Months Ended November 30, 2020

Commodity derivative contracts

Cost of product sold

(0.3)

Foreign currency contracts

Selling, general, and administrative expenses

(18.1)

(18.4)

For the ~~Nine~~Three Months Ended November 30, ~~2019~~2021

Commodity derivative contracts

Cost of product sold

~~(23.7)~~—

Foreign currency contracts

Selling, general, and administrative expenses

~~(7.4)~~(11.0)

~~(31.1)~~(11.0)


Constellation Brands, Inc. Q3 FY 2022 Form 10-Q			#WORTHREACHINGFOR I11


FINANCIAL STATEMENTS			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			Table of Contents

Derivative Instruments Not
Designated as Hedging Instruments

Location of Net Gain (Loss)
Recognized in Income (Loss)

Net
Gain (Loss)
Recognized
in Income (Loss)

(in millions)

For the Three Months Ended November 30, 2020

Commodity derivative contracts

Cost of product sold

9.1

Foreign currency contracts

Selling, general, and administrative expenses

1.9

11.0

~~For the Three Months Ended November 30, 2019~~

~~Commodity derivative contracts~~

~~Cost of product sold~~

~~3.1~~

~~Foreign currency contracts~~

~~Selling, general and administrative expenses~~

~~1.5~~

~~4.6~~


~~Constellation Brands, Inc. Q3 FY 2021 Form 10-Q~~			~~#WORTHREACHINGFOR~~ I14


~~FINANCIAL STATEMENTS~~			~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~			~~Table of Contents~~

5. FAIR VALUE OF FINANCIAL INSTRUMENTS

Authoritative guidance establishes a framework for measuring fair value, including a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The hierarchy includes three levels:

•Level 1 inputs are quoted prices in active markets for identical assets or liabilities;

•Level 2 inputs include data points that are observable such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) such as volatility, interest rates, and yield curves that are observable for the asset and liability, either directly or indirectly; and

•Level 3 inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.

Fair value methodology

The following methods and assumptions are used to estimate the fair value for each class of our financial instruments:

Foreign currency and commodity derivative contracts

The fair value is estimated using market-based inputs, obtained from independent pricing services, entered into valuation models. These valuation models require various inputs, including contractual terms, market foreign exchange prices, market commodity prices, interest-rate yield curves, and currency volatilities, as applicable (Level 2 fair value measurement).

~~Interest rate swap and treasury lock contracts~~

The fair value is estimated based on quoted market prices from respective counterparties. Quotes are corroborated by using discounted cash flow calculations based upon forward interest-rate yield curves, which are obtained from independent pricing services (Level 2 fair value measurement).

Canopy ~~investments~~investment

Equity securities, Warrants – The November 2018 Canopy Warrants consist of three tranches of warrants, including 88.5 million Tranche A Warrants expiring November 1, 2023, which are currently exercisable, 38.4 million Tranche B Warrants expiring November 1, 2026, and 12.8 million Tranche C Warrants expiring November 1, 2026. The inputs used to estimate the fair value of the November 2018 Canopy ~~warrants (all as defined in Note 8)~~Warrants are as ~~follows:~~follows(1) (2):


		November 30, 2020 (1) (2)						February 29, 2020 (2)										November 30, 2021						February 28, 2021
		Tranche A Warrants (3)			Tranche B Warrants (4)			Tranche A Warrants (3)			Tranche B Warrants (4)			November 2017 Canopy Warrants (3)				Tranche A Warrants (3)			Tranche B Warrants (4)			Tranche A Warrants (3)			Tranche B Warrants (4)
Exercise price (5)	Exercise price (5)	C$	50.40		C$	76.68		C$	50.40		C$	76.68		C$	12.98		Exercise price (5)	C$	50.40		C$	76.68		C$	50.40		C$	76.68
Valuation date stock price (6)	Valuation date stock price (6)	C$	37.32		C$	37.32		C$	25.17		C$	25.17		C$	25.17		Valuation date stock price (6)	C$	13.72		C$	13.72		C$	41.90		C$	41.90
Remaining contractual term (7)	Remaining contractual term (7)	2.9 years			5.9 years			3.7 years			6.7 years			0.2 years			Remaining contractual term (7)	1.9 years			4.9 years			2.7 years			5.7 years
Expected volatility (8)	Expected volatility (8)	70.0		%	70.0		%	70.0		%	70.0		%	105.3		%	Expected volatility (8)	75.0		%	75.0		%	70.0		%	70.0		%
Risk-free interest rate (9)	Risk-free interest rate (9)	0.3		%	0.5		%	1.1		%	1.1		%	1.5		%	Risk-free interest rate (9)	1.0		%	1.4		%	0.5		%	1.1		%
Expected dividend yield (10)	Expected dividend yield (10)	0.0		%	0.0		%	0.0		%	0.0		%	0.0		%	Expected dividend yield (10)	0.0		%	0.0		%	0.0		%	0.0		%

(1)The November 2017 Canopy Warrants were exercised on May 1, 2020 and as such are not included in the table as of November 30, 2020. For additional information on the November 2017 Canopy Warrants and the related exercise, refer to Note 8.

~~(2)~~The exercise price for the Tranche C Warrants is based on the ~~volume-weighted average of the closing market price of Canopy’s common shares on the Toronto Stock Exchange (“TSX”) for the five trading days immediately preceding the exercise date and~~VWAP Exercise Price. The Tranche C Warrants are not included in the table as there is no fair value assigned.


Constellation Brands, Inc. Q3 FY 2022 Form 10-Q			#WORTHREACHINGFOR I12


FINANCIAL STATEMENTS			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			Table of Contents

(2)In connection with the Acreage Transaction, we obtained other rights which include a share repurchase credit. If Canopy has not purchased the lesser of 27,378,866 Canopy common shares, or C$1,583.0 million worth of Canopy common shares for cancellation between April 18, 2019, and two-years after the full exercise of the Tranche A Warrants, we will be credited an amount that will reduce the aggregate exercise price otherwise payable upon each exercise of the Tranche B Warrants and Tranche C Warrants. The credit will be an amount equal to the difference between C$1,583.0 million and the actual price paid by Canopy in purchasing its common shares for cancellation. The likelihood of receiving the share repurchase credit if we were to fully exercise the Tranche A Warrants is remote, therefore, no fair value has been assigned.

(3)The fair value is estimated using the Black-Scholes option-pricing model (Level 2 fair value measurement).

(4)The fair value is estimated using Monte Carlo simulations (Level 2 fair value measurement).

(5)Based on the exercise price from the applicable underlying agreements.


~~Constellation Brands, Inc. Q3 FY 2021 Form 10-Q~~			~~#WORTHREACHINGFOR~~ I15


~~FINANCIAL STATEMENTS~~			~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~			~~Table of Contents~~

(6)Based on the closing market price for Canopy common stock on the TSX as of the applicable date.

(7)Based on the ~~following~~ expiration ~~dates for~~date of the ~~November 2017 Canopy Warrants and November 2018 Canopy Warrants (all as defined in Note 8):~~warrants.


~~November 2017 Canopy Warrants~~						~~May 1, 2020~~
~~Tranche A Warrants~~						~~November 1, 2023~~
~~Tranche B Warrants~~						~~November 1, 2026~~

(8)Based on consideration of historical and/or implied volatility levels of the underlying equity security and limited consideration of historical peer group volatility levels.

(9)Based on the implied yield currently available on Canadian Treasury zero coupon issues with a remaining term equal to the expiration date of the applicable warrants.

(10)Based on historical dividend levels.

Debt securities, Convertible – We have elected the fair value option to account for ~~convertible debt securities issued by~~the Canopy Debt Securities acquired in June 2018 for C$200.0 million, or $150.5 ~~million (the “Canopy Debt Securities”).~~million. Interest income on the Canopy Debt Securities is calculated using the effective interest method and is recognized separately from the changes in fair value in interest expense. The Canopy Debt Securities have a contractual maturity of five years from the date of issuance but may be converted prior to maturity by either party upon the occurrence of certain events. At settlement, the Canopy Debt Securities can be settled at the option of the issuer, in cash, equity shares of the issuer, or a combination thereof. The fair value is estimated using a binomial lattice option-pricing model (Level 2 fair value measurement), which includes an estimate of the credit spread based on ~~the implied spread~~market spreads using bond data as of the ~~issuance date of the notes and changes in market spreads through the~~ valuation ~~date of the notes.~~date.

The inputs used to estimate the fair value of the Canopy Debt Securities are as follows:


		November 30, 2020			February 29, 2020				November 30, 2021			February 28, 2021
Conversion price (1)	Conversion price (1)	C$	48.17		C$	48.17		Conversion price (1)	C$	48.17		C$	48.17
Valuation date stock price (2)	Valuation date stock price (2)	C$	37.32		C$	25.17		Valuation date stock price (2)	C$	13.72		C$	41.90
Remaining term (3)	Remaining term (3)	2.6 years			3.4 years			Remaining term (3)	1.6 years			2.4 years
Expected volatility (4)	Expected volatility (4)	59.9		%	58.2		%	Expected volatility (4)	75.0		%	57.6		%
Risk-free interest rate (5)	Risk-free interest rate (5)	0.3		%	1.1		%	Risk-free interest rate (5)	0.8		%	0.4		%
Expected dividend yield (6)	Expected dividend yield (6)	0.0		%	0.0		%	Expected dividend yield (6)	0.0		%	0.0		%

(1)Based on the rate which the Canopy Debt Securities may be converted into equity shares, or the equivalent amount of cash, at the option of the issuer.

(2)Based on the closing market price for Canopy common stock on the TSX as of the applicable date.

(3)Based on the contractual maturity date of the notes.

(4)Based on consideration of historical and/or implied volatility levels of the underlying equity security, ~~reduced~~adjusted for certain risks associated with debt ~~securities.~~securities, as appropriate.

(5)Based on the implied yield currently available on Canadian Treasury zero coupon issues with a term equal to the remaining contractual term of the ~~debt securities.~~Canopy Debt Securities.

(6)Based on historical dividend levels.

~~Short-term borrowings~~

The revolving credit facility under our senior credit facility is a variable interest rate bearing note with a fixed margin, adjustable based upon our debt rating (as defined in our senior credit facility). Its fair value is estimated by discounting cash flows using LIBOR plus a margin reflecting current market conditions obtained from participating member financial institutions (Level 2 fair value measurement). The remaining instruments, including


Constellation Brands, Inc. Q3 FY ~~2021~~2022 Form 10-Q			#WORTHREACHINGFOR I 1613


FINANCIAL STATEMENTS			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			Table of Contents

Short-term borrowings

Our short-term borrowings consist of our commercial paper ~~are~~program and the revolving credit facility under our 2020 Credit Agreement. The revolving credit facility is a variable interest rate bearing ~~notes for which~~note with a fixed margin, adjustable based upon our debt rating (as defined in our senior credit facility). For these short-term borrowings the carrying value approximates the fair value.

Long-term debt

The term loan under our ~~March 2020~~June 2021 Term Credit Agreement ~~(as defined in Note 9)~~ is a variable interest rate bearing note with a fixed margin, adjustable based upon our debt rating. The carrying value approximates the fair value of the term loan. The fair value of the remaining fixed interest rate long-term debt is estimated by discounting cash flows using interest rates currently available for debt with similar terms and maturities (Level 2 fair value measurement).

The carrying amounts of certain of our financial instruments, including cash and cash equivalents, accounts receivable, and accounts payable, ~~and short-term borrowings,~~ approximate fair value as of November 30, ~~2020,~~2021, and February ~~29, 2020,~~28, 2021, due to the relatively short maturity of these instruments. As of November 30, ~~2020,~~2021, the carrying amount of long-term debt, including the current portion, was ~~$10,944.5~~$10,089.5 million, compared with an estimated fair value of ~~$12,486.7~~$10,995.5 million. As of February ~~29, 2020,~~28, 2021, the carrying amount of long-term debt, including the current portion, was ~~$11,945.7~~$10,442.3 million, compared with an estimated fair value of ~~$12,935.9~~$11,580.9 million.

Recurring basis measurements

The following table presents our financial assets and liabilities measured at estimated fair value on a recurring basis:


		Fair Value Measurements Using									Fair Value Measurements Using
		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total			Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
(in millions)	(in millions)									(in millions)
November 30, 2020
November 30, 2021										November 30, 2021
Assets:	Assets:									Assets:
Foreign currency contracts	Foreign currency contracts	$	0	$	94.2	$	0	$	94.2	Foreign currency contracts	$	—	$	21.0	$	—	$	21.0
Commodity derivative contracts	Commodity derivative contracts	$	0	$	10.4	$	0	$	10.4	Commodity derivative contracts	$	—	$	45.8	$	—	$	45.8

Equity securities (1)	Equity securities (1)	$	0	$	1,377.7	$	0	$	1,377.7	Equity securities (1)	$	—	$	143.3	$	—	$	143.3
Canopy Debt Securities (1)	Canopy Debt Securities (1)	$	0	$	158.5	$	0	$	158.5	Canopy Debt Securities (1)	$	—	$	146.5	$	—	$	146.5

Liabilities:	Liabilities:									Liabilities:
Foreign currency contracts	Foreign currency contracts	$	0	$	6.4	$	0	$	6.4	Foreign currency contracts	$	—	$	71.8	$	—	$	71.8
Commodity derivative contracts	Commodity derivative contracts	$	0	$	20.3	$	0	$	20.3	Commodity derivative contracts	$	—	$	4.1	$	—	$	4.1

February 29, 2020

February 28, 2021										February 28, 2021
Assets:	Assets:									Assets:
Foreign currency contracts	Foreign currency contracts	$	0	$	96.3	$	0	$	96.3	Foreign currency contracts	$	—	$	76.6	$	—	$	76.6
Commodity derivative contracts	Commodity derivative contracts	$	0	$	0.6	$	0	$	0.6	Commodity derivative contracts	$	—	$	21.2	$	—	$	21.2
Equity securities (1)	Equity securities (1)	$	0	$	991.5	$	0	$	991.5	Equity securities (1)	$	—	$	1,639.7	$	—	$	1,639.7
Canopy Debt Securities (1)	Canopy Debt Securities (1)	$	0	$	125.6	$	0	$	125.6	Canopy Debt Securities (1)	$	—	$	176.3	$	—	$	176.3
Liabilities:	Liabilities:									Liabilities:
Foreign currency contracts	Foreign currency contracts	$	0	$	34.4	$	0	$	34.4	Foreign currency contracts	$	—	$	9.7	$	—	$	9.7
Commodity derivative contracts	Commodity derivative contracts	$	0	$	40.9	$	0	$	40.9	Commodity derivative contracts	$	—	$	5.3	$	—	$	5.3
Interest rate swap contracts		$	0	$	0.8	$	0	$	0.8
Treasury lock contracts		$	0	$	7.6	$	0	$	7.6


Constellation Brands, Inc. Q3 FY ~~2021~~2022 Form 10-Q			#WORTHREACHINGFOR I 1714


FINANCIAL STATEMENTS			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			Table of Contents

(1) Unrealized net gain (loss) from the changes in fair value of our securities measured at fair value recognized in income (loss) from unconsolidated investments, are as follows:
For the Nine Months
Ended November 30, For the Three Months
Ended November 30,
2020 2019 2020 2019
(in millions)
November 2017 Canopy Warrants (i)
$ (61.8) $ (542.7) $ 0 $ (91.9)
November 2018 Canopy Warrants (ii)
561.3 (1,561.2) 741.9 (426.8)
Canopy Debt Securities 25.2 (97.0) 27.7 (15.6)
$ 524.7 $ (2,200.9) $ 769.6 $ (534.3)
(i) The November 2017 Canopy Warrants were exercised in May 2020. For additional information on the November 2017 Canopy Warrants and the related exercise, refer to Note 8.
(ii) The terms of the November 2018 Canopy Warrants were modified in June 2019. For additional information on the November 2018 Canopy Warrants and the related modification, refer to Note 8. The amounts for the nine months ended November 30, 2019, are net of a $1,176.0 million unrealized gain resulting from the June 2019 Warrant Modification.


(1)	Unrealized net gain (loss) from the changes in fair value of our securities measured at fair value recognized in income (loss) from unconsolidated investments, are as follows:
			For the Nine Months Ended November 30,				For the Three Months Ended November 30,
			2021		2020		2021		2020
	(in millions)
	November 2017 Canopy Warrants (i)		$	—	$	(61.8)	$	—	$	—
	November 2018 Canopy Warrants		(1,496.4)		561.3		(189.4)		741.9
	Canopy Debt Securities		(38.4)		25.2		(10.3)		27.7
			$	(1,534.8)	$	524.7	$	(199.7)	$	769.6

	(i)	In May 2020, we exercised the November 2017 Canopy Warrants at an exercise price of C$12.98 per warrant share for C$245.0 million, or $173.9 million, and received 18.9 million common shares of Canopy.

Nonrecurring basis measurements

The following table presents our assets and liabilities measured at estimated fair value on a nonrecurring basis for which an impairment assessment was performed for the periods presented:


		Fair Value Measurements Using									Fair Value Measurements Using
		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Losses			Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Losses
(in millions)	(in millions)									(in millions)
For the Nine Months Ended November 30, 2021										For the Nine Months Ended November 30, 2021
Long-lived assets										Long-lived assets	$	—	$	—	$	20.0	$	665.9

For the Nine Months Ended November 30, 2020	For the Nine Months Ended November 30, 2020									For the Nine Months Ended November 30, 2020
Long-lived assets held for sale	Long-lived assets held for sale	$	0	$	0	$	712.4	$	24.0	Long-lived assets held for sale	$	—	$	—	$	712.4	$	24.0

For the Nine Months Ended November 30, 2019
Long-lived assets held for sale		$	0	$	0	$	989.6	$	417.0
Trademarks (1)		0		0		0		11.0
Total		$	0	$	0	$	989.6	$	428.0

~~(1)~~
~~The balance~~

Long-lived assets

In April 2021, our Board of Directors authorized management to sell or abandon the Mexicali Brewery. Subsequently, management determined that we will be unable to use or repurpose certain assets at the Mexicali Brewery. Accordingly, for the first quarter of Fiscal 2022, long-lived assets with a carrying value of $685.9 million were written down to their estimated fair value of $20.0 million, resulting in an impairment of $665.9 million. This impairment was included in impairment of brewery construction in progress within our consolidated results of operations for the nine months ended November 30, ~~2019, has been reclassified~~2021. Our estimate of fair value was determined based on the expected salvage value of the assets. The Mexicali Brewery is a component of the Beer segment. We continue to ~~assets held~~work with government officials in Mexico to (i) determine next steps for ~~sale (see “Trademarks” below~~our suspended Mexicali Brewery construction project, (ii) pursue various forms of recovery for capitalized costs and additional expenses incurred in establishing the brewery, however, there can be no assurance of any recoveries, and (iii) explore options to add further ~~discussion).~~capacity at other locations in Mexico, including the construction of the Southeast Mexico Brewery where there is ample water and a skilled workforce to meet our long-term needs. In the medium-term, under normal operating conditions, we have ample capacity at the Nava and Obregon breweries to meet consumer needs based on current growth forecasts and current and planned production capabilities. Expansion and optimization efforts continue at our current brewery locations under our Mexico Beer Projects to align with our anticipated future growth expectations.

Long-lived assets held for sale

For the first quarter of ~~fiscal~~Fiscal 2021, in connection with the Wine and Spirits ~~Transactions~~Divestitures and the Concentrate Business ~~Transaction,~~Divestiture, long-lived assets held for sale were written down to their estimated fair value, less ~~costs~~cost to sell, resulting in a loss of $25.0 million. For the second quarter of ~~fiscal~~Fiscal 2021, a reduction to the loss on long-lived assets held for sale of $22.0 million was recognized. Subsequently, for the third quarter of ~~fiscal~~Fiscal 2021, primarily in connection with the Wine and Spirits ~~Transactions~~Divestitures and the Concentrate Business ~~Transaction,~~Divestiture, long-lived


Constellation Brands, Inc. Q3 FY 2022 Form 10-Q			#WORTHREACHINGFOR I15


FINANCIAL STATEMENTS			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			Table of Contents

assets held for sale were written down to their estimated fair value, less costs to sell, resulting in a loss of $21.0 million. ~~These~~The long-lived assets held for sale with a carrying value of $736.4 million were written down to their estimated fair value of $712.4 million, less costs to sell, resulting in a total loss of $24.0 million for the nine months ended November 30, 2020. This loss was included in impairment of assets held for sale within our consolidated results of operations. These assets consisted primarily of goodwill, intangible assets, and certain winery and vineyard assets which had satisfied the conditions necessary to be classified as held for sale. Our ~~current estimate of~~estimated fair value was determined based on the expected proceeds primarily from the Wine and Spirits ~~Transactions~~Divestitures and the Concentrate Business ~~Transaction~~Divestiture as of November 30, 2020, excluding the contingent consideration, which we will recognize when it is determined to be realizable.


~~Constellation Brands, Inc. Q3 FY 2021 Form 10-Q~~			~~#WORTHREACHINGFOR~~ I18


~~FINANCIAL STATEMENTS~~			~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~			~~Table of Contents~~

During the second quarter of fiscal 2020, in connection with the Original Wine and Spirits Transaction, long-lived assets held for sale were written down to their estimated fair value, less cost to sell, resulting in a loss of $27.0 million. Subsequently, for the third quarter of fiscal 2020, in connection with the Revised Wine and Spirits Transaction and the Nobilo Wine Transaction, an additional loss of $340.0 million was recognized. The long-lived assets held for sale with a carrying value of $1,292.9 million were written down to their current estimated fair value of $949.6 million, less costs to sell, resulting in a total loss of $367.0 million for the nine months ended November 30, 2019. This loss was included in impairment of assets held for sale within our consolidated results of operations. These assets consisted primarily of goodwill, intangible assets, and certain winery and vineyard assets which had satisfied the conditions necessary to be classified as held for sale. Our estimate of fair value was determined based on the expected proceeds from the Revised Wine and Spirits Transaction and the Nobilo Wine Transaction as of November 30, 2019, excluding the contingent consideration, which we will recognize when it is determined to be realizable.

For the third quarter of fiscal 2020, in connection with the Ballast Point Divestiture, long-lived assets held for sale with a carrying value of $81.3 million were written down to their estimated fair value of $40.0 million, less costs to sell. As a result, a loss of $50.0 million, inclusive of costs to sell and other losses was included in impairment of assets held for sale. These assets consisted primarily of intangible assets and certain production and warehouse assets which had satisfied the conditions necessary to be classified as held for sale. Our estimate of fair value was determined based on the expected proceeds from the Ballast Point Divestiture as of November 30, 2019. Ballast Point was a component of the Beer segment and was included in our beer reporting unit through date of divestiture. Accordingly, goodwill was allocated to the Ballast Point assets held for sale based on the relative fair value of the business being sold compared to the relative fair value of the reporting unit. Goodwill not allocated to assets associated with the Ballast Point Divestiture remained in the beer reporting unit.

~~Trademarks~~

During the second quarter of fiscal 2020, certain continuing negative trends within our Beer segment’s Ballast Point craft beer portfolio, including increased rate of revenue decline and increased competition, indicated that it was more likely than not that the fair value of our indefinite lived intangible asset associated with the Ballast Point craft beer trademark might be below its carrying value. Accordingly, we performed a quantitative assessment for impairment. As a result of this assessment, the Ballast Point craft beer trademark asset with a carrying value of $28.0 million was written down to its estimated fair value of $17.0 million, resulting in an impairment of $11.0 million. This impairment was included in selling, general, and administrative expenses within our consolidated results of operations for the nine months ended November 30, 2019.

6. GOODWILL

The changes in the carrying amount of goodwill are as follows:

Beer Wine and Spirits Consolidated
(in millions)
Balance, February 28, 2019 $ 5,167.9 $ 2,920.9 $ 8,088.8
Purchase accounting allocations (1)
0 58.8 58.8
Black Velvet Divestiture 0 (72.2) (72.2)
Foreign currency translation adjustments 0.2 (9.5) (9.3)
Reclassified (to) from assets held for sale (2)
(4.7) (304.3) (309.0)
Balance, February 29, 2020 5,163.4 2,593.7 7,757.1
Purchase accounting allocations (3)
0 14.3 14.3
Foreign currency translation adjustments (26.7) 13.1 (13.6)
Reclassified (to) from assets held for sale (2)
0.9 30.3 31.2
Balance, November 30, 2020 $ 5,137.6 $ 2,651.4 $ 7,789.0


	Beer		Wine and Spirits		Consolidated
(in millions)
Balance, February 29, 2020	$	5,163.4	$	2,593.7	$	7,757.1
Purchase accounting allocations (1)	—		14.3		14.3

Foreign currency translation adjustments	(38.7)		15.9		(22.8)
Reclassified from assets held for sale (2)	0.9		44.0		44.9
Balance, February 28, 2021	5,125.6		2,667.9		7,793.5
Purchase accounting allocations (1)(3)	—		94.5		94.5

Foreign currency translation adjustments	(34.7)		(5.2)		(39.9)


Balance, November 30, 2021	$	5,090.9	$	2,757.2	$	7,848.1

(1)Purchase accounting allocations associated ~~primarily~~ with the acquisition of ~~Nelson’s Green Brier (Wine and Spirits).~~Empathy Wines.


~~Constellation Brands, Inc. Q3 FY 2021 Form 10-Q~~			~~#WORTHREACHINGFOR~~ I19


~~FINANCIAL STATEMENTS~~			~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~			~~Table of Contents~~

(2)Primarily in connection with the Wine and Spirits ~~Transactions,~~Divestitures, goodwill associated with the businesses being sold was reclassified ~~(to)~~ from assets held for sale based on the changes to relative fair values of the portion of the business being sold and the remaining wine and spirits and beer portfolios. The relative fair values were determined using the income approach based on assumptions, including projected revenue growth rates, terminal growth rate, and discount rate and other projected financial information.

(3)Preliminary purchase accounting allocations associated ~~primarily~~ with the acquisition of ~~Empathy Wines (Wine and Spirits).~~My Favorite Neighbor.

7. INTANGIBLE ASSETS

The major components of intangible assets are as follows:


		November 30, 2020				February 29, 2020					November 30, 2021				February 28, 2021
		Gross Carrying Amount		Net Carrying Amount		Gross Carrying Amount		Net Carrying Amount			Gross Carrying Amount		Net Carrying Amount		Gross Carrying Amount		Net Carrying Amount
(in millions)	(in millions)									(in millions)
Amortizable intangible assets	Amortizable intangible assets									Amortizable intangible assets
Customer relationships	Customer relationships	$	88.0	$	28.3	$	87.4	$	31.8	Customer relationships	$	87.1	$	23.0	$	87.2	$	26.3
Other	Other	20.5		0.3		20.2		0.3		Other	21.0		0.2		21.1		0.2
Total	Total	$	108.5	28.6		$	107.6	32.1		Total	$	108.1	23.2		$	108.3	26.5

Nonamortizable intangible assets	Nonamortizable intangible assets									Nonamortizable intangible assets
Trademarks	Trademarks			2,711.1				2,686.8		Trademarks			2,733.5				2,705.6
Total intangible assets	Total intangible assets			$	2,739.7			$	2,718.9	Total intangible assets			$	2,756.7			$	2,732.1

~~The intangible assets balance at November 30, 2020, and February 29, 2020, excludes intangible assets reclassified to assets held for sale, which consist primarily of~~trademarks. We did not incur costs to renew or extend the term of acquired intangible assets for the nine months and three months ended November 30, 2020, and November 30, 2019. Net carrying amount represents the gross carrying value net of accumulated amortization.

~~8. EQUITY METHOD INVESTMENTS~~

~~Our equity method investments are as follows:~~

November 30, 2020 February 29, 2020
Carrying Value Ownership Percentage Carrying Value Ownership Percentage
(in millions)
Canopy Equity Method Investment $ 2,738.7 38.2 % $ 2,911.7 35.3 %
Other equity method investments (1)
221.2 20%-50% 182.2 20%-50%
$ 2,959.9 $ 3,093.9

~~(1)The other equity method investments balance at November 30, 2020, and February 29, 2020, excludes investments reclassified to assets held for sale.~~

~~Canopy Equity Method Investment~~

In November 2017, we acquired 18.9 million common shares, which represented a 9.9% ownership interest in Ontario, Canada-based Canopy Growth Corporation (the “November 2017 Canopy Investment”), a public company and leading provider of medicinal and recreational cannabis products (“Canopy”), plus warrants which gave us the option to purchase an additional 18.9 million common shares of Canopy (the “November 2017 Canopy Warrants”). The November 2017 Canopy Investment was accounted for at fair value from the date of investment through October 31, 2018. From November 1, 2018, the November 2017 Canopy Investment has been


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FINANCIAL STATEMENTS			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			Table of Contents

~~accounted~~We did not incur costs to renew or extend the term of acquired intangible assets for ~~under the equity method. The November 2017 Canopy Warrants were accounted for at fair value from the date of investment through April 30, 2020. See “Canopy Equity Method Investment” below.~~

In November 2018, we increased our ownership interest in Canopy by acquiring an additional 104.5 million common shares (the “November 2018 Canopy Investment”) (see “Canopy Equity Method Investment” below), plus warrants which give us the option to purchase an additional 139.7 million common shares of Canopy (the “November 2018 Canopy Warrants”, and together with the November 2018 Canopy Investment, the “November 2018 Canopy Transaction”) for C$5,078.7 million, or $3,869.9 million. On November 1, 2018, our ownership interest in Canopy increased to 36.6% which allowed us to exercise significant influence, but not control, over Canopy.

In May 2020, we exercised the November 2017 Canopy Warrants at an exercise price of C$12.98 per warrant share for C$245.0 million, or $173.9 million (the “May 2020 Canopy Investment”). The May 2020 Canopy Investment increased our ownership interest in Canopy to 38.6% upon exercise. We entered into foreign currency forward contracts to fix the U.S. dollar cost of the May 2020 Canopy Investment. For the nine months and three months ended November 30, ~~2020, we recognized net losses on the foreign currency forward contracts of $7.5 million, in selling, general,~~2021, and administrative expenses within our consolidated results of operations. The payment at maturity of the derivative instruments is reported as cash flows from investing activities in investments in equity method investees and securities for the nine months ended November 30, 2020. Net carrying amount represents the gross carrying value net of accumulated amortization.

8. EQUITY METHOD INVESTMENTS

Our equity method investments are as follows:


	November 30, 2021				February 28, 2021
	Carrying Value		Ownership Percentage		Carrying Value		Ownership Percentage
(in millions)
Canopy Equity Method Investment (1) (2)	$	2,528.7	36.2	%	$	2,578.8	38.1	%
Other equity method investments	227.7		20%-50%		209.6		20%-50%
	$	2,756.4			$	2,788.4

(1)The fair value based on the closing price of the underlying equity security as of November 30, 2021, and February 28, 2021, was $1,527.2 million and $4,679.3 million, respectively.

(2)Includes the following:


	Common Shares	Purchase Price
(in millions)
November 2017 Canopy Investment	18.9	$	130.1
November 2018 Canopy Investment	104.5	2,740.3
May 2020 Canopy Investment	18.9	173.9
	142.3	$	3,044.3

Canopy Equity Method Investment

We ~~account for the November 2017 Canopy Investment, the November 2018 Canopy Investment, and the May 2020 Canopy Investment, each of which represents an~~complement our beverage alcohol strategy with our investment in ~~common shares~~Canopy, a leading provider of ~~Canopy, collectively, under the equity method (the “Canopy Equity Method Investment”).~~medicinal and recreational cannabis products. Equity in earnings (losses) from the Canopy Equity Method Investment and related activities (see table below) include, among other items, restructuring and other strategic business development costs, the amortization of the fair value adjustments associated with the definite-lived intangible assets over their estimated useful lives, ~~the flow through of inventory step-up,~~and unrealized gains (losses) associated with changes in our Canopy ownership percentage resulting from periodic equity issuances made by ~~Canopy, and our share of Canopy’s additional loss resulting from the June 2019 Warrant Modification (as defined below) of $409.0 million (the “June 2019 Warrant Modification Loss”).~~

Canopy. Amounts included in our consolidated results of operations for each period are as follows:


		For the Nine Months Ended November 30,				For the Three Months Ended November 30,					For the Nine Months Ended November 30,				For the Three Months Ended November 30,
		2020		2019		2020		2019			2021		2020		2021		2020
(in millions)	(in millions)									(in millions)
Equity in earnings (losses) from Canopy and related activities	Equity in earnings (losses) from Canopy and related activities	$	(421.0)	$	(544.2)	$	(12.4)	$	46.2	Equity in earnings (losses) from Canopy and related activities	$	(39.5)	$	(421.0)	$	(4.2)	$	(12.4)

In June 2019, the Canopy shareholders approved the modification of the terms of the November 2018 Canopy Warrants and certain other rights (the “June 2019 Warrant Modification”), and the other required approvals necessary for the modifications to be effective were granted. The November 2018 Canopy Warrants now consist of three tranches of warrants, including 88.5 million warrants expiring November 1, 2023 (the “Tranche A Warrants”) which are currently exercisable, 38.4 million warrants expiring November 1, 2026 (the “Tranche B Warrants”), and 12.8 million warrants expiring November 1, 2026 (the “Tranche C Warrants”, and collectively with the Tranche A Warrants and the Tranche B Warrants, the “November 2018 Canopy Warrants”). These changes are the result of Canopy’s intention to acquire Acreage Holdings, Inc. (“Acreage”) upon U.S. Federal cannabis legalization, subject to certain conditions (the “Acreage Transaction”). In connection with the Acreage Transaction, Canopy had a call option to acquire 100% of the shares of Acreage (the “Acreage Financial Instrument”).

The other rights obtained in June 2019 in connection with the Acreage Transaction include a share repurchase credit and the ability to purchase Canopy common shares on the open market or in private agreement transactions. If Canopy has not purchased the lesser of 27,378,866 Canopy common shares, or C$1,583.0 million


~~Constellation Brands, Inc. Q3 FY 2021 Form 10-Q~~			~~#WORTHREACHINGFOR~~ I21


~~FINANCIAL STATEMENTS~~			~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~			~~Table of Contents~~

worth of Canopy common shares for cancellation between April 18, 2019 and two-years after the full exercise of the Tranche A Warrants, we will be credited an amount that will reduce the aggregate exercise price otherwise payable upon each exercise of the Tranche B Warrants and Tranche C Warrants. The credit will be an amount equal to the difference between C$1,583.0 million and the actual price paid by Canopy in purchasing its common shares for cancellation. If we choose to purchase Canopy common shares on the open market or in private agreement with existing holders, the number of Tranche B Warrants or Tranche C Warrants shall be decreased by one for each Canopy common share acquired, up to an aggregate maximum reduction of 20 million warrants. The likelihood of receiving the share repurchase credit if we were to fully exercise the Tranche A Warrants is remote, therefore, no fair value has been assigned.

In September 2020, the Acreage shareholders approved the modification of the Acreage Transaction and related Acreage Financial Instrument (the “New Acreage Agreement”), and the other required regulatory approvals necessary for the modification to be effective were granted. The New Acreage Agreement reduces (i) the ratio of Canopy shares required to be exchanged for Acreage shares upon U.S. Federal cannabis legalization and (ii) the number of Acreage shares subject to the fixed exchange ratio from 100% to 70%, calculated as a percentage of Acreage’s issued and outstanding shares (the “New Acreage Financial Instrument”). The remaining 30% of Acreage shares will be subject to a floating exchange ratio and Canopy, in its sole discretion, will have the option to acquire these shares with Canopy shares, cash or a combination thereof.

Canopy has various equity and convertible debt securities outstanding, including primarily equity awards granted to its employees, and options and warrants issued to various third parties, including our November 2018 Canopy Warrants, Canopy Debt Securities, and the ~~New~~ Acreage Financial Instrument. As of November 30, ~~2020,~~2021, the exercise and/or conversion of ~~Canopy equity~~certain of these outstanding securities held by its employees and/or held by other third parties, excluding our November 2018 Canopy Warrants, Canopy Debt Securities, and the New Acreage Financial Instrument, would not have a significant effect on our share of Canopy’s reported earnings or losses. Additionally, under an amended and restated investor rights agreement, we have the option to purchase additional common shares of Canopy at the then-current price of the underlying equity security to allow us to maintain our relative ownership interest. If we exercised all of our November 2018 Canopy Warrants, it could have a significant effect on our share of Canopy’s reported earnings or losses and our ownership interest in ~~Canopy would be expected to increase to greater than 50%.~~If Canopy exercised the New Acreage Financial Instrument, which would require the issuance of Canopy shares, it could have a significant effect on our share of Canopy’s reported earnings or losses and our ownership interest in Canopy would decrease and no longer be expected to be greater than 50%.Canopy.

~~As of November 30, 2020, the exercise of all Canopy warrants held by us would~~We have ~~required a cash outflow of approximately $6.1 billion based on the terms of the November 2018 Canopy Warrants. Additionally, as of November 30, 2020, the fair value of~~evaluated the Canopy Equity Method Investment as of November 30, 2021, and determined that there was ~~$4,083.5 million~~not an other-than-temporary-impairment. Our conclusion was based on several contributing factors, including: (i) the ~~closing price~~period of time for which the ~~underlying equity security as of~~fair value has been less than the carrying value, (ii) an expectation that ~~date.~~

The following table presents summarized financial information for Canopy presented in accordance with U.S. GAAP. We recognize our equity in earnings (losses) for Canopy on a two-month lag. Accordingly, we recognized our share of Canopy’s earnings (losses) for the periods January through September 2020 and January through September 2019 in our nine months ended November 30, 2020, and November 30, 2019, results, respectively. We recognized our share of Canopy’s earnings (losses) for the periods July through September 2020 and July through September 2019 in our three months ended November 30, 2020, and November 30, 2019, results, respectively. The amounts shown represent 100% of Canopy’s results ~~of operations for~~will improve, (iii) an expectation that the ~~respective periods, however,~~Canopy stock price will recover in the ~~results of operations for~~near term, and (iv) our ability and intent to hold the ~~nine months ended November 30, 2019, exclude~~investment until that recovery. We will continue to review the ~~impact of the June 2019 Warrant Modification Loss because it was recorded by~~ Canopy within equity. The nine months and three months ended November 30, 2020, includes costs designed to improve Canopy’s organizational focus, streamline operations, and align production capability with projected demand.


Constellation Brands, Inc. Q3 FY ~~2021~~2022 Form 10-Q			#WORTHREACHINGFOR I 2217


FINANCIAL STATEMENTS			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			Table of Contents

For the Nine Months
Ended November 30, For the Three Months
Ended November 30,
2020 2019 2020 2019
(in millions)
Net sales $ 261.5 $ 196.4 $ 101.5 $ 58.0
Gross profit (loss) $ (33.0) $ 13.8 $ 19.6 $ (7.3)
Net income (loss) $ (1,138.7) $ (246.0) $ (72.5) $ 172.6
Net income (loss) attributable to Canopy $ (1,055.8) $ (245.4) $ (24.1) $ 185.0
Equity Method Investment for an other-than-temporary impairment. There may be a future impairment of our Canopy Equity Method Investment if Canopy’s stock price does not recover in the near term or our expectations about Canopy’s prospective results and cash flows decline, which could be influenced by a variety of factors including adverse market conditions and the economic impact of COVID-19.

~~Subsequent events~~

~~In December 2020,~~The following table presents summarized financial information for Canopy ~~announced its plans to close five Canadian production facilities as part of its efforts to streamline its operations and further improve margins.~~prepared in accordance with U.S. GAAP. We recognize our equity in earnings (losses) for Canopy has publicly disclosed that it expects to record an estimated pre-tax loss of approximately C$350 million to C$400 million in their third and fourth quarters of fiscal 2021 results from the facilities closures. We expect to recordon a two-month lag. Accordingly, we recognized our ~~proportional~~ share of Canopy’s ~~estimated pre-tax loss of approximately C$130 million to C$155 million~~earnings (losses) for the periods January through September 2021 and January through September 2020 in our ~~fourth quarter of fiscal~~nine months ended November 30, 2021, and ~~first quarter~~November 30, 2020, results, respectively. We recognized our share of ~~fiscal 2022 results.~~

In December 2020, Canopy announced an agreement to divest its ownership interest in Canopy Rivers Inc. (“Canopy Rivers”) in exchange for (i) exchangeable shares, warrants, and debt in TerrAscend Corp., (ii) shares in Les Serres Vert Cannabis Inc., and (iii) the termination of a royalty agreement with The Tweed Tree Lot Inc. (the “Canopy Rivers Transaction”). As additional considerationCanopy’s earnings (losses) for the ~~assets being transferred~~periods July through September 2021 and ~~termination~~July through September 2020 in our three months ended November 30, 2021, and November 30, 2020, results, respectively. The amounts shown represent 100% of Canopy’s reported results for the ~~royalty agreement, Canopy will make a cash payment of C$115 million and issue 3,750,000 Canopy shares. The Canopy Rivers Transaction is subject to Canopy Rivers shareholder and regulatory approval.~~respective periods.


	For the Nine Months Ended November 30,				For the Three Months Ended November 30,
	2021		2020		2021		2020
(in millions)
Net sales	$	332.4	$	261.5	$	104.3	$	101.5
Gross profit (loss)	$	(26.6)	$	(33.0)	$	(56.5)	$	19.6
Net income (loss)	$	(182.6)	$	(1,138.7)	$	(12.9)	$	(72.5)
Net income (loss) attributable to Canopy	$	(242.2)	$	(1,055.8)	$	(8.7)	$	(24.1)

Other equity method investment

~~Booker Vineyard~~My Favorite Neighbor

In April 2020, we invested in My Favorite Neighbor, ~~LLC, also known as Booker Vineyard, a super-luxury, direct-to-consumer focused wine business (“Booker Vineyard”)~~ which we ~~account~~accounted for under the equity method. We ~~recognize~~recognized our share of their equity in earnings (losses) in our consolidated financial statements in the Wine and Spirits ~~segment.~~segment up to the date we acquired the remaining ownership interest.

9. ~~BORROWINGS~~OTHER ACCRUED EXPENSES AND LIABILITIES

~~Borrowings consist~~The major components of ~~the following:~~other accrued expenses and liabilities are as follows:

November 30, 2020 February 29,
2020
Current Long-term Total Total
(in millions)
Short-term borrowings
Commercial paper $ 40.0 $ 238.9
$ 40.0 $ 238.9
Long-term debt
Term loan credit facilities $ 24.5 $ 436.0 $ 460.5 $ 1,295.7
Senior notes 499.7 9,969.8 10,469.5 10,624.7
Other 4.2 10.3 14.5 25.3
$ 528.4 $ 10,416.1 $ 10,944.5 $ 11,945.7


	November 30, 2021		February 28, 2021
(in millions)
Salaries, commissions, and payroll benefits and withholdings	$	336.6	$	232.1
Promotions and advertising	186.1		159.9
Income taxes payable	114.1		24.7
Accrued interest	71.1		93.4
Operating lease liability	69.6		68.8
Accrued excise taxes	39.5		19.9
Deferred revenue	36.9		16.3
Derivative liabilities	32.0		10.9
Other	168.6		153.9
	$	1,054.5	$	779.9

~~Senior credit facility~~

In March 2020, the Company, CB International Finance S.à r.l., a wholly-owned subsidiary of ours (“CB International”), certain of the Company’s subsidiaries as guarantors, Bank of America, N.A., as administrative agent (the “Administrative Agent”), and certain other lenders entered into a Restatement Agreement (the “2020


Constellation Brands, Inc. Q3 FY ~~2021~~2022 Form 10-Q			#WORTHREACHINGFOR I 2318


FINANCIAL STATEMENTS			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			Table of Contents

Restatement Agreement”) that amended and restated the 2018 Credit Agreement (as amended and restated by the 2020 Restatement Agreement, the “2020 Credit Agreement”). The 2020 Credit Agreement provides for an aggregate revolving credit facility of $2.0 billion. The principal changes effected by the 2020 Restatement Agreement were:10. BORROWINGS

•~~the removal~~Borrowings consist of the ~~subsidiary guarantees and termination of the guarantee agreement;~~following:

•~~the inclusion of the parent guaranty provisions in connection with the termination of the guarantee agreement;~~

•~~the removal of certain provisions pertaining to term loans since no term loans are outstanding; and~~

•~~the revision of the LIBOR successor rate provisions to permit the use of rates based on the secured overnight financing rate (“SOFR”) administered by the Federal Reserve Bank of New York.~~


	November 30, 2021						February 28, 2021
	Current		Long-term		Total		Total
(in millions)
Short-term borrowings

Commercial paper	$	243.0					$	—

	$	243.0					$	—

Long-term debt

Term loan credit facilities	$	—	$	300.0	$	300.0	$	454.4
Senior notes	—		9,771.0		9,771.0		9,972.4
Other	5.7		12.8		18.5		15.5
	$	5.7	$	10,083.8	$	10,089.5	$	10,442.3

~~Upon removal of all subsidiary guarantors from our 2020 Credit Agreement, the subsidiary guarantors were automatically released from the indentures relating to our outstanding senior notes.~~Bank facilities

~~2020 Term Credit Agreement~~

~~In March 2020, the~~The Company, ~~certain of the Company’s subsidiaries as guarantors,~~CB International, the Administrative Agent, and certain other lenders ~~entered into a term loan restatement agreement (the “Term Loan Restatement Agreement”) that amended and restated~~are parties to the ~~Term~~2020 Credit Agreement (as amended and restated by the Term Loan Restatement Agreement, the “2020 Term Credit Agreement”). The Term Credit Agreement provided for aggregate credit facilities of $1.5 billion, consisting of a $500.0 million three-year term loan facility (the “Three-Year Term Facility”) and a $1.0 billion five-year term loan facility (the “Five-Year Term Facility”). We prepaid the outstanding Three-Year Term Facility and Five Year Term Facility borrowings under our 2020 Term Credit Agreement during the second quarter of fiscal 2021.

~~March 2020 Term Credit Agreement~~

~~In March 2020,~~Agreement. Also, the Company ~~certain of~~and the ~~Company’s subsidiaries as guarantors, Bank of America, N.A., as~~ Administrative Agent and ~~lender (“~~Lender are parties to the ~~Lender”) entered into a 2020 term loan restatement agreement (the “2020 Term Loan Restatement Agreement”) that amended and restated the 2019~~June 2021 Term Credit Agreement (as amended and restated by the 2020 Term Loan Restatement Agreement, the “March 2020 Term Credit Agreement”). The March 2020 Term Credit Agreement provides for a $491.3 million five-year term loan facility (the “2019 Five-Year Term Facility”). The principal changes effected by the 2020 Term Loan Restatement Agreement were:

•~~the removal of the subsidiary guarantees and termination of the respective guarantee agreements; and~~

•~~the revision of the LIBOR successor rate provisions to permit the use of rates based on SOFR.~~Agreement.

As of November 30, ~~2020,~~2021, aggregate credit facilities under the 2020 Credit Agreement and the ~~March 2020~~June 2021 Term Credit Agreement consist of the following:


	Amount		Maturity
(in millions)
2020 Credit Agreement
Revolving ~~Credit Facility~~credit facility (1) (2)	$	2,000.0	Sept 14, 2023





~~March 2020~~June 2021 Term Credit Agreement
2019 Five-Year Term Facility (1) (3)	$	491.3	Jun 28, 2024

(1)Contractual interest rate varies based on our debt rating (as defined in the respective agreement) and is a function of LIBOR plus a margin, or the base rate plus a margin, or, in certain circumstances where LIBOR cannot be adequately ascertained or available, an alternative benchmark rate plus a margin.

(2)We and/or CB International are the borrower under the $2,000.0 million ~~Revolving Credit Facility.~~revolving credit facility. Includes a sub-facility for letters of credit of up to $200.0 million.

(3)We are the borrower under the 2019 Five-Year Term Facility.


Constellation Brands, Inc. Q3 FY ~~2021~~2022 Form 10-Q			#WORTHREACHINGFOR I 2419


FINANCIAL STATEMENTS			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			Table of Contents

As of November 30, ~~2020,~~2021, information with respect to borrowings under the 2020 Credit Agreement and the ~~March 2020~~June 2021 Term Credit Agreement is as follows:

2020
Credit
Agreement March 2020
Term Credit
Agreement
Revolving
Credit
Facility
2019 Five-
Year Term
Facility (1)
(in millions)
Outstanding borrowings $ 0 $ 460.5
Interest rate 0 % 1.0 %
LIBOR margin 0 % 0.88 %
Outstanding letters of credit $ 11.8
Remaining borrowing capacity (2)
$ 1,948.2


	Outstanding borrowings		Interest rate		LIBOR margin		Outstanding letters of credit		Remaining borrowing capacity (1)
(in millions)
2020 Credit Agreement
Revolving credit facility	$	—	—	%	—	%	$	12.2	$	1,744.8





June 2021 Term Credit Agreement
2019 Five-Year Term Facility (2) (3)	$	300.0	0.7	%	0.63	%

(1)~~Outstanding term loan facilities borrowings are net of unamortized debt issuance costs.~~

~~(2)~~Net of outstanding revolving credit facility borrowings, outstanding letters of credit under the 2020 Credit Agreement, and outstanding borrowings under our commercial paper program of ~~$40.0~~$243.0 million (excluding unamortized discount) (see “Commercial paper program”) below).

(2)Outstanding term loan facilities borrowings are net of unamortized debt issuance costs.

(3)Outstanding borrowings reflect a $142.1 million partial prepayment of the 2019 Five-Year Term Facility under our June 2021 Term Credit Agreement.

We and our subsidiaries are subject to covenants that are contained in the 2020 Credit Agreement and the ~~March 2020~~June 2021 Term Credit Agreement, including those restricting the incurrence of additional indebtedness, additional liens, mergers and consolidations, transactions with affiliates, and sale and leaseback transactions, in each case subject to numerous conditions, exceptions, and thresholds. The financial covenants are limited to a minimum interest coverage ratio and a maximum net leverage ratio.

Commercial paper program

We have a commercial paper program which provides for the issuance of up to an aggregate principal amount of $2.0 billion of commercial paper. Our commercial paper program is backed by unused commitments under our revolving credit facility under our 2020 Credit Agreement. Accordingly, outstanding borrowings under our commercial paper program reduce the amount available under our revolving credit ~~facility under our 2020 Credit Agreement.~~facility. As of November 30, ~~2020,~~2021, we had ~~$40.0~~$243.0 million of outstanding borrowings, net of unamortized discount, under our commercial paper program with a weighted average annual interest rate of ~~0.4%~~0.3% and a weighted average remaining term of 16six days.

~~Treasury lock contracts~~Senior notes

In July 2021, we issued $1,000.0 million aggregate principal amount of 2.25% senior notes due August 2031. Proceeds from this offering, net of discount and debt issuance costs, were $987.2 million. Interest on the 2.25% July 2021 Senior Notes is payable semiannually on February 1 and ~~March 2020,~~August 1 of each year, beginning February 1, 2022. The 2.25% July 2021 Senior Notes are redeemable, in whole or in part, at our option at any time prior to May 1, 2031, at a redemption price equal to 100% of the outstanding principal amount, plus accrued and unpaid interest and a make-whole payment based on the present value of the future payments at the adjusted treasury rate, as defined in the applicable indenture, plus 15 basis points. On or after May 1, 2031, we ~~entered into treasury lock agreements,~~may redeem the 2.25% July 2021 Senior Notes, in whole or in part, at our option at any time at a redemption price equal to 100% of the outstanding principal amount, plus accrued and unpaid interest. The 2.25% July 2021 Senior Notes are senior unsecured obligations which ~~were designated as cash flow hedges. As a result~~rank equally in right of ~~these hedges,~~payment to all of our existing and future senior unsecured indebtedness.

In May 2017, we ~~fixed our 10-year treasury rates on~~issued $500.0 million aggregate principal amount of ~~future~~2.70% senior notes due May 2022. In November 2017, we issued $700.0 million aggregate principal amount of 2.65% senior notes due November 2022. On August 25, 2021, we repaid the 2.70% May 2017 Senior Notes and 2.65% November 2017 Senior Notes with proceeds from the 2.25% July 2021 Senior Notes and cash on hand. These notes were redeemed prior to maturity at a redemption price equal to 100% of the outstanding principal amount, plus accrued and unpaid interest and a $26.6 million make-whole payment. The make-whole payment is included in loss on extinguishment of debt issuances at an average rate of 1.2% (exclusive of borrowing margins). In April 2020, we settled all outstanding treasury lock contracts, and recognized an unrealized loss, net of income tax effect, of $21.8 million in accumulated other comprehensive income (loss). This loss is being amortized to interest expense over 10 years. See “Senior notes” below.within our consolidated results.


Constellation Brands, Inc. Q3 FY ~~2021~~2022 Form 10-Q			#WORTHREACHINGFOR I 2520


FINANCIAL STATEMENTS			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			Table of Contents

~~Senior notes~~

In April 2020, we issued $1,200.0 million aggregate principal amount of senior notes (the “April 2020 Senior Notes”). Proceeds from this offering, net of discount and debt issuance costs, were $1,183.3 million. The April 2020 Senior Notes consist of:

Date of Redemption
Principal Maturity Interest Payments Stated Redemption Rate Stated Basis Points
(in millions, except basis points)
2.875% Senior Notes (1) (2)
$ 600.0 May 2030 May/Nov Feb 2030 35
3.75% Senior Notes (1) (2)
$ 600.0 May 2050 May/Nov Nov 2049 40

~~(1)Senior unsecured obligations which rank equally in right of payment to all of our existing and future senior unsecured indebtedness.~~

~~(2)~~Redeemable, in whole or in part, at our option at any time prior to the stated redemption date as defined in the indenture, at a redemption rate equal to 100% of the outstanding principal amount, plus accrued and unpaid interest and a make-whole payment based on the present value of the future payments at the adjusted Treasury Rate plus the stated basis points as defined in the indenture. On or after the stated redemption date, redeemable, in whole or in part, at our option at any time at a redemption price equal to 100% of the outstanding principal amount, plus accrued and unpaid interest.

In November 2017, we issued $700.0 million aggregate principal amount of 2.25% senior notes due November 2020 (the “2.25% November 2017 Senior Notes”). On May 27, 2020, we repaid the 2.25% November 2017 Senior Notes with proceeds from the April 2020 Senior Notes. This note was redeemed prior to maturity at a redemption price equal to 100% of the outstanding principal amount, plus accrued and unpaid interest and a make-whole payment of $6.2 million. The make-whole payment is included in loss on extinguishment of debt within our consolidated results of operations.

In October 2018, we issued $650.0 million aggregate principal amount of senior floating rate notes due November 2021 (“the Senior Floating Rate Notes”). On November 30, 2020, we repaid the Senior Floating Rate Notes with cash on hand. This note was redeemed prior to maturity at a redemption price equal to 100% of the outstanding principal amount, plus accrued and unpaid interest.

Debt payments

As of November 30, ~~2020,~~2021, the required principal repayments under long-term debt obligations (excluding unamortized debt issuance costs and unamortized discounts of ~~$63.1~~$59.9 million and ~~$17.4~~$19.1 million, respectively) for the remaining three months of ~~fiscal 2021~~Fiscal 2022 and for each of the five succeeding fiscal years and thereafter are as follows:

(in millions)
2021 $ 7.2
2022 528.7
2023 1,828.7
2024 1,078.1
2025 782.3
2026 900.0
Thereafter 5,900.0
$ 11,025.0

~~Subsequent event~~

~~Senior notes~~

In May 2013, we issued $500.0 million aggregate principal amount of 3.75% senior notes due May 2021 (the “3.75% May 2013 Senior Notes”). On January 5, 2021, we gave notice for full redemption of the 3.75%


~~Constellation Brands, Inc. Q3 FY 2021 Form 10-Q~~			~~#WORTHREACHINGFOR~~ I26


~~FINANCIAL STATEMENTS~~			~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~			~~Table of Contents~~

May 2013 Senior Notes. This note will be redeemed prior to maturity at a redemption price equal to 100% of the outstanding principal amount, plus accrued and unpaid interest and a make-whole payment of approximately $4 million. The make-whole payment will be included in loss on extinguishment of debt within our consolidated results of operations in the fourth quarter of fiscal 2021.


(in millions)
2022	$	1.6
2023	606.3
2024	1,055.6
2025	703.3
2026	901.3
2027	600.3
Thereafter	6,300.1
	$	10,168.5

~~10.~~11. INCOME TAXES

Our effective tax rate for the nine months ended November 30, 2021, and November 30, 2020, was (115.8)% and 20.2% ~~of tax expense as compared with 73.0% of tax benefit for the nine months ended November 30, 2019.~~, respectively. Our effective tax rate for the three months ended November 30, 2021, and November 30, 2020, was 17.1% and 12.0% ~~of tax expense~~, respectively.

~~as compared with 225.3% of tax benefit for~~

For the nine months and three months ended November 30, ~~2019.~~2021, our effective tax rate did not approximate the federal statutory rate of 21% primarily due to (i) valuation allowances on the unrealized net loss from the changes in fair value of our investment in Canopy and Canopy equity in earnings (losses), (ii) a benefit of lower effective tax rates applicable to our foreign businesses, and (iii) recognition of a net income tax benefit from stock-based compensation award activity. For the nine months ended November 30, 2021, our effective rate was also impacted by the long-lived asset impairment of brewery construction in progress.

For the nine months ended November 30, 2020, our effective tax rate ~~approximates~~approximated the federal statutory rate of 21% as the effective rate of tax benefit from our foreign businesses and the recognition of a net income tax benefit from stock-based compensation award activity was largely offset by the net income tax expense recognized on the unrealized net ~~unrealized~~ gain from the changes in fair value of our ~~investments~~investment in Canopy.

For the three months ended November 30, 2020, our effective tax rate was lower than the federal statutory rate of 21% primarily due ~~to:~~

•to (i) the removal of valuation allowances due to the unrealized net ~~unrealized~~ gain from the changes in fair value of our ~~investments~~investment in ~~Canopy;~~Canopy and

• (ii) lower effective tax rates from our foreign businesses.

~~For the nine months and three months ended November 30, 2019, our effective tax rate was higher than the federal statutory rate of 21% primarily due to:~~

•the recognition of a $547.4 million net income tax benefit resulting from the remeasurement of our deferred tax assets in connection with the September 2019 enactment of tax reform in Switzerland; and

•a higher effective rate of tax benefit from our foreign businesses including the tax benefits recorded on the net unrealized loss from the changes in fair value of our investments in Canopy and the tax benefits recorded on the Canopy equity in earnings (losses) and related activities.


Constellation Brands, Inc. Q3 FY 2022 Form 10-Q			#WORTHREACHINGFOR I21

~~11.~~


FINANCIAL STATEMENTS			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			Table of Contents

12. STOCKHOLDERS’ EQUITY

Common stock

The number of shares of common stock issued and treasury stock, and associated share activity, are as follows:


		Common Stock			Treasury Stock			Common Stock			Treasury Stock
								Class A	Class B	Class 1	Class A	Class B
Balance at February 28, 2021							Balance at February 28, 2021	187,204,280	28,270,288	612,936	17,070,550	5,005,800
Share repurchases							Share repurchases	—	—	—	1,696,722	—
Conversion of shares							Conversion of shares	43,441	(42,810)	(631)	—	—
Exercise of stock options							Exercise of stock options	—	—	781	(116,058)	—

Vesting of restricted stock units (1)							Vesting of restricted stock units (1)	—	—	—	(66,157)	—
Vesting of performance share units (1)							Vesting of performance share units (1)	—	—	—	(7,934)	—

Balance at May 31, 2021							Balance at May 31, 2021	187,247,721	28,227,478	613,086	18,577,123	5,005,800
Share repurchases							Share repurchases	—	—	—	4,079,651	—

Exercise of stock options							Exercise of stock options	—	—	1,267	(34,736)	—
Employee stock purchases							Employee stock purchases	—	—	—	(28,768)	—

Vesting of restricted stock units (1)							Vesting of restricted stock units (1)	—	—	—	(5,256)	—

Balance at August 31, 2021							Balance at August 31, 2021	187,247,721	28,227,478	614,353	22,588,014	5,005,800

Share repurchases							Share repurchases	—	—	—	402,642	—

Exercise of stock options							Exercise of stock options	—	—	1,603,397	(43,534)	—

Balance at November 30, 2021							Balance at November 30, 2021	187,247,721	28,227,478	2,217,750	22,947,122	5,005,800
		Class A	Class B	Class 1	Class A	Class B
Balance at February 29, 2020	Balance at February 29, 2020	186,090,745	28,300,206	1,692,227	18,256,826	5,005,800	Balance at February 29, 2020	186,090,745	28,300,206	1,692,227	18,256,826	5,005,800

Conversion of shares	Conversion of shares	2,532	(2,532)	0	—	—	Conversion of shares	2,532	(2,532)	—	—	—
Exercise of stock options	Exercise of stock options	—	—	2,576	(44,593)	—	Exercise of stock options	—	—	2,576	(44,593)	—

Vesting of restricted stock units (1)	Vesting of restricted stock units (1)	—	—	—	(76,019)	—	Vesting of restricted stock units (1)	—	—	—	(76,019)	—
Vesting of performance share units (1)	Vesting of performance share units (1)	—	—	—	(17,335)	—	Vesting of performance share units (1)	—	—	—	(17,335)	—

Balance at May 31, 2020	Balance at May 31, 2020	186,093,277	28,297,674	1,694,803	18,118,879	5,005,800	Balance at May 31, 2020	186,093,277	28,297,674	1,694,803	18,118,879	5,005,800

Conversion of shares	Conversion of shares	684,808	(11,113)	(673,695)	—	—	Conversion of shares	684,808	(11,113)	(673,695)	—	—
Exercise of stock options	Exercise of stock options	—	—	0	(781,075)	—	Exercise of stock options	—	—	—	(781,075)	—
Employee stock purchases	Employee stock purchases	—	—	—	(32,867)	—	Employee stock purchases	—	—	—	(32,867)	—

Vesting of restricted stock units (1)	Vesting of restricted stock units (1)	—	—	—	(3,514)	—	Vesting of restricted stock units (1)	—	—	—	(3,514)	—

Balance at August 31, 2020	Balance at August 31, 2020	186,778,085	28,286,561	1,021,108	17,301,423	5,005,800	Balance at August 31, 2020	186,778,085	28,286,561	1,021,108	17,301,423	5,005,800

Conversion of shares							Conversion of shares	417,966	(9,044)	(408,922)	—	—
Exercise of stock options							Exercise of stock options	—	—	—	(110,717)	—

Vesting of restricted stock units (1)							Vesting of restricted stock units (1)	—	—	—	(666)	—

Balance at November 30, 2020							Balance at November 30, 2020	187,196,051	28,277,517	612,186	17,190,040	5,005,800

(1) Net of the following shares withheld to satisfy tax withholding requirements:


	For the Three Months Ended May 31,	For the Three Months Ended August 31,	For the Three Months Ended November 30,	For the Nine Months Ended November 30,
2021
Restricted Stock Units	36,048	165	—	36,213
Performance Share Units	4,565	—	—	4,565

2020
Restricted Stock Units	37,506	187	240	37,933
Performance Share Units	9,433	—	—	9,433


Constellation Brands, Inc. Q3 FY ~~2021~~2022 Form 10-Q			#WORTHREACHINGFOR I 2722


FINANCIAL STATEMENTS			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			Table of Contents

Common Stock Treasury Stock
Class A Class B Class 1 Class A Class B
Conversion of shares 417,966 (9,044) (408,922) — —
Exercise of stock options — — 0 (110,717) —
Vesting of restricted stock units (1)
— — — (666) —
Balance at November 30, 2020 187,196,051 28,277,517 612,186 17,190,040 5,005,800
Balance at February 28, 2019 185,740,178 28,322,419 1,149,624 18,927,966 5,005,800
Conversion of shares 133,667 (55) (133,612) — —
Exercise of stock options — — 2,107 (173,725) —
Vesting of restricted stock units (1)
— — — (88,683) —
Vesting of performance share units (1)
— — — (29,015) —
Cancellation of restricted shares — — — 444 —
Balance at May 31, 2019 185,873,845 28,322,364 1,018,119 18,636,987 5,005,800
Share repurchases — — — 265,593 —
Conversion of shares 6,267 (543) (5,724) — —
Exercise of stock options — — 0 (258,628) —
Employee stock purchases — — — (36,840) —
Vesting of restricted stock units (1)
— — — (2,148) —
Balance at August 31, 2019 185,880,112 28,321,821 1,012,395 18,604,964 5,005,800
Conversion of shares 191,233 (2,215) (189,018) — —
Exercise of stock options — — 0 (38,154) —
Vesting of restricted stock units (1)
— — — (242) —
Balance at November 30, 2019 186,071,345 28,319,606 823,377 18,566,568 5,005,800

~~(1)~~ ~~Net of the following shares withheld to satisfy tax withholding requirements:~~

For the Three
Months Ended
May 31, For the Three
Months Ended
August 31, For the Three
Months Ended
November 30, For the Nine
Months Ended
November 30,
2020
Restricted Stock Units 37,506 187 240 37,933
Performance Share Units 9,433 0 0 9,433
2019
Restricted Stock Units 48,562 1,176 94 49,832
Performance Share Units 17,439 0 0 17,439

Stock repurchases

In January 2018, our Board of Directors authorized the repurchase of up to $3.0 billion of our Class A Common Stock and Class B Convertible Common Stock (the “2018 Authorization”). The Board of Directors did not specify a date upon which this authorization would expire. Shares repurchased under the 2018 Authorization have become treasury shares.

~~As of November 30, 2020, total shares repurchased under the 2018 Authorizations are as follows:~~

Class A Common Shares
Repurchase
Authorization Dollar Value
of Shares
Repurchased Number of
Shares
Repurchased
(in millions, except share data)
2018 Authorization $ 3,000.0 $ 1,045.9 4,897,605


~~Constellation Brands, Inc. Q3 FY 2021 Form 10-Q~~			~~#WORTHREACHINGFOR~~ I28


~~FINANCIAL STATEMENTS~~			~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~			~~Table of Contents~~

~~Subsequent event~~

Stock. In January 2021, our Board of Directors authorized ~~the~~an additional repurchase of up to $2.0 billion of our Class A Common Stock and Class B Convertible Common ~~Stock (the “2021 Authorization”).~~Stock. The Board of Directors did not specify a date upon which ~~this authorization~~these authorizations would expire. ~~No shares have been repurchased under the 2021 Authorization.~~ Shares repurchased under ~~the 2021 Authorization~~these authorizations will become treasury shares.

For the nine months ended November 30, 2021, we repurchased 6,179,015 shares of Class A Common Stock pursuant to the 2018 Authorization at an aggregate cost of $1,390.5 million through a combination of open market transactions and an ASR that was announced in June 2021.

~~12.~~

As of November 30, 2021, total shares repurchased under the 2018 Authorization and the 2021 Authorization are as follows:


			Class A Common Shares
	Repurchase Authorization		Dollar Value of Shares Repurchased		Number of Shares Repurchased
(in millions, except share data)

2018 Authorization	$	3,000.0	$	2,436.4	11,076,620
2021 Authorization	$	2,000.0	$	—	—

13. NET INCOME (LOSS) PER COMMON SHARE ATTRIBUTABLE TO CBI

For the nine months ended November 30, 2021, net income (loss) per common share – diluted for Class A Common Stock and Class B Convertible Common Stock have been computed using the two-class method. For the three months ended November 30, 2021, and for the nine months and three months ended November 30, 2020, ~~and for the three months ended November 30, 2019,~~ net income (loss) per common share – diluted for Class A Common Stock has been computed using the if-converted method and assumes the exercise of stock options using the treasury stock method and the conversion of Class B Convertible Common Stock as this method is more dilutive than the two-class method. For the three months ended November 30, 2021, and for the nine months and three months ended November 30, 2020, ~~and for the three months ended November 30, 2019,~~ net income (loss) per common share – diluted for Class B Convertible Common Stock has been computed using the two-class method and does not assume conversion of Class B Convertible Common Stock into shares of Class A Common Stock. ~~For the nine months ended November 30, 2019, net income (loss) per common share – diluted for Class A Common Stock and Class B Convertible Common Stock has been computed using the two-class method.~~ The computation of basic and diluted net income (loss) per common share is as follows:

For the Nine Months Ended
November 30, 2020 November 30, 2019
Common Stock Common Stock
Class A Class B Class A Class B
(in millions, except per share data)
Net income (loss) attributable to CBI allocated – basic $ 1,436.5 $ 178.6 $ (364.0) $ (46.2)
Conversion of Class B common shares into Class A common shares 178.6 0 0 0
Effect of stock-based awards on allocated net income (loss) 0 (1.2) 0 0
Net income (loss) attributable to CBI allocated – diluted $ 1,615.1 $ 177.4 $ (364.0) $ (46.2)
Weighted average common shares outstanding – basic 170.083 23.284 168.258 23.316
Conversion of Class B common shares into Class A common shares (1)
23.284 0 0 0
Stock-based awards, primarily stock options (1)
1.734 0 0 0
Weighted average common shares outstanding – diluted 195.101 23.284 168.258 23.316
Net income (loss) per common share attributable to CBI – basic $ 8.44 $ 7.67 $ (2.17) $ (1.98)
Net income (loss) per common share attributable to CBI – diluted $ 8.28 $ 7.62 $ (2.17) $ (1.98)


	For the Nine Months Ended
	November 30, 2021				November 30, 2020
	Common Stock				Common Stock
	Class A		Class B		Class A		Class B
(in millions, except per share data)
Net income (loss) attributable to CBI allocated – basic	$	(386.9)	$	(48.9)	$	1,436.5	$	178.6
Conversion of Class B common shares into Class A common shares	—		—		178.6		—
Effect of stock-based awards on allocated net income (loss)	—		—		—		(1.2)
Net income (loss) attributable to CBI allocated – diluted	$	(386.9)	$	(48.9)	$	1,615.1	$	177.4

Weighted average common shares outstanding – basic	167.692		23.230		170.083		23.284
Conversion of Class B common shares into Class A common shares (1)	—		—		23.284		—
Stock-based awards, primarily stock options (1)	—		—		1.734		—
Weighted average common shares outstanding – diluted	167.692		23.230		195.101		23.284

Net income (loss) per common share attributable to CBI – basic	$	(2.31)	$	(2.10)	$	8.44	$	7.67
Net income (loss) per common share attributable to CBI – diluted	$	(2.31)	$	(2.10)	$	8.28	$	7.62

	For the Three Months Ended
	November 30, 2021				November 30, 2020
	Common Stock				Common Stock
	Class A		Class B		Class A		Class B
(in millions, except per share data)
Net income (loss) attributable to CBI allocated – basic	$	417.4	$	53.4	$	1,139.5	$	141.4
Conversion of Class B common shares into Class A common shares	53.4		—		141.4		—
Effect of stock-based awards on allocated net income (loss)	—		(0.3)		—		(1.1)
Net income (loss) attributable to CBI allocated – diluted	$	470.8	$	53.1	$	1,280.9	$	140.3

Weighted average common shares outstanding – basic	164.999		23.222		170.571		23.274
Conversion of Class B common shares into Class A common shares	23.222		—		23.274		—
Stock-based awards, primarily stock options	1.718		—		1.599		—
Weighted average common shares outstanding – diluted	189.939		23.222		195.444		23.274

Net income (loss) per common share attributable to CBI – basic	$	2.53	$	2.30	$	6.68	$	6.07
Net income (loss) per common share attributable to CBI – diluted	$	2.48	$	2.29	$	6.55	$	6.03


~~Constellation Brands, Inc. Q3 FY 2021 Form 10-Q~~			~~#WORTHREACHINGFOR~~ I29


~~FINANCIAL STATEMENTS~~			~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~			~~Table of Contents~~

For the Three Months Ended
November 30, 2020 November 30, 2019
Common Stock Common Stock
Class A Class B Class A Class B
(in millions, except per share data)
Net income (loss) attributable to CBI allocated – basic $ 1,139.5 $ 141.4 $ 320.1 $ 40.3
Conversion of Class B common shares into Class A common shares 141.4 0 40.3 0
Effect of stock-based awards on allocated net income (loss) 0 (1.1) 0 (0.4)
Net income (loss) attributable to CBI allocated – diluted $ 1,280.9 $ 140.3 $ 360.4 $ 39.9
Weighted average common shares outstanding – basic 170.571 23.274 168.346 23.314
Conversion of Class B common shares into Class A common shares 23.274 0 23.314 0
Stock-based awards, primarily stock options 1.599 0 3.196 0
Weighted average common shares outstanding – diluted 195.444 23.274 194.856 23.314
Net income (loss) per common share attributable to CBI – basic $ 6.68 $ 6.07 $ 1.90 $ 1.73
Net income (loss) per common share attributable to CBI – diluted $ 6.55 $ 6.03 $ 1.85 $ 1.71

(1)

WeFor the nine months ended November 30, 2021, we have excluded the following weighted average common shares outstanding from the calculation of diluted net income (loss) per common share, as the effect of including these would have been ~~anti-dilutive:~~

~~For the Nine Months Ended~~

~~November 30, 2019~~

(anti-dilutive, in ~~millions)~~

millions:

Class B Convertible Common Stock

23.230

~~23.316~~

Stock-based awards, primarily stock options

1.807

~~3.290~~

~~13.~~14. COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CBI

Comprehensive income (loss) consists of net income (loss), foreign currency translation adjustments, unrealized net ~~unrealized~~ gain (loss) on derivative instruments, pension/postretirement adjustments, and our share of OCI of equity method investments. The reconciliation of net income (loss) attributable to CBI to comprehensive income (loss) attributable to CBI is as follows:


		Before Tax Amount		Tax (Expense) Benefit		Net of Tax Amount			Before Tax Amount		Tax (Expense) Benefit		Net of Tax Amount
(in millions)	(in millions)							(in millions)
For the Nine Months Ended November 30, 2020
For the Nine Months Ended November 30, 2021								For the Nine Months Ended November 30, 2021
Net income (loss) attributable to CBI	Net income (loss) attributable to CBI					$	1,615.1	Net income (loss) attributable to CBI					$	(435.8)
Other comprehensive income (loss) attributable to CBI:	Other comprehensive income (loss) attributable to CBI:							Other comprehensive income (loss) attributable to CBI:
Foreign currency translation adjustments:	Foreign currency translation adjustments:							Foreign currency translation adjustments:
Net gain (loss)	Net gain (loss)	$	(101.8)	$	0	(101.8)		Net gain (loss)	$	(178.2)	$	—	(178.2)
Reclassification adjustments	Reclassification adjustments	0		0		0		Reclassification adjustments	—		—		—
Net gain (loss) recognized in other comprehensive income (loss)	Net gain (loss) recognized in other comprehensive income (loss)	(101.8)		0		(101.8)		Net gain (loss) recognized in other comprehensive income (loss)	(178.2)		—		(178.2)
Unrealized gain (loss) on cash flow hedges:	Unrealized gain (loss) on cash flow hedges:							Unrealized gain (loss) on cash flow hedges:
Net derivative gain (loss)	Net derivative gain (loss)	(39.1)		3.2		(35.9)		Net derivative gain (loss)	(74.5)		3.2		(71.3)
Reclassification adjustments	Reclassification adjustments	34.1		(2.4)		31.7		Reclassification adjustments	(28.2)		2.5		(25.7)
Net gain (loss) recognized in other comprehensive income (loss)	Net gain (loss) recognized in other comprehensive income (loss)	(5.0)		0.8		(4.2)		Net gain (loss) recognized in other comprehensive income (loss)	(102.7)		5.7		(97.0)


Constellation Brands, Inc. Q3 FY ~~2021~~2022 Form 10-Q			#WORTHREACHINGFOR I 3023


FINANCIAL STATEMENTS			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			Table of Contents


		Before Tax Amount		Tax (Expense) Benefit		Net of Tax Amount			Before Tax Amount		Tax (Expense) Benefit		Net of Tax Amount
(in millions)	(in millions)							(in millions)

Pension/postretirement adjustments:	Pension/postretirement adjustments:							Pension/postretirement adjustments:
Net actuarial gain (loss)	Net actuarial gain (loss)	(0.6)		0.2		(0.4)		Net actuarial gain (loss)	0.4		(0.1)		0.3
Reclassification adjustments	Reclassification adjustments	0		0		0		Reclassification adjustments	—		—		—
Net gain (loss) recognized in other comprehensive income (loss)	Net gain (loss) recognized in other comprehensive income (loss)	(0.6)		0.2		(0.4)		Net gain (loss) recognized in other comprehensive income (loss)	0.4		(0.1)		0.3
Share of OCI of equity method investments	Share of OCI of equity method investments							Share of OCI of equity method investments
Net gain (loss)	Net gain (loss)	20.6		(5.3)		15.3		Net gain (loss)	(16.4)		3.7		(12.7)
Reclassification adjustments	Reclassification adjustments	0		0		0		Reclassification adjustments	—		—		—
Net gain (loss) recognized in other comprehensive income (loss)	Net gain (loss) recognized in other comprehensive income (loss)	20.6		(5.3)		15.3		Net gain (loss) recognized in other comprehensive income (loss)	(16.4)		3.7		(12.7)
Other comprehensive income (loss) attributable to CBI	Other comprehensive income (loss) attributable to CBI	$	(86.8)	$	(4.3)	(91.1)		Other comprehensive income (loss) attributable to CBI	$	(296.9)	$	9.3	(287.6)
Comprehensive income (loss) attributable to CBI	Comprehensive income (loss) attributable to CBI					$	1,524.0	Comprehensive income (loss) attributable to CBI					$	(723.4)

For the Nine Months Ended November 30, 2019
For the Nine Months Ended November 30, 2020								For the Nine Months Ended November 30, 2020
Net income (loss) attributable to CBI	Net income (loss) attributable to CBI					$	(410.2)	Net income (loss) attributable to CBI					$	1,615.1
Other comprehensive income (loss) attributable to CBI:	Other comprehensive income (loss) attributable to CBI:							Other comprehensive income (loss) attributable to CBI:
Foreign currency translation adjustments:	Foreign currency translation adjustments:							Foreign currency translation adjustments:
Net gain (loss)	Net gain (loss)	$	(4.5)	$	0	(4.5)		Net gain (loss)	$	(101.8)	$	—	(101.8)
Reclassification adjustments	Reclassification adjustments	(22.7)		0		(22.7)		Reclassification adjustments	—		—		—
Net gain (loss) recognized in other comprehensive income (loss)	Net gain (loss) recognized in other comprehensive income (loss)	(27.2)		0		(27.2)		Net gain (loss) recognized in other comprehensive income (loss)	(101.8)		—		(101.8)
Unrealized gain (loss) on cash flow hedges:	Unrealized gain (loss) on cash flow hedges:							Unrealized gain (loss) on cash flow hedges:
Net derivative gain (loss)	Net derivative gain (loss)	18.5		3.7		22.2		Net derivative gain (loss)	(39.1)		3.2		(35.9)
Reclassification adjustments	Reclassification adjustments	(8.4)		(1.1)		(9.5)		Reclassification adjustments	34.1		(2.4)		31.7
Net gain (loss) recognized in other comprehensive income (loss)	Net gain (loss) recognized in other comprehensive income (loss)	10.1		2.6		12.7		Net gain (loss) recognized in other comprehensive income (loss)	(5.0)		0.8		(4.2)

Pension/postretirement adjustments:	Pension/postretirement adjustments:							Pension/postretirement adjustments:
Net actuarial gain (loss)	Net actuarial gain (loss)	0		0		0		Net actuarial gain (loss)	(0.6)		0.2		(0.4)
Reclassification adjustments	Reclassification adjustments	1.8		(0.1)		1.7		Reclassification adjustments	—		—		—
Net gain (loss) recognized in other comprehensive income (loss)	Net gain (loss) recognized in other comprehensive income (loss)	1.8		(0.1)		1.7		Net gain (loss) recognized in other comprehensive income (loss)	(0.6)		0.2		(0.4)
Share of OCI of equity method investments	Share of OCI of equity method investments							Share of OCI of equity method investments
Net gain (loss)	Net gain (loss)	(22.3)		5.2		(17.1)		Net gain (loss)	20.6		(5.3)		15.3
Reclassification adjustments	Reclassification adjustments	0		0		0		Reclassification adjustments	—		—		—
Net gain (loss) recognized in other comprehensive income (loss)	Net gain (loss) recognized in other comprehensive income (loss)	(22.3)		5.2		(17.1)		Net gain (loss) recognized in other comprehensive income (loss)	20.6		(5.3)		15.3
Other comprehensive income (loss) attributable to CBI	Other comprehensive income (loss) attributable to CBI	$	(37.6)	$	7.7	(29.9)		Other comprehensive income (loss) attributable to CBI	$	(86.8)	$	(4.3)	(91.1)
Comprehensive income (loss) attributable to CBI	Comprehensive income (loss) attributable to CBI					$	(440.1)	Comprehensive income (loss) attributable to CBI					$	1,524.0

For the Three Months Ended November 30, 2020
For the Three Months Ended November 30, 2021								For the Three Months Ended November 30, 2021
Net income (loss) attributable to CBI	Net income (loss) attributable to CBI					$	1,280.9	Net income (loss) attributable to CBI					$	470.8
Other comprehensive income (loss) attributable to CBI:	Other comprehensive income (loss) attributable to CBI:							Other comprehensive income (loss) attributable to CBI:
Foreign currency translation adjustments:	Foreign currency translation adjustments:							Foreign currency translation adjustments:
Net gain (loss)	Net gain (loss)	$	347.2	$	0	347.2		Net gain (loss)	$	(251.2)	$	—	(251.2)
Reclassification adjustments	Reclassification adjustments	0		0		0		Reclassification adjustments	—		—		—
Net gain (loss) recognized in other comprehensive income (loss)	Net gain (loss) recognized in other comprehensive income (loss)	347.2		0		347.2		Net gain (loss) recognized in other comprehensive income (loss)	(251.2)		—		(251.2)
Unrealized gain (loss) on cash flow hedges:
Net derivative gain (loss)		124.3		0		124.3
Reclassification adjustments		6.1		(0.5)		5.6
Net gain (loss) recognized in other comprehensive income (loss)		130.4		(0.5)		129.9
Pension/postretirement adjustments:
Net actuarial gain (loss)		(0.4)		0.2		(0.2)
Reclassification adjustments		0		0		0
Net gain (loss) recognized in other comprehensive income (loss)		(0.4)		0.2		(0.2)


Constellation Brands, Inc. Q3 FY ~~2021~~2022 Form 10-Q			#WORTHREACHINGFOR I 3124


FINANCIAL STATEMENTS			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			Table of Contents

Before Tax
Amount Tax (Expense)
Benefit Net of Tax
Amount
(in millions)
Share of OCI of equity method investments
Net gain (loss) (14.1) (4.7) (18.8)
Reclassification adjustments 0 0 0
Net gain (loss) recognized in other comprehensive income (loss) (14.1) (4.7) (18.8)
Other comprehensive income (loss) attributable to CBI $ 463.1 $ (5.0) 458.1
Comprehensive income (loss) attributable to CBI $ 1,739.0
For the Three Months Ended November 30, 2019
Net income (loss) attributable to CBI $ 360.4
Other comprehensive income (loss) attributable to CBI:
Foreign currency translation adjustments:
Net gain (loss) $ 53.7 $ 0 53.7
Reclassification adjustments (22.7) 0 (22.7)
Net gain (loss) recognized in other comprehensive income (loss) 31.0 0 31.0
Unrealized gain (loss) on cash flow hedges:
Net derivative gain (loss) 56.9 (0.1) 56.8
Reclassification adjustments (2.4) (0.5) (2.9)
Net gain (loss) recognized in other comprehensive income (loss) 54.5 (0.6) 53.9
Pension/postretirement adjustments:
Net actuarial gain (loss) 0 0 0
Reclassification adjustments 1.7 (0.1) 1.6
Net gain (loss) recognized in other comprehensive income (loss) 1.7 (0.1) 1.6
Share of OCI of equity method investments
Net gain (loss) 8.3 (2.0) 6.3
Reclassification adjustments 0 0 0
Net gain (loss) recognized in other comprehensive income (loss) 8.3 (2.0) 6.3
Other comprehensive income (loss) attributable to CBI $ 95.5 $ (2.7) 92.8
Comprehensive income (loss) attributable to CBI $ 453.2

~~Accumulated other comprehensive income (loss), net of income tax effect, includes the following components:~~

Foreign
Currency
Translation
Adjustments Net
Unrealized
Gain (Loss)
on Derivative
Instruments Pension/
Postretirement
Adjustments Share of OCI of
Equity Method
Investments Accumulated
Other
Comprehensive
Income
(Loss)
(in millions)
Balance, February 29, 2020 $ (345.7) $ 62.5 $ (2.6) $ 19.5 $ (266.3)
Other comprehensive income (loss):
Other comprehensive income (loss) before reclassification adjustments (101.8) (35.9) (0.4) 15.3 (122.8)
Amounts reclassified from accumulated other comprehensive income (loss) 0 31.7 0 0 31.7
Other comprehensive income (loss) (101.8) (4.2) (0.4) 15.3 (91.1)
Balance, November 30, 2020 $ (447.5) $ 58.3 $ (3.0) $ 34.8 $ (357.4)


	Before Tax Amount		Tax (Expense) Benefit		Net of Tax Amount
(in millions)
Unrealized gain (loss) on cash flow hedges:
Net derivative gain (loss)	(93.8)		11.7		(82.1)
Reclassification adjustments	(8.1)		0.8		(7.3)
Net gain (loss) recognized in other comprehensive income (loss)	(101.9)		12.5		(89.4)
Pension/postretirement adjustments:
Net actuarial gain (loss)	0.5		(0.1)		0.4
Reclassification adjustments	—		—		—
Net gain (loss) recognized in other comprehensive income (loss)	0.5		(0.1)		0.4
Share of OCI of equity method investments
Net gain (loss)	9.7		(2.2)		7.5
Reclassification adjustments	—		—		—
Net gain (loss) recognized in other comprehensive income (loss)	9.7		(2.2)		7.5
Other comprehensive income (loss) attributable to CBI	$	(342.9)	$	10.2	(332.7)
Comprehensive income (loss) attributable to CBI					$	138.1

For the Three Months Ended November 30, 2020
Net income (loss) attributable to CBI					$	1,280.9
Other comprehensive income (loss) attributable to CBI:
Foreign currency translation adjustments:
Net gain (loss)	$	347.2	$	—	347.2
Reclassification adjustments	—		—		—
Net gain (loss) recognized in other comprehensive income (loss)	347.2		—		347.2
Unrealized gain (loss) on cash flow hedges:
Net derivative gain (loss)	124.3		—		124.3
Reclassification adjustments	6.1		(0.5)		5.6
Net gain (loss) recognized in other comprehensive income (loss)	130.4		(0.5)		129.9




Pension/postretirement adjustments:
Net actuarial gain (loss)	(0.4)		0.2		(0.2)
Reclassification adjustments	—		—		—
Net gain (loss) recognized in other comprehensive income (loss)	(0.4)		0.2		(0.2)
Share of OCI of equity method investments
Net gain (loss)	(14.1)		(4.7)		(18.8)
Reclassification adjustments	—		—		—
Net gain (loss) recognized in other comprehensive income (loss)	(14.1)		(4.7)		(18.8)
Other comprehensive income (loss) attributable to CBI	$	463.1	$	(5.0)	458.1
Comprehensive income (loss) attributable to CBI					$	1,739.0


Constellation Brands, Inc. Q3 FY ~~2021~~2022 Form 10-Q			#WORTHREACHINGFOR I 3225


FINANCIAL STATEMENTS			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			Table of Contents

~~14.~~Accumulated other comprehensive income (loss), net of income tax effect, includes the following components:


	Foreign Currency Translation Adjustments		Unrealized Net Gain (Loss) on Derivative Instruments		Pension/ Postretirement Adjustments		Share of OCI of Equity Method Investments		Accumulated Other Comprehensive Income (Loss)
(in millions)
Balance, February 28, 2021	$	(392.5)	$	43.5	$	(4.2)	$	17.7	$	(335.5)
Other comprehensive income (loss):
Other comprehensive income (loss) before reclassification adjustments	(178.2)		(71.3)		0.3		(12.7)		(261.9)
Amounts reclassified from accumulated other comprehensive income (loss)	—		(25.7)		—		—		(25.7)
Other comprehensive income (loss)	(178.2)		(97.0)		0.3		(12.7)		(287.6)
Balance, November 30, 2021	$	(570.7)	$	(53.5)	$	(3.9)	$	5.0	$	(623.1)

15. BUSINESS SEGMENT INFORMATION

Our internal management financial reporting consists of 3 business divisions: (i) Beer, (ii) Wine and Spirits, and (iii) Canopy and we report our operating results in 4 segments: (i) Beer, (ii) Wine and Spirits, (iii) Corporate Operations and Other, and (iv) Canopy. The Canopy Equity Method Investment makes up the Canopy segment.

In the Beer segment, our portfolio consists of high-end imported beer brands, craft beer, and ~~alternative beverage alcohol brands.~~ABAs. We have an exclusive perpetual brand license to import, market, and sell our Mexican beer portfolio in the U.S. In the Wine and Spirits segment, we sell a portfolio that includes higher-margin, higher-growth wine brands complemented by certain higher-end spirits brands. Amounts included in the Corporate Operations and Other segment consist of costs of executive management, corporate development, corporate finance, corporate growth and strategy, human resources, internal audit, investor relations, legal, public relations, and information technology, as well as our investments made through our corporate venture capital function. All costs included in the Corporate Operations and Other segment are general costs that are applicable to the consolidated group and are, therefore, not allocated to the other reportable segments. All costs reported within the Corporate Operations and Other segment are not included in our ~~chief operating decision maker’s (“CODM”)~~CODM’s evaluation of the operating income (loss) performance of the other reportable segments. The business segments reflect how our operations are managed, how resources are allocated, how operating performance is evaluated by senior management, and the structure of our internal financial reporting. Long-lived tangible assets and total asset information by segment is not provided to, or reviewed by, our CODM as it is not used to make strategic decisions, allocate resources, or assess performance.

In addition, management excludes ~~items that affect comparability (“~~Comparable ~~Adjustments”)~~Adjustments from its evaluation of the results of each operating segment as these Comparable Adjustments are not reflective of core operations of the segments. Segment operating performance and the incentive compensation of segment management ~~compensation~~ are evaluated based ~~upon~~on core segment operating income (loss)~~. As such, the performance measures for incentive compensation purposes for segment management~~ which do not include the impact of these Comparable Adjustments.

We evaluate segment operating performance based on operating income (loss) of the respective business units. Comparable Adjustments that impacted comparability in our segment operating income (loss) for each period are as follows:

For the Nine Months
Ended November 30, For the Three Months
Ended November 30,
2020 2019 2020 2019
(in millions)
Cost of product sold
Recovery of (loss on) inventory write-down $ (26.5) $ 8.6 $ (26.5) $ 0
Strategic business development costs (25.8) (124.2) (0.7) (61.7)
COVID-19 incremental costs (6.3) 0 (0.8) 0
Net gain (loss) on undesignated commodity derivative contracts (0.3) (23.7) 9.1 3.1
Flow through of inventory step-up (0.1) (1.5) 0 (0.3)
Settlements of undesignated commodity derivative contracts 30.2 7.5 6.6 2.3
Accelerated depreciation 0 (7.1) 0 (1.8)
Total cost of product sold (28.8) (140.4) (12.3) (58.4)


Constellation Brands, Inc. Q3 FY ~~2021~~2022 Form 10-Q			#WORTHREACHINGFOR I 3326


FINANCIAL STATEMENTS			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			Table of Contents

For the Nine Months
Ended November 30, For the Three Months
Ended November 30,
2020 2019 2020 2019
Selling, general, and administrative expenses
Restructuring and other strategic business development costs (21.6) (25.5) (12.7) (2.4)
Net gain (loss) on foreign currency derivative contracts (8.0) (0.8) 0 (0.8)
Transaction, integration, and other acquisition-related costs (5.4) (6.7) (1.5) (1.2)
COVID-19 incremental costs (4.8) 0 (0.2) 0
Impairment of intangible assets 0 (11.0) 0 0
Other gains (losses) (1)
4.6 1.1 (4.3) 0
Total selling, general, and administrative expenses (35.2) (42.9) (18.7) (4.4)
Impairment of assets held for sale (24.0) (417.0) (21.0) (390.0)
Gain (loss) on sale of business (4.7) 76.0 (0.3) 76.0
Comparable Adjustments, Operating income (loss) $ (92.7) $ (524.3) $ (52.3) $ (376.8)
We evaluate segment operating performance based on operating income (loss) of the respective business units. Comparable Adjustments that impacted comparability in our segment operating income (loss) for each period are as follows:

(1) Primarily includes the following:
For the Nine Months
Ended November 30,
2020 2019
Gain on vineyard sale $ 8.8 $ 0
Increase in our ownership interest in Nelson’s Green Brier $ 0 $ 11.8
(Increase) in estimated fair value of a contingent liability associated with a prior period acquisition $ 0 $ (11.4)


	For the Nine Months Ended November 30,				For the Three Months Ended November 30,
	2021		2020		2021		2020
(in millions)
Cost of product sold
Net gain (loss) on undesignated commodity derivative contracts	$	48.1	$	(0.3)	$	—	$	9.1
Net flow through of reserved inventory	11.6		—		11.6		—
Settlements of undesignated commodity derivative contracts	(24.8)		30.2		(12.5)		6.6
Strategic business development costs	(2.6)		(25.8)		—		(0.7)
Loss on inventory write-down	(1.0)		(26.5)		(1.0)		(26.5)
COVID-19 incremental costs	—		(6.3)		—		(0.8)
Flow through of inventory step-up	—		(0.1)		(0.1)		—


Total cost of product sold	31.3		(28.8)		(2.0)		(12.3)

Selling, general, and administrative expenses
Restructuring and other strategic business development costs	0.1		(21.6)		0.2		(12.7)
Transaction, integration, and other acquisition-related costs	(0.8)		(5.4)		(0.8)		(1.5)
Net gain (loss) on foreign currency derivative contracts	—		(8.0)		—		—
COVID-19 incremental costs	—		(4.8)		—		(0.2)


Other gains (losses) (1)	12.6		(0.1)		18.7		(4.6)
Total selling, general, and administrative expenses	11.9		(39.9)		18.1		(19.0)

Impairment of brewery construction in progress	(665.9)		—		—		—
Impairment of assets held for sale	—		(24.0)		—		(21.0)


Comparable Adjustments, Operating income (loss)	$	(622.7)	$	(92.7)	$	16.1	$	(52.3)


(1)	Includes the following:
		For the Nine Months Ended November 30,				For the Three Months Ended November 30,
		2021		2020		2021		2020
	(in millions)
	Increase in our ownership interest in My Favorite Neighbor	$	13.5	$	—	$	13.5	$	—
	Property tax settlement	$	10.4	$	—	$	10.4	$	—
	Transition services agreements activity	$	(11.7)	$	—	$	(4.5)	$	—
	Gain (loss) on vineyard sale	$	(0.7)	$	8.8	$	(0.7)	$	—
	Gain (loss) on sale of the Black Velvet Canadian Whisky business	$	—	$	(3.6)	$	—	$	—

The accounting policies of the segments are the same as those described for the Company in Note 1 of our consolidated financial statements included in our ~~2020~~2021 Annual Report. Amounts included below for the Canopy segment represent 100% of Canopy’s reported results on a two-month lag, prepared in accordance with U.S. GAAP, and converted from Canadian dollars to U.S. dollars. Although we own less than 100% of the outstanding shares of Canopy, 100% of ~~the Canopy~~its results are included in the information below and subsequently eliminated in order to reconcile to our consolidated financial statements.~~Segment information is as follows:~~

For the Nine Months
Ended November 30, For the Three Months
Ended November 30,
2020 2019 2020 2019
(in millions)
Beer
Net sales $ 4,697.9 $ 4,428.4 $ 1,677.9 $ 1,310.6
Segment operating income (loss) $ 1,988.0 $ 1,780.8 $ 714.5 $ 514.9
Capital expenditures $ 347.8 $ 427.6 $ 149.3 $ 154.8
Depreciation and amortization $ 143.8 $ 155.7 $ 50.9 $ 49.5


Constellation Brands, Inc. Q3 FY ~~2021~~2022 Form 10-Q			#WORTHREACHINGFOR I 3427


FINANCIAL STATEMENTS			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			Table of Contents

For the Nine Months
Ended November 30, For the Three Months
Ended November 30,
2020 2019 2020 2019
(in millions)
Wine and Spirits
Net sales:
Wine $ 1,711.2 $ 1,747.3 $ 666.7 $ 601.2
Spirits 252.8 264.9 93.5 87.6
Net sales $ 1,964.0 $ 2,012.2 $ 760.2 $ 688.8
Segment operating income (loss) $ 507.8 $ 501.6 $ 182.3 $ 180.4
Income (loss) from unconsolidated investments $ 26.6 $ 34.6 $ 25.5 $ 31.6
Equity method investments (1)
$ 137.7 $ 97.9 $ 137.7 $ 97.9
Capital expenditures $ 67.3 $ 58.5 $ 29.9 $ 15.4
Depreciation and amortization $ 68.5 $ 75.2 $ 23.2 $ 25.2
Corporate Operations and Other
Segment operating income (loss) $ (171.3) $ (148.7) $ (61.4) $ (51.3)
Income (loss) from unconsolidated investments $ 0.2 $ (1.8) $ (0.3) $ (0.5)
Equity method investments $ 83.5 $ 81.4 $ 83.5 $ 81.4
Capital expenditures $ 52.6 $ 52.2 $ 10.7 $ 12.9
Depreciation and amortization $ 10.9 $ 15.2 $ 3.7 $ 4.7
Canopy
Net sales $ 261.5 $ 196.4 $ 101.5 $ 58.0
Segment operating income (loss) $ (1,071.0) $ (541.3) $ (213.4) $ (210.8)
Capital expenditures $ 135.9 $ 443.5 $ 21.5 $ 172.9
Depreciation and amortization $ 78.5 $ 56.2 $ 23.9 $ 21.2
Consolidation and Eliminations
Net sales $ (261.5) $ (196.4) $ (101.5) $ (58.0)
Operating income (loss) $ 1,071.0 $ 541.3 $ 213.4 $ 210.8
Income (loss) from unconsolidated investments $ (108.8) $ (180.2) $ (43.0) $ (71.1)
Equity method investments $ 2,738.7 $ 2,879.4 $ 2,738.7 $ 2,879.4
Capital expenditures $ (135.9) $ (443.5) $ (21.5) $ (172.9)
Depreciation and amortization $ (78.5) $ (56.2) $ (23.9) $ (21.2)
Comparable Adjustments
Operating income (loss) $ (92.7) $ (524.3) $ (52.3) $ (376.8)
Income (loss) from unconsolidated investments $ 212.5 $ (2,564.4) $ 800.2 $ (416.5)
Depreciation and amortization $ 0 $ 7.1 $ 0 $ 1.8
Consolidated
Net sales $ 6,661.9 $ 6,440.6 $ 2,438.1 $ 1,999.4
Operating income (loss) $ 2,231.8 $ 1,609.4 $ 783.1 $ 267.2
Income (loss) from unconsolidated investments (2)
$ 130.5 $ (2,711.8) $ 782.4 $ (456.5)
Equity method investments (1)
$ 2,959.9 $ 3,058.7 $ 2,959.9 $ 3,058.7
Capital expenditures $ 467.7 $ 538.3 $ 189.9 $ 183.1
Depreciation and amortization $ 223.2 $ 253.2 $ 77.8 $ 81.2
Segment information is as follows:

~~(1)~~

~~Equity method investments balance at November 30, 2020, and November 30, 2019, exclude amounts reclassified to assets held for sale.~~


	For the Nine Months Ended November 30,				For the Three Months Ended November 30,
	2021		2020		2021		2020
(in millions)
Beer
Net sales	$	5,185.9	$	4,697.9	$	1,752.6	$	1,677.9
Segment operating income (loss)	$	2,089.7	$	1,988.0	$	723.6	$	714.5


Capital expenditures	$	501.5	$	347.8	$	205.7	$	149.3
Depreciation and amortization	$	183.1	$	143.8	$	64.6	$	50.9

Wine and Spirits
Net sales:
Wine	$	1,351.1	$	1,711.2	$	506.2	$	666.7
Spirits	181.2		252.8		61.8		93.5
Net sales	$	1,532.3	$	1,964.0	$	568.0	$	760.2
Segment operating income (loss)	$	348.9	$	507.8	$	144.5	$	182.3
Income (loss) from unconsolidated investments	$	33.6	$	26.6	$	33.4	$	25.5

Equity method investments (1)	$	117.4	$	137.7	$	117.4	$	137.7

Capital expenditures	$	78.0	$	67.3	$	24.0	$	29.9
Depreciation and amortization	$	59.6	$	68.5	$	20.0	$	23.2

Corporate Operations and Other
Segment operating income (loss)	$	(161.7)	$	(171.3)	$	(44.3)	$	(61.4)
Income (loss) from unconsolidated investments	$	(2.1)	$	0.2	$	(1.3)	$	(0.3)

Equity method investments	$	110.3	$	83.5	$	110.3	$	83.5

Capital expenditures	$	19.2	$	52.6	$	15.6	$	10.7
Depreciation and amortization	$	9.7	$	10.9	$	3.2	$	3.7

Canopy
Net sales	$	332.4	$	261.5	$	104.3	$	101.5
Segment operating income (loss)	$	(508.0)	$	(1,071.0)	$	(171.0)	$	(213.4)


Capital expenditures	$	49.7	$	135.9	$	12.2	$	21.5
Depreciation and amortization	$	66.2	$	78.5	$	22.9	$	23.9

Consolidation and Eliminations
Net sales	$	(332.4)	$	(261.5)	$	(104.3)	$	(101.5)
Operating income (loss)	$	508.0	$	1,071.0	$	171.0	$	213.4
Income (loss) from unconsolidated investments	$	(142.6)	$	(108.8)	$	(68.4)	$	(43.0)

Equity method investments	$	2,528.7	$	2,738.7	$	2,528.7	$	2,738.7

Capital expenditures	$	(49.7)	$	(135.9)	$	(12.2)	$	(21.5)
Depreciation and amortization	$	(66.2)	$	(78.5)	$	(22.9)	$	(23.9)

Comparable Adjustments

Operating income (loss)	$	(622.7)	$	(92.7)	$	16.1	$	(52.3)
Income (loss) from unconsolidated investments	$	(1,430.7)	$	212.5	$	(135.5)	$	800.2


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FINANCIAL STATEMENTS			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			Table of Contents

(2) Income (loss) from unconsolidated investments consists of:
For the Nine Months
Ended November 30, For the Three Months
Ended November 30,
2020 2019 2020 2019
(in millions)
Unrealized net gain (loss) on securities measured at fair value $ 524.7 $ (2,200.9) $ 769.6 $ (534.3)
Equity in earnings (losses) from Canopy and related activities (421.0) (544.2) (12.4) 46.2
Equity in earnings (losses) from other equity method investees 26.8 32.9 25.2 31.1
Net gain (loss) on sale of unconsolidated investment 0 0.4 0 0.5
$ 130.5 $ (2,711.8) $ 782.4 $ (456.5)


	For the Nine Months Ended November 30,				For the Three Months Ended November 30,
	2021		2020		2021		2020
(in millions)
Consolidated
Net sales	$	6,718.2	$	6,661.9	$	2,320.6	$	2,438.1
Operating income (loss)	$	1,654.2	$	2,231.8	$	839.9	$	783.1
Income (loss) from unconsolidated investments (2)	$	(1,541.8)	$	130.5	$	(171.8)	$	782.4

Equity method investments (1)	$	2,756.4	$	2,959.9	$	2,756.4	$	2,959.9

Capital expenditures	$	598.7	$	467.7	$	245.3	$	189.9
Depreciation and amortization	$	252.4	$	223.2	$	87.8	$	77.8


(1)	Equity method investments balance at November 30, 2020, exclude amounts reclassified to assets held for sale.
(2)	Income (loss) from unconsolidated investments consists of:
			For the Nine Months Ended November 30,				For the Three Months Ended November 30,
			2021		2020		2021		2020
		(in millions)
		Unrealized net gain (loss) on securities measured at fair value	$	(1,534.8)	$	524.7	$	(199.7)	$	769.6
		Equity in earnings (losses) from Canopy and related activities	(39.5)		(421.0)		(4.2)		(12.4)
		Equity in earnings (losses) from other equity method investees	32.5		26.8		32.1		25.2


			$	(1,541.8)	$	130.5	$	(171.8)	$	782.4


Constellation Brands, Inc. Q3 FY ~~2021~~2022 Form 10-Q			#WORTHREACHINGFOR I 3629


MD&A			Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

~~INTRODUCTION~~

Introduction

This MD&A provides additional information on our businesses, current developments, financial condition, cash flows, and results of operations. It should be read in conjunction with our ~~consolidated financial statements and notes thereto included herein (the “Financial Statements”)~~Financial Statements and with our consolidated financial statements and notes included in our ~~2020~~2021 Annual Report. This MD&A is organized as follows:

•Overview. This section provides a general description of our business, which we believe is important in understanding the results of our operations, financial condition, and potential future trends.

•Strategy. This section provides a description of our strategy and a discussion of recent developments, COVID-19 and global supply chain related impacts, and significant investments, acquisitions, and divestitures.

•Results of operations. This section provides an analysis of our results of operations presented on a business segment basis for the three months ended November 30, ~~2020 (“Third Quarter 2021”),~~2021, and November 30, ~~2019 (“Third Quarter 2020”),~~2020, and the nine months ended November 30, ~~2020 (“Nine Months 2021”),~~2021, and November 30, ~~2019 (“Nine Months 2020”)~~.2020. In addition, a brief description of significant transactions and other items that affect the comparability of the results is provided.

•~~Financial liquidity~~Liquidity and capital resources. This section provides an analysis of our cash flows, outstanding debt, and a discussion of the amount of financial capacity available to fund our ongoing operations and future commitments, as well as a discussion of other financing arrangements.

~~OVERVIEW~~Overview

We are an international ~~beverage alcohol company with a broad portfolio~~producer and marketer of ~~consumer-preferred high-end imported~~ beer, ~~brands, and higher-end~~ wine, and spirits ~~brands. Many of our products are recognized as leaders~~with operations in ~~their respective categories. We~~the U.S., Mexico, New Zealand, and Italy with powerful, consumer-connected, high-quality brands like Corona Extra, Modelo Especial, Robert Mondavi, Kim Crawford, Meiomi, and SVEDKA Vodka. In the U.S., we are one of the ~~leading U.S.~~top growth ~~drivers~~contributors at retail among beverage alcohol suppliers. ~~In the U.S. market, we~~We are the third-largest beer company and a ~~leading~~leader in the high-end of the U.S. beer market and a higher-end wine and spirits ~~company.~~company with many of our products as leaders in their respective categories. Our strong market positions make us a supplier of choice to many of our consumers and our customers, who include wholesale distributors, retailers, and on-premise locations. We conduct our business through entities we wholly own as well as through a variety of joint ventures and other entities.

Our internal management financial reporting consists of three business divisions: (i) Beer, (ii) Wine and Spirits, and (iii) Canopy and we report our operating results in four segments: (i) Beer, (ii) Wine and Spirits,


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(iii) Corporate Operations and Other, and (iv) Canopy. Our Canopy Equity Method Investment makes up the Canopy segment.

In the Beer segment, our portfolio consists of high-end imported beer brands, craft beer, and ~~alternative beverage alcohol brands.~~ABAs. We have an exclusive perpetual brand license to import, market, and sell our Mexican beer portfolio in the U.S. In the Wine and Spirits segment, we sell a ~~our~~ portfolio that includes higher-margin, higher-growth wine brands complemented by certain higher-end spirits brands. Amounts included in the Corporate Operations and Other segment consist of costs of executive management, corporate development, corporate finance, corporate growth and strategy, human resources, internal audit, investor relations, legal, public relations, and information technology, as well as our investments made through our corporate venture capital function. All costs included in the Corporate Operations and Other segment are general costs that are applicable to the consolidated group and are, therefore, not allocated to the other reportable segments. All costs reported within the Corporate Operations and Other segment are not included in our CODM’s evaluation of the operating income (loss) performance of the other reportable segments. The business segments reflect how our operations are managed, how resources are allocated, how operating performance is evaluated by senior management, and the structure of our internal financial reporting.


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~~STRATEGY~~Strategy

Business strategy

Our overall strategy is to drive ~~industry-leading~~ growth ~~build unrivaled shareholder value,~~ and shape the future of our industry by building brands that people ~~love.~~love and delivering unrivaled value to our stockholders. We ~~believe sharing a toast, unwinding after a day, celebrating milestones, and helping people connect, is Worth Reaching For. We~~endeavor to position our portfolio to benefit from the consumer-led premiumization trend, ~~towards premiumization,~~ which we believe will continue to ~~result in~~drive faster growth rates in the higher-end of the beer, wine, and spirits categories. We focus on developing our expertise in consumer insights and category management, as well as our strong distributor network, which provides an effective route-to-market. Additionally, we leverage our scale across the total beverage alcohol market and our level of diversification hedges our portfolio risk. In addition to growing our existing business, we focus on targeted acquisitions of, and investments in, businesses that are higher-margin, higher-growth, consumer-led, have a low integration risk, and/or fill a gap in our portfolio. We also strive to identify, meet, and stay ahead of evolving consumer trends and market dynamics. See “Investments, acquisitions, and divestitures” below.

~~We strive~~To capitalize on consumer-led premiumization trends, become more competitive, and grow our business, we have employed a strategy dedicated to ~~strengthen~~a combination of organic growth and acquisitions, with a focus on the higher-margin, higher-growth categories of the beverage alcohol industry. Key elements of our ~~portfolio of higher-end beer, wine, and spirits brands and differentiate ourselves through:~~strategy include:

•~~leveraging~~leverage our leading position in total beverage alcohol and our scale with wholesalers and retailers to expand distribution of our product portfolio;

•~~strengthening~~strengthen relationships with wholesalers and retailers by providing consumer and beverage alcohol insights;

•~~investing~~invest in brand building and innovation activities;

•~~positioning~~position ourselves for success with consumer-led products that identify, meet, and stay ahead of evolving consumer trends and market dynamics;

•~~realizing~~realize operating efficiencies ~~through~~by expanding and enhancing production capabilities and maximizing asset utilization; and

•~~developing~~develop employees to enhance performance in the marketplace.

Our business strategy for the Beer segment focuses on leading the high-end segment of the U.S. beer ~~and~~market. This includes continued focus on growing our beer portfolio in the U.S. through expanding distribution for key brands, as well as ~~new product development and~~ innovation ~~within the existing portfolio of brands,~~ and continued expansion, ~~construction,~~optimization, and ~~optimization~~construction activities for our Mexico beer operations. Additionally, in an effort to more fully compete in growing sectors of the high-end segment of the U.S. beer market, we have leveraged our innovation capabilities to introduce new ~~brands~~line extensions and package formats that align with consumer trends.We continue to refine our options to optimize the value of our Beer segment and drive increased focus on our high-performing import portfolio and new product introductions. See “Investments, acquisitions, and divestitures - Ballast Point Divestiture” below.

~~In connection~~Expansion and optimization efforts continue at our current brewery locations under our Mexico Beer Projects to align with our business strategy for the Beer segment, we have more than tripled the production capacity of our brewery located in Nava, Coahuila, Mexico (the “Nava Brewery”) since its June 2013 acquisition. Additionally, we are continuing to invest to expand our brewery operations in Obregon, Sonora, Mexico (the “Obregon Brewery”), where an additional five million hectoliter expansion is now expected to be completed in early fiscal 2022, although further COVID-19 containment measures may alter that timeline. Atanticipated future growth expectations. However, at this time, we have ~~paused~~suspended all Mexicali Brewery construction activities, following a negative result from a public consultation held in ~~Mexico, see “Capital expenditures” below. Expansion, construction, and optimization efforts~~Mexico. We continue to work with government officials in Mexico ~~continue~~ to ~~align with~~explore options to add further capacity at other locations in Mexico, including the construction of the Southeast Mexico Brewery where there is ample water and a skilled workforce to meet our ~~anticipated future growth expectations.~~long-term needs (see “Liquidity and Capital Resources - Capital expenditures” below for further discussion).


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Our ~~business~~ strategy for the Wine and Spirits segment is to build an industry-leading portfolio of higher-end wine and spirits brands. We are investing to meet the evolving needs of consumers, including ~~launching direct-to-consumer~~offering DTC and other eCommerce platforms; building brands through consumer insights, sensory expertise, and innovation; and refreshing existing brands, as we continue to focus on moving our branded wine and spirits portfolio towards a higher-margin, higher-growth portfolio of brands. We ~~dedicate a large share of our sales and marketing resources to well-known wine and spirits brands sold in the U.S., which comprise the U.S. Power Brands~~


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(“Power Brands”), as they represent a majority of our U.S. wine and spirits revenue and profitability, and generally hold strong positions in their respective price categories. These brands and/or portfolio of brands include:

~~Wine Brands~~

Wine Portfolio
of Brands

~~Spirits Brands~~

●~~7 Moons~~

●~~Drylands~~

●~~SIMI~~

●~~Charles Smith~~

●~~Casa Noble~~

●~~Auros~~

●~~Kim Crawford~~

●~~Spoken Barrel~~

●~~Prisoner~~

● ~~High West~~

●~~Champagne Palmer & Co~~

●~~Meiomi~~

●~~Robert Mondavi~~

●~~Mi CAMPO~~

●~~Cooper & Thief~~

●~~Mount Veeder~~

●~~Schrader~~

●~~Nelson’s Green Brier~~

●~~Crafters Union~~

●~~Nobilo(1)~~

●~~SVEDKA~~

●~~Cuvée Sauvage~~

●~~Ruffino~~

●~~The Real McCoy~~

~~(1)See “Recent Developments - Wine and Spirits Transactions” below.~~

We focus our innovation and investment dollars on ~~those~~ brands within our portfolio which position us to benefit from the consumer-led trend towards premiumization. Additionally, in connection with the ~~Wine and Spirits Transactions, Paul Masson Transaction, and Concentrate Business Transaction,~~recent divestitures, we expect to optimize the value of our wine and spirits portfolio by driving increased focus on our higher-end ~~Power Brands~~brands to accelerate growth and improve overall operating margins. In markets where it is feasible, we entered into a contractual ~~arrangements~~arrangement to consolidate our U.S. distribution ~~network~~ in order to obtain dedicated distributor selling resources which focus on our U.S. wine and spirits portfolio to drive organic growth. This ~~consolidated~~ U.S. ~~distribution network~~distributor currently represents about 70% of our branded wine and spirits volume in the U.S. ~~Throughout the terms of these contracts, we generally expect shipments on an annual basis to these distributors to essentially equal the distributors’ shipments to retailers.~~

Marketing, sales, and distribution of our products are managed on a geographic basis ~~in order~~allowing us to ~~fully~~ leverage leading market positions. In addition, market dynamics and consumer trends vary across each of our markets. Within our primary market in the U.S., we offer a range of beverage alcohol products across the imported beer, craft beer, ~~alternative beverage alcohol,~~ABA, branded wine, and spirits categories, with generally separate distribution networks utilized for (i) our beer portfolio and (ii) our wine and spirits portfolio. The environment for our products is competitive in each of our markets.

We ~~complemented~~complement our ~~total beverage alcohol~~ strategy ~~in an adjacent category by making investments~~with our investment in Canopy, by expanding our portfolio into adjacent categories. Canopy is a leading cannabis company with operations in countries across the world. ~~These investments are~~This investment is consistent with our long-term strategy to identify, ~~meet,~~address, and stay ahead of evolving consumer trends and market ~~dynamics, and they represent a significant expansion of~~dynamics. We expanded our strategic relationship with Canopy to help position ~~Canopy~~it as a global leader in cannabis production, branding, intellectual property, and retailing.

We remain committed to our long-term financial model of: growing sales, expanding margins, and increasing cash flow in order to achieve earnings per share growth, maintain our targeted leverage ratio, and deliver returns to ~~shareholders~~stockholders through the payment of ~~quarterly cash~~ dividends and periodic share repurchases. Our results of operations and financial condition havebeenaffected by inflation and changing prices. We intend to pass along rising costs through increased selling prices, subject to normal competitive conditions. In addition, we continue to identify on-going cost savings initiatives, including our commodity hedge program. However, there can be no assurances that we will be able to fully mitigate rising costs through increased selling prices and/or cost savings initiatives.

CSR strategy

Our CSR strategy is designed to align with our business goals and stakeholder interests, reflect our company values, and more directly address pressing societal needs.Specifically, we dedicate our resources towards four focus areas:

Model water stewardship for our industry –We have made water conservation and stewardship the focus of our sustainability initiatives. We are committed to increasing our site water efficiency, maintaining source availability and quality, using our relationships to advance conservation efforts, and reporting transparently.

Be a champion for the professional development and advancement of women – We are committed to providing resources to support the advancement of women within our company, our communities, and our industry.

Serve as a catalyst for economic development and prosperity for disadvantaged communities –We are committed to addressing the needs of disadvantaged communities, with a focus on Latinx/Hispanic and Black/African American communities.


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Be a culture carrier of responsible consumption – We are committed to empowering adults to make responsible choices in their alcohol (substance) consumption by supporting fact-based education, engagement programs, and policies. We are evolving our approach to responsible consumption by embracing a contemporary mindset that aligns with consumer betterment trends.

During Third Quarter 2022 we took the following steps to advance our CSR strategy:

•revised our Corporate Governance and Responsibility Committee and Human Resources Committee charters to specifically address oversight of (i) environmental, sustainability, and social responsibility programs and goals and (ii) employee DE&I matters, respectively;

•renewed our commitment and increased our level of support in Dress for Success Worldwide, an organization whose mission is to empower women to achieve economic independence;

•initiated an additional short-term investment, consisting of a certificate of deposit, in a minority-owned financial institution;

•continued to drive change and enhance diverse representation among our U.S. salaried population;

•supported more than 225 employee-designated charitable organizations on GivingTuesday with a special match, in addition to our charitable matching program, providing approximately $150,000 in total donations; and

•announced the launch of a new initiative between Modelo, UFC, the world’s premier mixed martial arts organization, and the nonprofit Rebuilding Together to revitalize training gyms across the country. This initiative is consistent with Rebuilding Together’s mission to repair homes, revitalize communities, and rebuild lives.

Recent Developments

~~Wine and Spirits Transactions~~Agreement with Coca-Cola

In ~~January~~December 2021, we ~~sold~~entered into a ~~portion~~brand authorization agreement with Coca-Cola in the U.S. to extend its FRESCA® brand into beverage alcohol for the launch of our wine and spirits business, including lower-margin, lower-growth wine and spirits brands, wineries, vineyards, offices, and facilities. We received cash proceeds of $559.5 million, subject to certain post-closing adjustments from the Further Revised Wine and Spirits Transaction. In addition, we have the potential to earn an incremental $250 million of contingent consideration if certain brand performance targets are met over a two-year period after closing. In January 2021, we also sold the New Zealand-based Nobilo Wine brand and certain related assets. We received cash proceeds of $129.1 million, subject to certain post-closing adjustments from the Nobilo Wine Transaction. The cash proceeds from these transactions will be utilized to repay the 3.75% May 2013 Senior Notes and for other general corporate purposes. These divestitures are consistent with our strategic focus on higher-margin, higher-growth brands.


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~~Paul Masson Transaction~~

~~Concentrate Business Transaction~~

The following table presents selected financial information included in our historical consolidated financial statements that will no longer be part of our consolidated results of operations after the Wine and Spirits Transactions, Paul Masson Transaction, and Concentrate Business Transaction:

Nine Months 2021 Nine Months 2020 Fiscal
2020
(in millions)
Net sales $ 578.4 $ 638.0 $ 874.9
Gross profit $ 229.5 $ 247.0 $ 335.6
Marketing (1)
$ 12.4 $ 13.1 $ 17.7

~~(1)Included in selling, general, and administrative expenses within our consolidated results of operations.~~ready-to-drink cocktails.

~~Canopy optimization~~Other acquisition

In December ~~2020, Canopy announced its plans to close five Canadian production facilities as part of its efforts to streamline its operations~~2021, we acquired a previously leased wine and ~~further improve margins. Canopy has publicly disclosed that it expects to record an estimated pre-tax loss of approximately C$350 million to C$400 million~~spirits distribution facility located in their third and fourth quarters of fiscal 2021 results from the facilities closures. We expect to record our proportional share of Canopy’s estimated pre-tax loss of approximately C$130 million to C$155 million in our fourth quarter of fiscal 2021 and first quarter of fiscal 2022 results.

In December 2020, Canopy announced an agreement to divest its ownership interest in Canopy Rivers in the Canopy Rivers Transaction. As additional consideration for the assets being transferred and termination of the royalty agreement, Canopy will make a cash payment of C$115 million and issue 3,750,000 Canopy shares. The Canopy Rivers Transaction is subject to Canopy Rivers shareholder and regulatory approval.Lodi, California.

COVID-19

~~We have an existing Crisis Management Committee that since January 2020 has been closely monitoring the impact of the virus that causes COVID-19, on our Company~~ and our workforce. In March 2020, the World Health Organization (“WHO”) recognized COVID-19 as a pandemic. COVID-19 has severely restricted the level of economic activity around the world. In response to COVID-19, the governments of many countries, states, cities, and other geographic regions took preventative or protective actions, such as imposing restrictions on travel and business operations and advising or requiring individuals to limit or forgo their time outside of their homes. Temporary closures of businesses were ordered, and numerous other businesses temporarily closed voluntarily. Further, individuals' ability to travel was curtailed through mandated travel restrictions and may be further limited through additional voluntary or mandated closures of travel-related businesses. In the key markets where we sell our products, the beverage alcohol industry has been classified as an essential business.

We have implemented various measures to reduce the spread of the virus including working from home, restricting visitors to our production locations, splitting our production workforces, reducing the on-site production workforce levels, screening workers before they enter facilities, implementing social distancing, and encouraging employees to adhere to prevention measures recommended by the Center for Disease Control (“CDC”) and the WHO. These prevention measures have been effective as evidenced by the minimal number of


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COVID-19 cases within our workforce. Since our non-production workforce is able to work remotely using various technology tools, we are able to maintain our operations and internal controls over financial reporting and disclosures. The health and safety of our workforce remains a top priority. We continue to implement and evolve our comprehensive plan to return to our non-production facilities, with government recommendations and our workforce safety guiding how we manage our return to facilities.Global Supply Chain Related Issues

COVID-19 containment measures ~~have~~ affected us predominantly in the first half of Fiscal 2021 primarily in the reduction of (i) depletion volume on our products in the on-premise business due to bar and restaurant closures and (ii) shipment volume related to the reduced production activity at our major breweries in ~~Mexico.~~Mexico which we were able to rectify in the second half of Fiscal 2021. The on-premise business has historically been about 10% to 15% of our depletion volume for beer, wine, and spirits. ~~The decrease in the on-premise business has been partially offset by an increase in off-premise. We expect our~~Our on-premise depletion volumes for Fiscal 2022 have been, and may continue to ~~return to more normal levels as the Federal Drug Administration approved~~be, impacted by regional COVID-19 ~~vaccines are administered across the U.S.~~case volumes, vaccine immunization rates, and ~~states begin the process of fully reopening their economies, including bars and restaurants.~~

new COVID-19 variants. Currently, our breweries, wineries, and bottling facilities are open and operational. ~~However,~~

As reflected in the discussion below, we have seen consumers shift more of their total shopping spend to online channels since the COVID-19 outbreak, which has led to increased eCommerce sales, including DTC, for our business. Fiscal 2022 has been, and may continue to be, impacted by challenges with both global supply chain logistics and transportation which are contributing to lower product inventory levels and higher cost of product sold. For example, wine produced in New Zealand and Italy and subsequently shipped to the U.S. for distribution has been affected by the lack of availability and increased costs of ocean freight shipping containers and port delays causing increased storage charges. In addition, we have experienced a brown glass purchasing shortage, which has impacted the near term growth prospects for certain ~~select facilities may experience occasional temporary closures due~~of our imported beer brands.

In response to ~~applicable local conditions. In June 2020, beer production at~~COVID-19, we have ensured our ~~major breweries in Mexico returned~~ ongoing liquidity and financial flexibility through cash preservation initiatives, capital management adjustments, and cost control measures. We have used opportunities


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to ~~normal levels following a slow down~~defer some payments including certain payroll taxes under the CARES Act afforded to us earlier in the ~~fiscal year.~~Our supply chains and distribution channels have not been materially impacted and we are working to rebuild our supply of products to meet forecasted demand. As a result of decreased production levels, we are closely monitoring distributor inventory to optimize stock levels. Product inventories have improved during the Third Quarter 2021 and are now expected to return to more normal levels by the end of Fiscal 2021.

We have also been impacted by the containment actions imposed by the Mexican government, including a temporary halt on expansion activities at the Obregon Brewery in early fiscal 2021. In June 2020, we resumed construction on a planned additional five million hectoliters expansion. Expansion is now expected to be completed in early fiscal 2022, although any further containment actions associated with COVID-19 may alter that timeline.

pandemic. We are not able to estimate the long-term impact of COVID-19 on our business, financial condition, results of operations, and/or cash flow. We believe we have sufficient liquidity available from operating cash flow, cash on hand, and availability under our $2.0 billion revolving credit facility. We expect to have continued access to capital markets and to be able to continue to return value to ~~shareholders.~~stockholders through dividends and periodic share repurchases.

Investments, acquisitions, and divestitures

~~Canopy segment~~

~~Canopy investments~~

In May 2020, we exercised the November 2017 Canopy Warrants at an exercise price of C$12.98 per warrant share for C$245.0 million, or $173.9 million, which increased our ownership interest in Canopy to 38.6%.

We expect the value of the Canopy investments accounted for at fair value to be volatile in future periods. Unrealized net gain (loss) from the changes in fair value of our Canopy investments accounted for at fair value in income (loss) from unconsolidated investments, are as follows:

Date of
Investment Investment Third
Quarter
2021 Third
Quarter
2020 Nine
Months
2021 Nine
Months
2020
(in millions)
Nov 2017
Warrants (1)
$ — $ (91.9) $ (61.8) $ (542.7)
Jun 2018 Convertible debt securities 27.7 (15.6) 25.2 (97.0)
Nov 2018
Warrants (2)
741.9 (426.8) 561.3 (1,561.2)
$ 769.6 $ (534.3) $ 524.7 $ (2,200.9)

~~(1)For additional information on the May 2020 Canopy Investment, refer to Note 8 of the Financial Statements.~~


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~~(2)In June 2019, the Canopy Shareholders approved the modification of the terms of the November 2018 Canopy Warrants. For additional information refer to Note 8 of the Financial Statements.~~ ~~Nine Months 2020~~ ~~includes a $1,176.0 million unrealized gain resulting from the June 2019 Warrant Modification.~~

We expect Canopy’s earnings to be volatile in future periods. Equity in earnings (losses) and related activities for our Canopy Equity Method Investment are recognized on a two-month lag. Accordingly, we recognized our share of Canopy’s earnings (losses) for the periods (i) July through September 2020, in our Third Quarter 2021 results, (ii) July through September 2019, in our Third Quarter 2020 results, (iii) January through September 2020, in our Nine Months 2021 results, and (iv) January through September 2019, in our ~~Nine Months 2020 result~~s.

As of November 30, 2020, the conversion of Canopy equity securities held by its employees and/or held by other third parties, excluding our November 2018 Canopy Warrants, Canopy Debt Securities, and the New Acreage Financial Instrument would not have a significant effect on our share of Canopy’s reported earnings or losses. Additionally, under an amended and restated investor rights agreement, we have the option to purchase additional common shares of Canopy at the then-current price of the underlying equity security to allow us to maintain our relative ownership interest. If we exercised all of our November 2018 Canopy Warrants, expiring November 1, 2023, and November 1, 2026, it could have a significant effect on our share of Canopy’s reported earnings or losses and our ownership interest in Canopy would be expected to increase to greater than 50%. In connection with the Acreage Transaction, Canopy and Acreage have entered into the New Acreage Financial Instrument, which would require the issuance of Canopy shares. If Canopy exercised the New Acreage Financial Instrument, it could have a significant effect on our share of Canopy’s reported earnings or losses and our ownership interest in Canopy would decrease and no longer be expected to be greater than 50%.

As previously noted, these investments are consistent with our long-term strategy to identify, meet, and stay ahead of evolving consumer trends and market dynamics, and they represent a significant expansion of our strategic relationship to position Canopy as a global leader in cannabis production, branding, intellectual property, and retailing.

Beer segment

Ballast Point Divestiture

In March 2020, we sold the Ballast Point craft beer business, including a number of its associated production facilities and brewpubs. ~~Accordingly, our consolidated results of operations include the results of operations of our Ballast Point craft beer business through the date of divestiture.~~ This divestiture is consistent with our strategic focus on our high-performing import ~~portfolio and new product introductions.~~portfolio.

Wine and Spirits segment

My Favorite Neighbor acquisition

In November 2021, we acquired the remaining 65% ownership interest in My Favorite Neighbor, which primarily included the acquisition of goodwill, trademarks, inventory, and property, plant, and equipment. The results of operations of My Favorite Neighbor are reported in the Wine and Spirits segment and have been included in our consolidated results of operations from the date of acquisition. In April 2020, we made an initial investment in My Favorite Neighbor that was accounted for under the equity method. We recognized our share of their equity in earnings (losses) in our consolidated financial statements in the Wine and Spirits segment up to the date we acquired the remaining ownership interest. The My Favorite Neighbor investment and subsequent acquisition supported our strategic focus on consumer-led premiumization trends and meeting the evolving needs of our consumers.

Paul Masson Divestiture

In January 2021, we sold the Paul Masson Grande Amber Brandy brand, related inventory, and interests in certain contracts. We recognized a net gain of $58.4 million on the sale of business primarily in the fourth quarter of Fiscal 2021. This divestiture is consistent with our increased focus on consumer-led premiumization trends.

Wine and Spirits Divestitures

In January 2021, we sold a portion of our wine and spirits business, including lower-margin, lower-growth wine and spirits brands, related inventory, interests in certain contracts, wineries, vineyards, offices, and facilities. We have the potential to earn an incremental $250 million of contingent consideration if certain brand performance targets are met over a two-year period after closing. Also in January 2021, we sold the New Zealand-based Nobilo Wine brand and certain related assets. We recognized a net loss of $33.5 million on the Wine and Spirits Divestitures primarily in the fourth quarter of Fiscal 2021. These divestitures are consistent with our increased focus on consumer-led premiumization trends.

Concentrate Business Divestiture

In December 2020, we sold certain brands used in our concentrates and high-color concentrate business, and certain related intellectual property, inventory, interests in certain contracts, and other assets. This divestiture is consistent with our focus on consumer-led premiumization trends.


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The following presents selected financial information included in our historical consolidated financial statements that are no longer part of our consolidated results of operations following the Paul Masson Divestiture, the Wine and Spirits Divestitures, and the Concentrate Business Divestiture:


	Third Quarter 2021		Nine Months 2021
(in millions)
Net sales	$	210.3	$	578.5
Gross profit	$	80.9	$	229.5
Marketing (1)	$	7.1	$	12.4

(1)Included in selling, general, and administrative expenses within our consolidated results of operations.

Copper ~~and~~& Kings acquisition

In September 2020, we acquired the remaining ownership interest in Copper ~~and~~& Kings which primarily included the acquisition of ~~inventories,~~inventory and property, plant, and equipment. This acquisition included a collection of traditional and craft batch-distilled American brandies and other select spirits. The results of operations of Copper ~~and~~& Kings are reported in the Wine and Spirits segment and have been included in our consolidated results of operations from the date of acquisition. The Copper & Kings acquisition supported our strategic focus on building an industry-leading portfolio of higher-end spirits brands.

Empathy Wines acquisition

In June 2020, we acquired Empathy Wines, which primarily included the acquisition of goodwill, trademarks, and inventory. This acquisition, which included a digitally-native wine brand, strengthened our position in the ~~direct-to-consumer~~DTC and other eCommerce markets. The results of operations of Empathy Wines are reported in the Wine and Spirits segment and have been included in our consolidated results of operations from the date of acquisition.


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~~MD&A~~			~~Table of Contents~~

~~Booker Vineyard investment~~

In April 2020, we invested in Booker Vineyard, a super-luxury, direct-to-consumer focused wine business that is accounted for under the equity method. We recognize our share of their equity in earnings (losses) in our consolidated financial statements in the Wine and Spirits segment.

~~Black Velvet Divestiture~~

In November 2019, we sold the Black Velvet Canadian Whisky business and the brand’s associated production facility, along with a subset of Canadian whisky brands produced at that facility, and related inventory at a transaction value of $266.3 million. Accordingly, our consolidated results of operations include the results of operations of our Canadian whisky business through the date of divestiture. We received cash proceeds of $266.7 million, net of post-closing adjustments. This divestiture is consistent with The Empathy Wines acquisition supported our strategic focus on ~~higher-margin, higher-growth brands. We recognized a net gain~~consumer-led premiumization trends and meeting the evolving needs of ~~$70.5 million on the sale of the business primarily in the third quarter of fiscal 2020.~~our consumers.

~~Nelson’s Green Brier acquisition~~Canopy segment

Canopy investment

In May ~~2019,~~2020, we ~~increased~~exercised the November 2017 Canopy Warrants at an exercise price of C$12.98 per warrant share for C$245.0 million, or $173.9 million. This investment expanded our ownership interest in Nelson’s Green Brier to 75%, resulting in consolidation of the business and recognition of a 25% noncontrolling interest. This acquisition included a portfolio of award-winning, Tennessee-based craft bourbon and whiskey products. The fair value of the business combination was allocated primarily to goodwill, trademarks, inventory, and property, plant, and equipment. The results of operations of Nelson’s Green Brier are reported in the Wine and Spirits segment and have been included in our consolidated results of operations from the date of acquisition.strategic relationship with Canopy.

For additional information on these recent developments, investments, acquisitions, and divestitures, refer to Notes 3, 5, 6, and ~~8 of the Financial Statements.~~8.

~~RESULTS OF OPERATIONS~~Results of Operations

~~FINANCIAL HIGHLIGHTS~~Financial Highlights

References to organic throughout the following discussion exclude the impact of ~~divested brand activity in connection with the Ballast Point Divestiture (beer), and Black Velvet Divestiture (wine and spirits),~~recent divestitures, as appropriate.

For Third Quarter ~~2021~~2022 compared with Third Quarter ~~2020:~~2021

•Our results of operations ~~benefited from~~were negatively impacted by (i) an unrealized net ~~gain~~loss from the changes in fair value of our ~~investments~~investment in Canopy as compared with the unrealized net gain in Third Quarter 2021 ~~as well as improvements within both the Beer~~ and ~~Wine and Spirits segments.~~

•~~Net sales increased 22% due to an increase~~(ii) a decrease in ~~both Beer and~~ Wine and Spirits net sales ~~driven primarily by volume growth. Favorable impacts from pricing and product mix shift also contributed~~due largely to the ~~increase as compared with Third Quarter 2020.~~

•Operating income increased 193% largely due to Third Quarter 2020 impairment of long-lived assets held for sale primarily in connection with the Wine and Spirits Transactions as well as an increase in Beer net sales in Third Quarter 2021 driven by volume growth.

•Net income attributable to CBI and diluted net income per common share attributable to CBI increased largely due to (i) an unrealized net gain from the changes in fair value of our investments in Canopy in Third Quarter 2021 as compared with an unrealized net loss in Third Quarter 2020, (ii) an impairment of long-lived assets held for sale in Third Quarter 2020, and (iii) volume growth within both the Beer and Wine and Spirits segments,recent divestitures, partially offset by improvements within the ~~Third Quarter 2021 provision for income taxes as compared with the benefit from income taxes for Third Quarter 2020.~~Beer segment.


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~~For Nine Months 2021 compared with~~ ~~Nine Months 2020~~:

•~~Our results of operations benefited from the unrealized net gain from the changes in fair value of our investments in Canopy in Nine Months 2021 and improvements within the Beer segment.~~

•Net sales ~~increased 3%~~ decreased 5% due to ~~(i)~~a decrease in Wine and Spirits net sales largely resulting from the recent divestitures, partially offset by an increase in Beer net sales driven ~~predominantly~~primarily by shipment volume growth ~~(ii)~~and favorable ~~impacts~~impact from pricing and product mix shift within both the Beer and Wine and Spirits segments, partially offset by (i) Wine and Spirits net sales led by branded volume decline largely from brands to be divested in January 2021, (ii) the Ballast Point Divestiture, and (iii) the Black Velvet Divestiture.pricing.

•Operating income increased ~~39%~~ 7% largely due to ~~charges recognized~~(i) favorable Comparable Adjustments for ~~Nine Months 2020~~ ~~in connection~~Third Quarter 2022 as compared with ~~our business transformation strategy within~~Third Quarter 2021, (ii) favorable marketing spend for both the Beer and Wine and Spirits ~~segment, including an impairment of long-lived assets held~~segments, driven by timing, (iii) favorable compensation and benefits for ~~sale primarily in connection with~~ the Beer, Wine and Spirits, ~~Transactions~~ and ~~an increase~~Corporate Operations and Other segments, and (iv) improvements within the Beer segment, partially offset by the decrease in ~~Beer~~Wine and Spirits net ~~sales in Nine Months 2021 driven by volume growth.~~sales.

•Net income attributable to CBI and diluted net income per common share attributable to CBI ~~increased~~decreased largely due to the items discussed above.

For Nine Months 2022 compared with Nine Months 2021

•Our results of operations were negatively impacted by (i) ~~the increase in~~an unrealized net ~~gain~~loss from the changes in fair value of our ~~investments~~investment in Canopy ~~in Nine Months 2021~~ as compared with the unrealized net ~~loss~~gain in Nine Months ~~2020,~~2021, (ii) anan impairment of long-lived assets ~~held~~ for ~~sale in~~ Nine Months ~~2020,~~2022 in connection with certain assets at the Mexicali Brewery, (iii) a decrease in Wine and ~~(iii) volume growth~~Spirits net sales due largely to the recent divestitures, and (iv) an increase in operational costs within the Beer segment, partially offset by ~~Nine Months 2021 provision for income taxes~~a decrease in equity in losses from Canopy’s results, as ~~compared with the benefit from income taxes for~~ ~~Nine Months 2020~~.well as an increase in Beer net sales.

~~COMPARABLE ADJUSTMENTS~~•Net sales increased 1%as an increase in Beer net sales, driven primarily by shipment volume growth and favorable impact from pricing, was offset by the decrease in Wine and Spirits net sales, due largely to the recent divestitures.

•Operating income decreased 26% largely due to (i) the impairment of long-lived assets in connection with certain assets at the Mexicali Brewery, (ii) the decrease in Wine and Spirits net sales, (iii) an increase in marketing spend for the Beer segment, driven by a planned increase to support the growth of our brands, and (iv) an increase in cost of product sold, driven by obsolescence and material costs within the Beer segment, partially offset by the increase in Beer net sales.

•Net income (loss) attributable to CBI and diluted net income (loss) per common share attributable to CBI decreased significantly largely due to the items discussed above, partially offset by lower provision for income taxes.

Comparable Adjustments

Management excludes items that affect comparability from its evaluation of the results of each operating segment as these Comparable Adjustments are not reflective of core operations of the segments. Segment operating performance and the incentive compensation of segment management ~~compensation~~ are evaluated based on core segment operating income (loss)~~. As such, the performance measures for incentive compensation purposes for segment management~~ which do not include the impact of these Comparable Adjustments.


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As more fully described herein and in the related Notes, ~~to the Financial Statements,~~ the Comparable Adjustments that impacted comparability in our segment results for each period are as follows:


		Third Quarter 2021		Third Quarter 2020		Nine Months 2021		Nine Months 2020			Third Quarter 2022		Third Quarter 2021		Nine Months 2022		Nine Months 2021
(in millions)	(in millions)									(in millions)
Cost of product sold	Cost of product sold									Cost of product sold
Recovery of (loss on) inventory write-down		$	(26.5)	$	—	$	(26.5)	$	8.6
Settlements of undesignated commodity derivative contracts										Settlements of undesignated commodity derivative contracts	$	(12.5)	$	6.6	$	(24.8)	$	30.2
Loss on inventory write-down										Loss on inventory write-down	(1.0)		(26.5)		(1.0)		(26.5)
Flow through of inventory step-up										Flow through of inventory step-up	(0.1)		—		—		(0.1)
Net flow through of reserved inventory										Net flow through of reserved inventory	11.6		—		11.6		—
COVID-19 incremental costs	COVID-19 incremental costs	(0.8)		—		(6.3)		—		COVID-19 incremental costs	—		(0.8)		—		(6.3)
Strategic business development costs	Strategic business development costs	(0.7)		(61.7)		(25.8)		(124.2)		Strategic business development costs	—		(0.7)		(2.6)		(25.8)
Net gain (loss) on undesignated commodity derivative contracts	Net gain (loss) on undesignated commodity derivative contracts	9.1		3.1		(0.3)		(23.7)		Net gain (loss) on undesignated commodity derivative contracts	—		9.1		48.1		(0.3)
Settlements of undesignated commodity derivative contracts		6.6		2.3		30.2		7.5
Accelerated depreciation		—		(1.8)		—		(7.1)
Flow through of inventory step-up		—		(0.3)		(0.1)		(1.5)

Total cost of product sold	Total cost of product sold	(12.3)		(58.4)		(28.8)		(140.4)		Total cost of product sold	(2.0)		(12.3)		31.3		(28.8)

Selling, general, and administrative expenses	Selling, general, and administrative expenses									Selling, general, and administrative expenses
Restructuring and other strategic business development costs	Restructuring and other strategic business development costs	(12.7)		(2.4)		(21.6)		(25.5)		Restructuring and other strategic business development costs	0.2		(12.7)		0.1		(21.6)
Transaction, integration, and other acquisition-related costs	Transaction, integration, and other acquisition-related costs	(1.5)		(1.2)		(5.4)		(6.7)		Transaction, integration, and other acquisition-related costs	(0.8)		(1.5)		(0.8)		(5.4)
COVID-19 incremental costs	COVID-19 incremental costs	(0.2)		—		(4.8)		—		COVID-19 incremental costs	—		(0.2)		—		(4.8)
Net gain (loss) on foreign currency derivative contracts	Net gain (loss) on foreign currency derivative contracts	—		(0.8)		(8.0)		(0.8)		Net gain (loss) on foreign currency derivative contracts	—		—		—		(8.0)
Impairment of intangible assets		—		—		—		(11.0)

Other gains (losses)	Other gains (losses)	(4.3)		—		4.6		1.1		Other gains (losses)	18.7		(4.6)		12.6		(0.1)
Total selling, general, and administrative expenses	Total selling, general, and administrative expenses	(18.7)		(4.4)		(35.2)		(42.9)		Total selling, general, and administrative expenses	18.1		(19.0)		11.9		(39.9)

Impairment of brewery construction in progress										Impairment of brewery construction in progress	—		—		(665.9)		—
Impairment of assets held for sale										Impairment of assets held for sale	—		(21.0)		—		(24.0)

Impairment of assets held for sale		(21.0)		(390.0)		(24.0)		(417.0)
Gain (loss) on sale of business		(0.3)		76.0		(4.7)		76.0
Comparable Adjustments, Operating income (loss)	Comparable Adjustments, Operating income (loss)	$	(52.3)	$	(376.8)	$	(92.7)	$	(524.3)	Comparable Adjustments, Operating income (loss)	$	16.1	$	(52.3)	$	(622.7)	$	(92.7)

Income (loss) from unconsolidated investments	Income (loss) from unconsolidated investments	$	800.2	$	(416.5)	$	212.5	$	(2,564.4)	Income (loss) from unconsolidated investments	$	(135.5)	$	800.2	$	(1,430.7)	$	212.5

Cost of product sold

~~Recovery of (loss on) inventory write-down~~

We recognized (i) a loss on the write-down of certain grapes as a result of smoke damage sustained during the 2020 U.S. wildfires (Third Quarter 2021, Nine Months 2021) and (ii) a reimbursement from our insurance carriers for losses recognized on the write-down of certain bulk wine inventory as a result of smoke damage sustained during the Fall 2017 California wildfires (Nine Months 2020). For additional information on the 2020 U.S. wildfires, refer to Note 2 of the Financial Statements.

~~COVID-19 incremental costs~~

We recognized costs for incremental wages and hazard payments to employees, purchases of personal protective equipment, more frequent and thorough cleaning and sanitization of our facilities, and costs associated with the unused beer keg reimbursement program with distributors.

~~Strategic business development costs~~


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Undesignated commodity derivative contracts

Net gain (loss) on undesignated commodity derivative contracts represents a net gain (loss) from the changes in fair value of undesignated commodity derivative contracts. The net gain (loss) is reported outside of segment operating results until such time that the underlying exposure is recognized in the segment operating results. At settlement, the net gain (loss) from the changes in fair value of the undesignated commodity derivative contracts is reported in the appropriate operating segment, allowing the results of our operating segments to reflect the economic effects of the commodity derivative contracts without the resulting unrealized mark to fair value volatility.

~~Accelerated depreciation~~Loss on inventory write-down

We recognized ~~accelerated depreciation~~a loss on the write-down of certain grapes as a result of smoke damage sustained during the 2020 U.S. wildfires (Third Quarter 2021, Nine Months 2021). For additional information on the 2020 U.S. wildfires, refer to Note 2.

Net flow through of reserved inventory

We sold reserved inventory previously written down in the fourth quarter of Fiscal 2021 following the 2020 U.S. wildfires.


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COVID-19 incremental costs

We recognized costs for ~~certain assets~~incremental wages and hazard payments to employees, purchases of personal protective equipment, more frequent and thorough cleaning and sanitization of our facilities, and costs associated with the unused beer keg reimbursement program with distributors.

Strategic business development costs

We recognized costs primarily in connection with losses on write-downs of excess inventory and contract terminations resulting from our ongoing efforts to optimize our portfolio, gain efficiencies, and reduce our cost structure within the ~~multi-year implementation of a new global enterprise resource planning (“ERP”) system which is intended to replace our existing operating~~Wine and ~~financial systems.~~Spirits segment.

Selling, general, and administrative expenses

Restructuring and other strategic business development costs

We recognized costs primarily ~~in connection with costs~~related to our strategy to optimize our portfolio, gain efficiencies, and reduce our cost structure within the Wine and Spirits ~~segment.~~segment (Third Quarter 2021, Nine Months 2021).

Transaction, integration, and other acquisition-related costs

We recognized transaction, integration, and other acquisition-related costs in connection with our investments, acquisitions, ~~divestitures,~~ and ~~investments.~~divestitures.

COVID-19 incremental costs

We recognized costs for payments to third-party general contractors to maintain their workforce for expansion activities at the Obregon Brewery and recognized costs for incremental wages and hazard payments to employees.

Net gain (loss) on foreign currency derivative contracts

We recognized a net loss primarily in connection with the settlement of foreign currency forward contracts entered into to fix the U.S. dollar cost of the May 2020 Canopy Investment.

~~Impairment of intangible assets~~

~~We recorded trademark impairment losses related to our Beer segment’s Ballast Point craft beer trademark asset. For additional information, refer to Note 5 of the Financial Statements.~~

Other gains (losses)

We recognized other gains (losses) primarily in connection with (i) transition services agreements activity related to the Wine and Spirits Divestitures (Third Quarter 2022, Nine Months 2022), (ii) a gain recognized on the remeasurement of our previously held equity interest in My Favorite Neighbor to the acquisition-date fair value (Third Quarter 2022, Nine Months 2022), (iii) a property tax settlement (Third Quarter 2022, Nine Months 2022), and (iv) a gain recognized on the sale of a vineyard (Nine Months 2021)~~, (ii)~~.

Impairment of brewery construction in progress

We recognized an ~~increase~~impairment of long-lived assets in ~~estimated fair value of a contingent liability associated~~connection with ~~a prior period acquisition (Nine Months 2020), and (iii) and a gain on~~certain assets at the ~~remeasurement of our previously held equity interest in Nelson’s Green Brier~~Mexicali Brewery. For additional information, refer to ~~the acquisition-date fair value (Nine Months 2020).~~Note 5.

Impairment of assets held for sale

We recognized impairments of long-lived assets held for sale in connection with the Wine and Spirits ~~Transactions~~Divestitures and the Concentrate Business ~~Transaction.~~Divestiture. For additional information, refer to Note ~~5 of the Financial Statements.~~

~~Gain (loss) on sale of business~~

~~We recognized a net gain (loss) primarily on the completion of the Black Velvet Divestiture.~~5.

Income (loss) from unconsolidated investments

We recognized an unrealized gain (loss) primarily from (i) the changes in fair value of our securities measured at fair value and (ii) equity in earnings (losses) from Canopy’s results, ofincluding equity in losses from Canopy largely related to costs designed to improve their organizational focus, streamline operations, ~~(iii) equity losses from~~and align production capability with projected demand. For additional information, refer to Notes 5 and 8.


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Business segments

Third Quarter 2022 compared to Third Quarter 2021

Net sales


	Third Quarter 2022		Third Quarter 2021		Dollar Change		Percent Change
(in millions)
Beer	$	1,752.6	$	1,677.9	$	74.7	4	%
Wine and Spirits:
Wine	506.2		666.7		(160.5)		(24	%)
Spirits	61.8		93.5		(31.7)		(34	%)
Total Wine and Spirits	568.0		760.2		(192.2)		(25	%)
Canopy	104.3		101.5		2.8		3	%
Consolidation and eliminations	(104.3)		(101.5)		(2.8)		(3	%)

Consolidated net sales	$	2,320.6	$	2,438.1	$	(117.5)	(5	%)


	Beer segment	Third Quarter 2022		Third Quarter 2021		Dollar Change		Percent Change
(in millions, branded product, 24-pack, 12-ounce case equivalents)
Net sales		$	1,752.6	$	1,677.9	$	74.7	4	%


Shipments		95.2		92.3				3.1	%


Depletions								8.4	%

The increase in Beer net sales is largely due to (i) $53.0 million of shipment volume growth within our Mexican beer portfolio, which benefited from continued consumer demand and (ii) $38.8 million of favorable impact from pricing in select markets within our Mexican beer portfolio, partially offset by $17.5 million of unfavorable product mix primarily from a shift in package types and an increase of on-premise keg sales. Third Quarter 2022 cases shipped exceeded cases depleted as we focused on replenishing product inventories which are expected to return to more normal levels by the end of Fiscal 2022.


	Wine and Spirits segment	Third Quarter 2022		Third Quarter 2021		Dollar Change		Percent Change
(in millions, branded product, 9-liter case equivalents)
Net sales		$	568.0	$	760.2	$	(192.2)	(25	%)

Shipments
Total		8.1		13.2				(38.6	%)
Organic (1)		8.1		7.9				2.5	%

U.S. Domestic		7.0		12.2				(42.6	%)
Organic U.S. Domestic (1)		7.0		6.9				1.4	%





Depletions (1)								(6.8	%)

(1)Includes an adjustment to remove volume associated with the Wine and Spirits Divestitures and Paul Masson Divestiture for the period September 1, 2020, through November 30, 2020.


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~~Canopy related~~The decrease in Wine and Spirits net sales is due to ~~costs designed to improve their organizational focus, streamline operations, and align production capability with projected demand (Nine Months 2021), and (iv)~~$210.3 million from the recent divestitures, partially offset by a $18.1 million increase in ~~fair value resulting~~organic net sales. The increase in organic net sales is driven by (i) $16.6 million increase primarily from ~~the June 2019 modification~~non-branded and bulk wine net sales, (ii) $12.8 million of ~~the terms of the November 2018 Canopy Warrants (~~favorable impact from pricing, and (iii) $3.8 million increase in branded wine and spirits shipment volume attributable to our continued focus on growing our brands, partially offset by $14.7 million from unfavorable product mix shift driven by timing.~~Nine Months 2020). For additional information, refer~~The increase in organic net sales was negatively impacted by global supply chain logistics and route to ~~Notes 5 and 8 of the Financial Statements.~~market changes.

~~THIRD QUARTER 2021 COMPARED TO THIRD QUARTER 2020~~

~~Net sales~~

Third
Quarter
2021 Third
Quarter
2020 Dollar
Change Percent
Change
(in millions)
Beer $ 1,677.9 $ 1,310.6 $ 367.3 28 %
Wine and Spirits:
Wine 666.7 601.2 65.5 11 %
Spirits 93.5 87.6 5.9 7 %
Total Wine and Spirits 760.2 688.8 71.4 10 %
Canopy 101.5 58.0 43.5 75 %
Consolidation and Eliminations (101.5) (58.0) (43.5) (75 %)
Consolidated net sales $ 2,438.1 $ 1,999.4 $ 438.7 22 %

Beer segment Third
Quarter
2021 Third
Quarter
2020 Dollar
Change Percent
Change
(in millions, branded product, 24-pack, 12-ounce case equivalents)
Net sales $ 1,677.9 $ 1,310.6 $ 367.3 28 %
Shipment volume
Total 92.3 72.6 27.1 %
Organic (1)
92.3 72.1 28.0 %
Depletion volume (1) (2)
12.3 %

~~(1)Includes an adjustment to remove volume associated with the Ballast Point Divestiture for the period September 1, 2019, through November 30, 2019.~~

~~(2)Depletions represent distributor shipments of our respective branded products to retail customers, based on third-party data.~~


			The increase in Beer net sales is largely due to $361.8 million of volume growth within our Mexican beer portfolio, which benefited from continued consumer demand, new product introductions, and line extensions, $14.3 million favorable impact from pricing in select markets within our Mexican beer portfolio, and $12.5 million favorable product mix shift, partially offset by $20.2 million from the Ballast Point Divestiture. Favorable product mix shift primarily resulted from a return to smaller packaging sizes, increased sales of our newly-released Corona Hard Seltzer, and a reduction in on-premise keg sales. The shipment volume trend outpaced the depletion volume trend for ~~Third Quarter 2021~~, as we began to replenish inventory levels in our distribution channels which were lower due to COVID-19 containment measures negatively affecting early fiscal 2021 production activity at our major breweries in Mexico. We expect this shipment volume trend to continue in the fourth quarter of fiscal 2021 and inventory in our distribution channels to return to normal levels by the end of Fiscal 2021.


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~~MD&A~~			~~Table of Contents~~

Wine and Spirits segment Third
Quarter
2021 Third
Quarter
2020 Dollar
Change Percent
Change
(in millions, branded product, 9-liter case equivalents)
Net sales $ 760.2 $ 688.8 $ 71.4 10 %
Shipment volume
Total 13.2 12.8 3.1 %
Organic (3)
13.2 12.4 6.5 %
U.S. Domestic 12.2 11.6 5.2 %
Organic U.S. Domestic (3)
12.2 11.3 8.0 %
U.S. Domestic Power Brands 6.1 5.9 3.4 %
Depletion volume (2)
U.S. Domestic (3)
(0.8 %)
U.S. Domestic Power Brands 3.7 %

~~(3)Includes an adjustment to remove volume associated with the Black Velvet Divestiture for the period September 1, 2019, through October 31, 2019.~~


			The increase in Wine and Spirits net sales is primarily due to a $46.5 million increase in branded wine and spirits volume, $27.9 million increase from favorable product mix shift, and $15.2 million from favorable pricing, partially offset by $13.4 million from the Black Velvet Divestiture, and $7.1 million driven by lower non-branded and bulk wine and spirits net sales. The Wine and Spirits ~~Third Quarter 2021~~ results have been favorably impacted by (i) our continued focus on new product development (“NPD”) and Power Brands and (ii) an increase in off-premise. During Fiscal 2021, as transition activities with distributors who are repositioning for ownership of brands upon closing the Wine and Spirits Transactions continue to occur, we do not expect shipment volume to be aligned with depletion volume.


			Canopy segment Our ownership interest in Canopy allows us to exercise significant influence, but not control, and, therefore, we account for our investment in Canopy under the equity method. Amounts included for the Canopy segment represent 100% of Canopy’s reported results on a two-month ~~lag,~~lag. Accordingly, we recognize our share of Canopy’s earnings (losses) for the periods (i) July through September 2021, in our ~~prepared~~Third Quarter 2022 results, (ii) July through September 2020, in ~~accordance with~~our ~~U.S. GAAP~~Third Quarter 2021 results, (iii) ,January through September 2021, in our Nine Months 2022 results, and ~~converted from Canadian dollars to U.S. dollars~~(iv) January through September 2020, in our Nine Months 2021 results. Although we own less than 100% of the outstanding shares of Canopy, 100% of ~~the Canopy~~its results are included and subsequently eliminated in order to reconcile to our consolidated financial statements. See “Income (loss) from unconsolidated investments” below for a discussion of Canopy’s net sales, gross profit (loss), selling, general, and administrative expenses, and operating income (loss). This discussion is based on information Canopy has publicly disclosed.

Gross profit

Third
Quarter
2021 Third
Quarter
2020 Dollar
Change Percent
Change
(in millions)
Beer $ 952.7 $ 735.3 $ 217.4 30 %
Wine and Spirits 327.8 310.6 17.2 6 %
Canopy 19.6 (7.3) 26.9 NM
Consolidation and Eliminations (19.6) 7.3 (26.9) NM
Comparable Adjustments (12.3) (58.4) 46.1 79 %
Consolidated gross profit $ 1,268.2 $ 987.5 $ 280.7 28 %
NM = Not Meaningful


~~Constellation Brands, Inc. Q3 FY 2021 Form 10-Q~~			~~#WORTHREACHINGFOR~~ I48


~~MD&A~~			~~Table of Contents~~


			The increase in Beer is largely due to $206.3 million of volume growth, $14.3 million of favorable impact from pricing, and $7.9 million of favorable product mix shift, partially offset by $6.8 million of higher cost of product sold and a decrease of $5.4 million in gross profit due to the Ballast Point Divestiture. Favorable product mix shift primarily resulted from the return to smaller packaging sizes and a reduction in on-premise keg sales, partially offset by increased sales of our newly-released Corona Hard Seltzer. The higher cost of product sold is largely due to increased operational costs of $10.2 million and increased transportation costs of $5.0 million, partially offset by $8.4 million of foreign currency transactional benefits. The increase in operational costs primarily consisted of higher (i) glass material costs, (ii) brewery compensation and benefits, and (iii) depreciation, partially offset by favorable fixed cost absorption. The increase in transportation costs primarily resulted from strategic actions taken to expedite shipments as we began to replenish inventory levels in our distribution channels which were lower due to COVID-19 containment measures.


			The increase in Wine and Spirits is largely due to $23.6 million of growth in branded wine and spirits volume, driven by NPD and Power Brands, $22.7 million of favorable product mix shift, and $15.2 million from favorable pricing, partially offset by $32.6 million higher cost of product sold, a decrease of $7.1 million in gross profit due to the Black Velvet Divestiture, and $6.7 million driven by lower non-branded and bulk wine and spirits net sales. Higher cost of product sold was largely attributable to unfavorable fixed cost absorption of $20.0 million from decreased production levels at certain facilities as a result of the 2020 U.S. wildfires.

~~Gross profit as a percent of net sales increased to 52.0% for Third Quarter 2021 compared with 49.4% for Third Quarter 2020.~~ This was largely due to (i) a favorable change of approximately 200 basis points in Comparable Adjustments, (ii) approximately 105 basis points of rate growth from volume within the Beer segment, (iii) approximately 40 basis points of rate growth from favorable Wine and Spirits product mix shift, and (iv) favorable impact from both Wine and Spirits and Beer pricing in select markets, which contributed approximately 35 basis points and 30 basis points of rate growth, respectively, partially offset by approximately 145 basis points and 30 basis points of rate decline from cost of product sold within the Wine and Spirits and Beer segments, respectively.

~~Selling, general, and administrative expenses~~


		Third Quarter 2021		Third Quarter 2020		Dollar Change		Percent Change			Third Quarter 2022		Third Quarter 2021		Dollar Change		Percent Change
(in millions)	(in millions)									(in millions)
Beer	Beer	$	238.2	$	220.4	$	17.8	8	%	Beer	$	958.1	$	952.7	$	5.4	1	%
Wine and Spirits	Wine and Spirits	145.5		130.2		15.3		12	%	Wine and Spirits	269.6		327.8		(58.2)		(18	%)
Corporate Operations and Other		61.4		51.3		10.1		20	%
Canopy	Canopy	233.0		203.5		29.5		14	%	Canopy	(56.5)		19.6		(76.1)		NM
Consolidation and Eliminations		(233.0)		(203.5)		(29.5)		(14	%)
Consolidation and eliminations										Consolidation and eliminations	56.5		(19.6)		76.1		NM
Comparable Adjustments	Comparable Adjustments	18.7		4.4		14.3		NM		Comparable Adjustments	(2.0)		(12.3)		10.3		84	%
Consolidated selling, general, and administrative expenses		$	463.8	$	406.3	$	57.5	14	%
Consolidated gross profit										Consolidated gross profit	$	1,225.7	$	1,268.2	$	(42.5)	(3	%)


			The increase in Beer is primarily due to ~~an increase~~$38.8 million of ~~$11.6~~favorable impact from pricing and $30.2 million ~~in marketing spend that was driven~~of shipment volume growth, partially offset by ~~timing~~$62.8 million of higher cost of product sold. The higher cost of product sold is largely due to (i) $37.8 million of higher material costs, including pallets, aluminum, steel, and ~~a $6.3~~cartons, (ii) $16.8 million increase in ~~general~~brewery costs primarily driven by higher compensation and ~~administrative expenses. Many of our planned investments~~benefits to support the growth of our Mexican beer portfolio, ~~through media~~ and ~~event sponsorships were suspended or canceled in the six months ended August 31, 2020, resulting from COVID-19 containment measures which shifted our normal spend to the second half~~(iii) $11.6 million of fiscal 2021. We now expect marketing spend will range from 9% to 9.5% of net sales for Fiscal 2021. The increase in general and administrative expenses is largely driven by increased compensation and benefits,higher depreciation, partially offset by ~~lower travel and entertainment expenses.~~$7.6 million of favorable fixed cost absorption related to increased production levels as compared to Third Quarter 2021.


Constellation Brands, Inc. Q3 FY ~~2021~~2022 Form 10-Q			#WORTHREACHINGFOR I 4940


MD&A			Table of Contents


			The ~~increase~~decrease in Wine and Spirits gross profit is ~~primarily~~ due to ~~an increase~~a decrease of ~~$10.2~~$80.9 million ~~in marketing spend that was driven~~from the recent divestitures, partially offset by ~~timing and~~ a ~~$5.5~~$22.7 million increase in general and administrative expenses. Many of our planned investments to support the growth of our Power Brands through media and event sponsorships were suspended or canceled in the six months ended August 31, 2020, resulting from COVID-19 containment measures which shifted our normal spend to the second half of fiscal 2021. We now expect marketing spend will range from 8% to 10% of net sales for Fiscal 2021.organic gross profit. The increase in ~~general~~organic gross profit is attributable to (i) $15.4 million of favorable cost of product sold, (ii) $12.8 million of favorable impact from pricing, and ~~administrative expenses is driven by increased compensation and benefits.~~


			~~The increase in Corporate Operations and Other is largely due to approximately an $8~~(iii) $8.2 million increase ~~in compensation~~primarily from non-branded and ~~benefits and $3~~bulk wine net sales, partially offset by $14.3 million of unfavorable ~~foreign currency losses.~~product mix shift driven by timing. The decrease in cost of product sold was largely attributable to (i) $15.5 million of net favorable fixed cost absorption and (ii) lower grape raw materials and other cost saving initiatives, partially offset by $6.4 million of increased transportation costs resulting from global supply chain logistics, including inflation, and route to market changes. The net favorable fixed cost absorption in Third Quarter 2022 primarily resulted from $20.0 million related to the 2020 U.S. wildfires, partially offset by decreased production levels at certain facilities due to a late frost in New Zealand which reduced the grape harvest.

~~Selling, general, and administrative expenses~~

Gross profit as a percent of net sales ~~decreased~~increased to ~~19.0%~~52.8% for Third Quarter ~~2021 as~~2022 compared with ~~20.3%~~52.0% for Third Quarter ~~2020~~2021. ~~. The decrease is driven~~This increase was largely due to approximately (i) 120 basis points of favorable impact from the recent lower-margin wine and spirits divestitures, (ii) 70 basis points of favorable impact from Beer pricing in select markets, (iii) 60 basis points of rate growth from cost of product sold within the Wine and Spirits segment, (iv) 40 basis points of favorable change in Comparable Adjustments, and (v) 35 basis points primarily related to favorable product mix shift within the Beer segment, partially offset by ~~290~~approximately 240 basis points of rate decline asfrom higher cost of product sold within the ~~increase in~~ Beer ~~net sales exceeded the increase in selling,~~segment.

Selling, general, and administrative expenses partially offset by (i) an increase in Corporate Operations and Other general and administrative expenses, which resulted in approximately 65 basis points of rate growth and (ii) an unfavorable change of 65 basis points in Comparable Adjustments.

~~Operating income (loss)~~


		Third Quarter 2021		Third Quarter 2020		Dollar Change		Percent Change			Third Quarter 2022		Third Quarter 2021		Dollar Change		Percent Change
(in millions)	(in millions)									(in millions)
Beer	Beer	$	714.5	$	514.9	$	199.6	39	%	Beer	$	234.5	$	238.2	$	(3.7)	(2	%)
Wine and Spirits	Wine and Spirits	182.3		180.4		1.9		1	%	Wine and Spirits	125.1		145.5		(20.4)		(14	%)
Corporate Operations and Other	Corporate Operations and Other	(61.4)		(51.3)		(10.1)		(20	%)	Corporate Operations and Other	44.3		61.4		(17.1)		(28	%)
Canopy	Canopy	(213.4)		(210.8)		(2.6)		(1	%)	Canopy	114.5		233.0		(118.5)		(51	%)
Consolidation and Eliminations		213.4		210.8		2.6		1	%
Consolidation and eliminations										Consolidation and eliminations	(114.5)		(233.0)		118.5		51	%
Comparable Adjustments	Comparable Adjustments	(52.3)		(376.8)		324.5		86	%	Comparable Adjustments	(18.1)		19.0		(37.1)		NM
Consolidated operating income (loss)		$	783.1	$	267.2	$	515.9	193	%
Consolidated selling, general, and administrative expenses										Consolidated selling, general, and administrative expenses	$	385.8	$	464.1	$	(78.3)	(17	%)


			The decrease in Beer is primarily due to $15.5 million of decreased marketing spend, partially offset by $11.5 million of increased general and administrative expenses. The favorable marketing spend was driven by timing as many of our planned investments to support the growth of our Mexican beer portfolio through media and event sponsorships were suspended or canceled in the first half of Fiscal 2021 which shifted our normal spend to the second half of Fiscal 2021. The increase in ~~Beer is largely attributable~~general and administrative expenses was driven primarily by unfavorable foreign currency transaction losses and increased travel as compared to ~~the strong net sales volume growth within our Mexican beer portfolio.~~Third Quarter 2021 resulting from COVID-19 containment measures, partially offset by lower compensation and benefits primarily related to favorable stock-based compensation as compared to Third Quarter 2021.


			The decrease in Wine and Spirits remained flat as the increase in branded wine and spirits volume, favorable product mix shift, and favorable pricing impact, were largely offset by higher cost of product sold and increased marketing spend.


			~~As previously discussed, the Corporate Operations and Other increase in operating loss~~ is ~~largely~~primarily due to $9.7 million of decreased marketing spend and $9.2 million of decreased general and administrative expenses. The favorable marketing spend was driven by timing as many of our planned investments to support the ~~increase~~growth of our brands through media and event sponsorships were suspended or canceled in the first half of Fiscal 2021 which shifted our normal spend to the second half of Fiscal 2021. The decrease in general and administrative expenses was driven by a decrease in outside services and lower compensation and ~~benefit costs.~~benefits primarily related to favorable stock-based compensation as compared to Third Quarter 2021.


Constellation Brands, Inc. Q3 FY ~~2021~~2022 Form 10-Q			#WORTHREACHINGFOR I 50


~~MD&A~~			~~Table of Contents~~

~~Income (loss) from unconsolidated investments~~

~~General~~

Third
Quarter
2021 Third
Quarter
2020 Dollar
Change Percent
Change
(in millions)
Unrealized net gain (loss) on securities measured at fair value $ 769.6 $ (534.3) $ 1,303.9 244 %
Equity in earnings (losses) from Canopy and related activities (12.4) 46.2 (58.6) (127 %)
Equity in earnings (losses) from other equity method investees 25.2 31.1 (5.9) (19 %)
Net gain (loss) on sale of unconsolidated investment — 0.5 (0.5) NM
$ 782.4 $ (456.5) $ 1,238.9 271 %


			~~Canopy segment~~ Canopy net sales increased to $101.5 million for Third Quarter 2021 from $58.0 million for Third Quarter 2020. This increase of $43.5 million, or 75% is primarily attributable to an increase in Canadian recreational sales as well as other product offering sales. Third Quarter 2020 Canadian recreational sales were negatively impacted by returns and pricing adjustments associated with the risk of over-supply of certain oil and softgel products at that time. The Canadian recreational sales for Third Quarter 2021 benefited from an increase in consumer demand resulting from (i) the opening of retail stores across Canada, (ii) an increase in sales of Canopy’s dry bud product, and (iii) the introduction of cannabis-infused beverages. The increase in other sales resulted from (i) vaporizers sold by Storz & Bickel GmbH & Co. KG, (ii) beauty, skincare, wellness, and sleep product sales from their May 2019 acquisition of This Works Products Limited, and (iii) sales of sports nutrition beverages, mixes, protein, gum, and mints from their October 2019 acquisition of BioSteel. Canopy gross profit (loss) increased to $19.6 million for Third Quarter 2021 from $(7.3) million for Third Quarter 2020. This increase of $26.9 million is primarily driven by increased net sales, partially offset by higher cost of product sold related to facilities not yet cultivating or producing cannabis or cannabis-related products, or having under-utilized capacity. Canopy selling, general, and administrative expenses increased $29.5 million primarily from expected credit losses on financial assets and related charges and asset impairment and restructuring costs, partially offset by a reduction in stock-based compensation expense. The combination of these factors were the main contributors to the increase in operating loss of $2.6 million.

~~Interest expense~~

Interest expense decreased to $95.7 million for Third Quarter 2021 from $103.1 million for Third Quarter 2020. This decrease of $7.4 million or 7% is predominantly due to lower average borrowings of approximately $1.0 billion primarily attributable to the partial repayment of financing entered into in connection with the November 2018 Canopy Transaction.

~~(Provision for) benefit from income taxes~~

Our effective tax rate for Third Quarter 2021 was 12.0% of tax expense as compared with 225.3% of tax benefit for Third Quarter 2020. In comparison to prior year, our taxes were negatively impacted primarily by:

•the recognition of a $547.4 million net income tax benefit resulting from the remeasurement of our deferred tax assets for Third Quarter 2020 in connection with the September 2019 enactment of tax reform in Switzerland; and

•~~lower net income tax benefits recorded for Third Quarter 2021 as compared with Third Quarter 2020 on the changes in fair value of our investments in Canopy and Canopy equity in earnings (losses).~~

~~For additional information, refer to Note 10 of the Financial Statements.~~


~~Constellation Brands, Inc. Q3 FY 2021 Form 10-Q~~			~~#WORTHREACHINGFOR~~ I51


~~MD&A~~			~~Table of Contents~~

~~Net income (loss) attributable to CBI~~

Net income (loss) attributable to CBI increased to $1,280.9 million for Third Quarter 2021 from $360.4 million for Third Quarter 2020. This increase in net income (loss) of $920.5 million is largely attributable to (i) the unrealized net gain from the changes in fair value of our investments in Canopy in Third Quarter 2021 as compared with an unrealized net loss in Third Quarter 2020, (ii) volume growth within the Beer and Wine and Spirits segments, and (iii) an impairment of long-lived assets held for sale for Third Quarter 2020, partially offset by the Third Quarter 2021 provision for income taxes as compared with a benefit from income taxes for Third Quarter 2020.

~~NINE MONTHS 2021 COMPARED TO NINE MONTHS 2020~~

~~Net sales~~

Nine
Months
2021 Nine
Months
2020 Dollar
Change Percent
Change
(in millions)
Beer $ 4,697.9 $ 4,428.4 $ 269.5 6 %
Wine and Spirits:
Wine 1,711.2 1,747.3 (36.1) (2 %)
Spirits 252.8 264.9 (12.1) (5 %)
Total Wine and Spirits 1,964.0 2,012.2 (48.2) (2 %)
Canopy 261.5 196.4 65.1 33 %
Consolidation and Eliminations (261.5) (196.4) (65.1) (33 %)
Consolidated net sales $ 6,661.9 $ 6,440.6 $ 221.3 3 %

Beer segment Nine
Months
2021 Nine
Months
2020 Dollar
Change Percent
Change
(in millions, branded product, 24-pack, 12-ounce case equivalents)
Net sales $ 4,697.9 $ 4,428.4 $ 269.5 6 %
Shipment volume
Total 258.9 246.6 5.0 %
Organic (1)
258.9 244.6 5.8 %
Depletion volume (1) (2)
7.3 %

~~(1)Includes an adjustment to remove volume associated with the Ballast Point Divestiture for the period March 2, 2019, through November 30, 2019.~~

~~(2)Depletions represent distributor shipments of our respective branded products to retail customers, based on third-party data.~~


			The increase in Beer net sales is largely due to $254.7 million of volume growth within our Mexican beer portfolio, which benefited from continued consumer demand, new product introductions, and line extensions, $65.9 million favorable impact from pricing in select markets within our Mexican beer portfolio, and $27.1 million increase from favorable product mix shift, partially offset by $73.5 million from the Ballast Point Divestiture. Favorable product mix shift primarily resulted from increased sales of our newly-released Corona Hard Seltzer and a reduction in on-premise keg sales. The depletion volume trend outpaced the shipment volume trend for Nine Months 2021, driven by COVID-19 containment measures which negatively affected early Fiscal 2021 production activity at our major breweries in Mexico, partially offset by the increased shipment volume related to replenishing inventory levels in our distribution channels.


~~Constellation Brands, Inc. Q3 FY 2021 Form 10-Q~~			~~#WORTHREACHINGFOR~~ I52


~~MD&A~~			~~Table of Contents~~

Wine and Spirits segment Nine
Months
2021 Nine
Months
2020 Dollar
Change Percent
Change
(in millions, branded product, 9-liter case equivalents)
Net sales $ 1,964.0 $ 2,012.2 $ (48.2) (2 %)
Shipment volume
Total 35.6 39.6 (10.1 %)
Organic (3)
35.6 38.2 (6.8 %)
U.S. Domestic 32.8 36.4 (9.9 %)
Organic U.S. Domestic (3)
32.8 35.0 (6.3 %)
U.S. Domestic Power Brands 16.8 16.7 0.6 %
Depletion volume (2)
U.S. Domestic (3)
(1.7 %)
U.S. Domestic Power Brands 2.5 %

~~(3)Includes an adjustment to remove volume associated with the Black Velvet Divestiture for the period March 1, 2019, through October 31, 2019~~.


			The decrease in Wine and Spirits net sales is primarily due to a $110.3 million decline in branded wine and spirits volume, driven by the brands to be divested in January 2021, and $51.4 million from the Black Velvet Divestiture, partially offset by $74.6 million of favorable product mix shift and $49.6 million from favorable pricing. The Wine and Spirits Nine Months 2021 results have been negatively impacted by (i) on-premise and retail tasting room closures as a result of COVID-19 containment measures and (ii) transition activities with distributors who are repositioning for ownership of brands upon closing the Wine and Spirits Transactions, partially offset by an increase in off-premise and a continued focus on NPD and Power Brands. The benefits from favorable product mix shift are expected to lessen for the remainder of Fiscal 2021 primarily due to shipment product mix outpacing depletion product mix.

~~Gross profit~~

Nine
Months
2021 Nine
Months
2020 Dollar
Change Percent
Change
(in millions)
Beer $ 2,632.9 $ 2,468.1 $ 164.8 7 %
Wine and Spirits 868.2 874.4 (6.2) (1 %)
Canopy (33.0) 13.8 (46.8) NM
Consolidation and Eliminations 33.0 (13.8) 46.8 NM
Comparable Adjustments (28.8) (140.4) 111.6 79 %
Consolidated gross profit $ 3,472.3 $ 3,202.1 $ 270.2 8 %


			The increase in Beer is primarily due to $144.2 million of volume growth and the $65.9 million favorable impact from pricing, partially offset by $16.5 million of higher cost of product sold, $15.6 million decrease in gross profit due to the Ballast Point Divestiture, and $8.7 million of unfavorable product mix shift. The higher cost of product sold is largely due to increased operational costs of $29.3 million and increased transportation costs of $4.6 million, partially offset by $17.4 million of foreign currency transactional benefits. The increase in operational costs primarily consisted of higher material costs, including glass, cartons, and pallets. Unfavorable product mix shift primarily resulted from increased sales of our newly-released Corona Hard Seltzer, partially offset by a reduction in on-premise keg sales.


~~Constellation Brands, Inc. Q3 FY 2021 Form 10-Q~~			~~#WORTHREACHINGFOR~~ I5341


MD&A			Table of Contents


			The decrease in ~~Wine~~Corporate Operations and ~~Spirits~~Other is largely due to ~~$45.2~~an approximately $19 million ~~higher cost of product sold, $40.2 million of decline~~decrease in ~~branded wine~~compensation and ~~spirits volume, driven by the brands~~benefits primarily related to ~~be divested in January 2021, and a decrease of $24.3 million in gross profit due~~favorable stock-based compensation as compared to the Black Velvet Divestiture, partially offset by $55.8 million of favorable product mix shift and the $49.6 million from favorable pricing. Higher cost of product sold was largely attributable to unfavorable fixed cost absorption including $20.0 million from decreased production levels at certain facilities as a result of the 2020 U.S. wildfires in the Third Quarter ~~2021, certain spirits packaging size obsolescence, increased winery compensation and benefits,as well as increased packaging costs, including glass and labels, partially offset by lower grape raw material costs.~~ 2021.

~~Gross profit~~Selling, general, and administrative expenses as a percent of net sales ~~increased~~decreased to ~~52.1%~~16.6% for ~~Nine Months 2021~~Third Quarter 2022 as compared with ~~49.7%~~19.0% for ~~Nine Months 2020. This was~~Third Quarter 2021. The decrease is driven largely ~~due to~~by (i) decreases in Beer, Corporate Operations and Other, and Wine and Spirits segments selling, general, and administrative expenses, which resulted in approximately 240 basis points of rate decline, and (ii) a favorable change of approximately ~~170~~175 basis points in Comparable Adjustments, ~~and favorable impacts from both Beer and Wine and Spirits pricing in select markets, which contributed~~partially offset by approximately ~~50 basis points and 40~~170 basis points of rate growth ~~respectively, partially offset by approximately 70 basis points of rate decline from higher cost of product sold within~~in connection with the ~~Wine~~recent wine and ~~Spirits segment and an unfavorable product mix shift for the Beer segment contributing approximately 35 basis points of rate decline.~~spirits divestitures.

~~Selling, general, and administrative expenses~~Operating income (loss)


		Nine Months 2021		Nine Months 2020		Dollar Change		Percent Change			Third Quarter 2022		Third Quarter 2021		Dollar Change		Percent Change
(in millions)	(in millions)									(in millions)
Beer	Beer	$	644.9	$	687.3	$	(42.4)	(6	%)	Beer	$	723.6	$	714.5	$	9.1	1	%
Wine and Spirits	Wine and Spirits	360.4		372.8		(12.4)		(3	%)	Wine and Spirits	144.5		182.3		(37.8)		(21	%)
Corporate Operations and Other	Corporate Operations and Other	171.3		148.7		22.6		15	%	Corporate Operations and Other	(44.3)		(61.4)		17.1		28	%
Canopy	Canopy	1,038.0		555.1		482.9		87	%	Canopy	(171.0)		(213.4)		42.4		20	%
Consolidation and Eliminations		(1,038.0)		(555.1)		(482.9)		(87	%)
Consolidation and eliminations										Consolidation and eliminations	171.0		213.4		(42.4)		(20	%)
Comparable Adjustments	Comparable Adjustments	35.2		42.9		(7.7)		(18	%)	Comparable Adjustments	16.1		(52.3)		68.4		NM
Consolidated selling, general, and administrative expenses		$	1,211.8	$	1,251.7	$	(39.9)	(3	%)
Consolidated operating income (loss)										Consolidated operating income (loss)	$	839.9	$	783.1	$	56.8	7	%


			The ~~decrease~~increase in Beer is primarily ~~due~~attributable to ~~a decrease of $41.9 million in marketing spend that was largely driven by decreased advertising resulting from COVID-19 related event cancellations. Many of our planned investments to support~~ the favorable pricing impact, strong shipment volume growth ofwithin our Mexican beer portfolio, ~~through media~~ and ~~event sponsorships were suspended or canceled in Nine Months 2021. The~~ favorable marketing spend, largely offset by the higher operational costs and increased general and administrative expenses, as ~~a percentage of net sales recognized in Nine Months 2021 is expected to return to targeted assumptions during the remainder of Fiscal 2021.~~described above.


			The decrease in Wine and Spirits is largely ~~due~~attributable to ~~a decrease of $7.6 million~~the recent divestitures and unfavorable product mix shift, partially offset by the increase in organic net sales, net favorable fixed cost absorption, lower marketing spend, ~~that was largely driven by decreased advertising resulting from COVID-19 related event cancellations~~ and a $3.7 million decrease in general and administrative expenses. Many of our planned investments to support the growth of our Power Brands through media and event sponsorships were suspended or canceled in Nine Months 2021. The favorable marketing spend as a percentage of net sales recognized in Nine Months 2021 is expected to return to targeted assumptions during the remainder of Fiscal 2021. The decrease inreduced general and administrative expenses, ~~is driven by a favorable impact from reduced travel driven by COVID-19 containment measures and certain cost saving initiatives.~~


			The increase in Corporate Operations and Other is largely due to approximately a $13 million increase in compensation and benefits, $7 million of unfavorable foreign currency losses, and an increase of $2 million in charitable contributions, primarily driven by COVID-19 support efforts, partially offset by $4 million of favorable impact from reduced travel driven by COVID-19 containment measures.

~~Selling, general, and administrative expenses as a percent of net sales decreased~~ to 18.2% for Nine Months 2021 as compared with 19.4% for Nine Months 2020. The decrease is driven largely by a reduction in both Beer and Wine and Spirits selling, general, and administrative expenses, largely related to decreased marketing spend,


~~Constellation Brands, Inc. Q3 FY 2021 Form 10-Q~~			~~#WORTHREACHINGFOR~~ I54


~~MD&A~~			~~Table of Contents~~

which results in approximately 145 basis points and 20 basis points of rate decline, respectively, partially offset by an increase in Corporate Operations and Other general and administrative expenses, which resulted in approximately 35 basis points of rate growth.

~~Operating income (loss)~~

Nine
Months
2021 Nine
Months
2020 Dollar
Change Percent
Change
(in millions)
Beer $ 1,988.0 $ 1,780.8 $ 207.2 12 %
Wine and Spirits 507.8 501.6 6.2 1 %
Corporate Operations and Other (171.3) (148.7) (22.6) (15 %)
Canopy (1,071.0) (541.3) (529.7) (98 %)
Consolidation and Eliminations 1,071.0 541.3 529.7 98 %
Comparable Adjustments (92.7) (524.3) 431.6 82 %
Consolidated operating income (loss) $ 2,231.8 $ 1,609.4 $ 622.4 39 %


			The increase in Beer is primarily attributable to the strong volume growth within our Mexican beer portfolio, favorable pricing impact, and decreased marketing spend, partially offset by the higher cost of product sold, and the Ballast Point Divestiture.


			The increase in Wine and Spirits was driven largely by the favorable impacts from product mix shift and pricing and decreased marketing spend, partially offset by the higher cost of product sold, the decline in branded wine and spirits volume, and the Black Velvet Divestiture.as described above.


			As previously discussed, the Corporate Operations and Other ~~increase~~decrease in operating loss is largely due ~~largely~~ to the ~~increase in~~favorable stock-based compensation ~~and benefits, unfavorable foreign currency losses, and increased charitable contributions, partially offset by the favorable impact from reduced travel.~~as compared to Third Quarter 2021.

Income (loss) from unconsolidated investments

General

Nine
Months
2021 Nine
Months
2020 Dollar
Change Percent
Change
(in millions)
Unrealized net gain (loss) on securities measured at fair value (1)
$ 524.7 $ (2,200.9) $ 2,725.6 124 %
Equity in earnings (losses) from Canopy and related activities (2)
(421.0) (544.2) 123.2 23 %
Equity in earnings (losses) from other equity method investees 26.8 32.9 (6.1) (19 %)
Net gain (loss) on sale of unconsolidated investment — 0.4 (0.4) NM
$ 130.5 $ (2,711.8) $ 2,842.3 105 %

~~(1)~~Nine Months 2020 includes an unrealized net loss from the changes in fair value of our securities measured at fair value of $3,376.9 million, partially offset by an $1,176.0 million unrealized gain resulting from the June 2019 Warrant Modification.

~~(2)~~Nine Months 2021 includes $251.5 million of costs designed to improve their organizational focus, streamline operations, and align production capability with projected demand and Nine Months 2020 includes our share of Canopy’s additional loss resulting from the June 2019 Warrant Modification of $409.0 million.


	Third Quarter 2022		Third Quarter 2021		Dollar Change		Percent Change
(in millions)
Unrealized net gain (loss) on securities measured at fair value	$	(199.7)	$	769.6	$	(969.3)	(126	%)
Equity in earnings (losses) from Canopy and related activities	(4.2)		(12.4)		8.2		66	%
Equity in earnings (losses) from other equity method investees	32.1		25.2		6.9		27	%

	$	(171.8)	$	782.4	$	(954.2)	(122	%)


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			Canopy segment Canopy net sales increased to ~~$261.5~~$104.3 million for ~~Nine Months 2021~~Third Quarter 2022 from ~~$196.4~~$101.5 million for ~~Nine Months 2020.~~Third Quarter 2021. This increase of ~~$65.1~~$2.8 million, or ~~33%~~3%, is primarily attributable to an increase in ~~other product offering sales and medical sales, as well as additional Canadian recreational~~global cannabis revenue, largely driven by higher U.S. CBD sales. The increase in global cannabis revenue was partially offset by a decrease in other ~~sales resulted~~consumer product revenue resulting from ~~(i)~~supply chain challenges and shipping restrictions of vaporizers sold by Storz & Bickel GmbH & Co. KG, (ii) beauty, skincare, wellness, and sleep product sales from their May 2019 acquisition of This Works Products Limited, and (iii) sales of sports nutrition beverages, mixes, protein, gum, and mints from their October 2019 acquisition of BioSteel. The increase in medical sales largely resulted from Canopy’s April 2019 acquisition of C3~~. Canadian recreational sales benefited from the introductions of retail stores across Canada and cannabis-infused beverages.~~KG. Canopy gross profit (loss) decreased to ~~$(33.0)~~$(56.5) million for ~~Nine Months 2021~~Third Quarter 2022 from ~~$13.8~~$19.6 million ~~or Nine Months 2020.~~for Third Quarter 2021. This decrease of ~~$46.8~~$76.1 millionis primarily driven by inventory write-downs related to ~~its organizational~~excess Canadian cannabis, price compression in the Canadian recreational channel, and ~~strategic review of their business~~higher shipping and ~~detailed evaluation of inventory.~~warehousing costs in North America, partially offset by payroll subsidies received from the Canadian government in Third Quarter 2022 pursuant to a COVID-19 relief program. Canopy selling, general, and administrative expenses ~~increased $482.9~~decreased $118.5 million primarily from a reduction in (i) ~~their decision to close greenhouse facilities as well as other changes related to its organizational and strategic review of their business and (ii)~~ expected credit losses on financial assets and related charges and (ii) asset impairment and restructuring costs, partially offset by ~~a reduction~~an increase in ~~stock-based compensation expense.~~sales and marketing expenses. The combination of these factors were the main contributors to the ~~increase~~decrease in operating loss of ~~$529.7~~$42.4 million.

Interest expense

Interest expense decreased to ~~$295.9~~$88.0 million for ~~Nine Months 2021~~Third Quarter 2022 from ~~$329.3~~$95.7 million for ~~Nine Months 2020.~~Third Quarter 2021. This decrease of ~~$33.4~~$7.7 million, or ~~10%~~8%, is predominantly due to lower average borrowings of approximately $1.2 billion primarily attributable to the partial repayment of financing entered into in connection with the November 2018 Canopy Transaction.

Loss on extinguishment of debt

Loss on extinguishment of debt consists of the write-off of debt issuance costs in connection with the early redemption of our Senior Floating Rate Notes (Third Quarter 2021).

(Provision for) benefit from income taxes

Our effective tax rate for ~~Nine Months 2021~~Third Quarter 2022 was ~~20.2% of tax expense~~17.1% as compared with ~~73.0% of tax benefit~~12.0% for ~~Nine Months 2020.~~Third Quarter 2021. In comparison to prior year, our taxes were ~~negatively~~ impacted primarily by:

•valuation allowances on the ~~recognition of a $547.4 million~~unrealized net ~~income tax benefit resulting~~loss from ~~the remeasurement of our deferred tax assets for Nine Months 2020 in connection with the September 2019 enactment of tax reform in Switzerland,~~

•~~lower net income tax benefits recorded for Nine Months 2021 as compared with Nine Months 2020 on~~ the changes in fair value of our ~~investments~~investment in Canopy and Canopy equity in earnings (losses); and

•a ~~larger~~ net income tax benefit from stock-based compensation award activity for ~~Nine Months 2021~~Third Quarter 2022 from changes in option exercise activity.

For additional information, refer to Note ~~10 of the Financial Statements.~~

We expect our reported effective tax rate for Fiscal 2021 to be in the range of 20% to 22%. This range includes related tax provisions from our Canopy investments for the Nine Months 2021 and estimated impact for (i) benefits related to the recognition of the income tax effect of stock-based compensation awards in the income statement when the awards vest or are settled and (ii) lower effective tax rates applicable to our foreign businesses. Since estimates are not currently available, this range does not reflect (i) any future changes in the fair value of our Canopy investments measured at fair value and any future equity in earnings (losses) and related activities from the Canopy Equity Method Investment and (ii) any gain (loss) recognized in connection with the Wine and Spirits Transactions, the Paul Masson Transaction, and the Concentrate Business Transaction.11.

Net income (loss) attributable to CBI

Net income ~~(loss)~~ attributable to CBI ~~increased~~decreased to ~~$1,615.1~~$470.8 million for ~~Nine Months 2021~~Third Quarter 2022 from ~~$(410.2)~~$1,280.9 million for ~~Nine Months 2020.~~Third Quarter 2021. This ~~increase~~decrease in net income of ~~$2,025.3~~$810.1 million is largely attributable to (i) the unrealized net ~~gain~~loss from the changes in fair value of our ~~investments~~investment in Canopy in ~~Nine Months 2021~~Third Quarter 2022 as compared with an unrealized net ~~loss~~gain in ~~Nine Months 2020,~~Third Quarter 2021 and (ii) ~~an impairment of long-lived assets held for sale for Nine Months 2020, (iii)~~the decrease in Wine and ~~strong volume growth~~Spirits net sales largely due to the recent divestitures, partially offset by improvements within the Beer ~~segment, partially offset by the Nine Months 2021 provision for income taxes as compared with a benefit from income taxes for Nine Months 2020.~~segment.


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Nine Months 2022 compared to Nine Months 2021

Net sales


	Nine Months 2022		Nine Months 2021		Dollar Change		Percent Change
(in millions)
Beer	$	5,185.9	$	4,697.9	$	488.0	10	%
Wine and Spirits:
Wine	1,351.1		1,711.2		(360.1)		(21	%)
Spirits	181.2		252.8		(71.6)		(28	%)
Total Wine and Spirits	1,532.3		1,964.0		(431.7)		(22	%)
Canopy	332.4		261.5		70.9		27	%
Consolidation and eliminations	(332.4)		(261.5)		(70.9)		(27	%)

Consolidated net sales	$	6,718.2	$	6,661.9	$	56.3	1	%


	Beer segment	Nine Months 2022		Nine Months 2021		Dollar Change		Percent Change
(in millions, branded product, 24-pack, 12-ounce case equivalents)
Net sales		$	5,185.9	$	4,697.9	$	488.0	10	%


Shipments		281.0		258.9				8.5	%


Depletions								8.7	%

The increase in Beer net sales is largely due to (i) $398.0 million of shipment volume growth within our Mexican beer portfolio, which benefited from continued consumer demand and a return to on-premise, including bars and restaurants, and (ii) $120.4 million of favorable impact from pricing in select markets within our Mexican beer portfolio, partially offset by $35.6 million of unfavorable product mix primarily from a shift in package types and an increase of on-premise keg sales.


	Wine and Spirits segment	Nine Months 2022		Nine Months 2021		Dollar Change		Percent Change
(in millions, branded product, 9-liter case equivalents)
Net sales		$	1,532.3	$	1,964.0	$	(431.7)	(22	%)

Shipments
Total		22.2		35.6				(37.6	%)
Organic (1)		22.2		21.2				4.7	%

U.S. Domestic		19.3		32.8				(41.2	%)
Organic U.S. Domestic (1)		19.3		18.6				3.8	%





Depletions (1)								(5.5	%)

(1)Includes an adjustment to remove volume associated with the Wine and Spirits Divestitures and Paul Masson Divestiture for the period March 1, 2020, through November 30, 2020.


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The decrease in Wine and Spirits net sales is due to $578.5 million from the recent divestitures, partially offset by a $146.8 million increase in organic net sales. The increase in organic net sales is driven by (i) $42.7 million increase from favorable product mix shift, (ii) $42.5 million increase in branded wine and spirits shipment volume attributable to our continued focus on growing our brands and an overlap of lower shipment volumes in Nine Months 2021 mainly from on-premise and retail tasting room closures as a result of COVID-19 containment measures, (iii) $36.8 million increase primarily from bulk wine and non-branded net sales, and (iv) $19.0 million of favorable impact from pricing.The increase in organic net sales was negatively impacted by global supply chain logistics and route to market changes. For Nine Months 2022, the organic U.S. shipment volume was ahead of the U.S. depletion volume largely driven by a challenging overlap due to consumer pantry loading behavior in the first half of Fiscal 2021 and timing related to transition activities with distributors that occurred at the end of Fiscal 2021. We expect U.S. shipment volume to outpace depletion volume for Fiscal 2022.

Gross profit


	Nine Months 2022		Nine Months 2021		Dollar Change		Percent Change
(in millions)
Beer	$	2,835.8	$	2,632.9	$	202.9	8	%
Wine and Spirits	707.6		868.2		(160.6)		(18	%)
Canopy	(26.6)		(33.0)		6.4		19	%
Consolidation and eliminations	26.6		33.0		(6.4)		(19	%)
Comparable Adjustments	31.3		(28.8)		60.1		NM
Consolidated gross profit	$	3,574.7	$	3,472.3	$	102.4	3	%


			The increase in Beer is primarily due to $224.3 million of shipment volume growth and $120.4 million of favorable impact from pricing, partially offset by $138.3 million of higher cost of product sold. The higher cost of product sold is largely due to higher operational costs including (i) a $78.2 million increase in obsolescence primarily from excess inventory of hard seltzers resulting from a slowdown in the overall category, (ii) $50.3 million of brewery costs primarily driven by higher compensation and benefits and maintenance, (iii) $40.1 million of higher material costs, including aluminum, pallets, steel, and cartons, and (iv) $27.9 million of higher depreciation, partially offset by (i) $46.4 million of favorable fixed cost absorption primarily as a result of COVID-19 containment measures for Nine Months 2021 and increased production levels for Nine Months 2022 and (ii) $14.1 million of foreign currency transactional benefits.


			The decrease in Wine and Spirits gross profit is due to a decrease of $229.5 million from the recent divestitures, partially offset by a $68.9 million increase in organic gross profit. The increase in organic gross profit is attributable to (i) $19.9 million of growth in branded wine and spirits shipment volume, driven by our continued focus on growing our brands as well as the return of our on-premise business, including bars, restaurants, and tasting rooms following a relaxation of COVID-19 containment measures, (ii) $19.0 million of favorable pricing, (iii) $15.9 million increase from favorable product mix shift, (iv) $9.0 million primarily related to favorable bulk wine and non-branded net sales, and (v) $4.1 million of lower cost of product sold. The decreased cost of product sold was largely attributable to (i) approximately $14 million of lower grape raw materials and other cost saving initiatives and (ii) $4.5million of net favorable fixed cost absorption, offset by $20.6 million of increased transportation costs resulting from global supply chain logistics, including inflation, and route to market changes. The net favorable fixed cost absorption in Nine Months 2022 primarily resulted from the impact of the 2020 U.S. wildfires, partially offset by decreased production levels at certain facilities as a result of a late frost in New Zealand which reduced the grape harvest.

Gross profit as a percent of net sales increased to 53.2% for Nine Months 2022 compared with 52.1% for Nine Months 2021. This increase was largely due to approximately (i) 110 basis points of favorable impact from


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the recent lower-margin wine and spirits divestitures, (ii) 85 basis points of favorable change in Comparable Adjustments, (iii) 80 basis points of favorable impact from Beer pricing in select markets, (iv) 20 basis points of rate growth from volume within the Beer segment, and (v) 20 basis points primarily related to favorable product mix shift within the Beer segment, partially offset by approximately 190 basis points of rate decline from cost of product sold within the Beer segment, driven by the increase in obsolescence.

Selling, general, and administrative expenses


	Nine Months 2022		Nine Months 2021		Dollar Change		Percent Change
(in millions)
Beer	$	746.1	$	644.9	$	101.2	16	%
Wine and Spirits	358.7		360.4		(1.7)		0	%
Corporate Operations and Other	161.7		171.3		(9.6)		(6	%)
Canopy	481.4		1,038.0		(556.6)		(54	%)
Consolidation and eliminations	(481.4)		(1,038.0)		556.6		54	%
Comparable Adjustments	(11.9)		39.9		(51.8)		NM
Consolidated selling, general, and administrative expenses	$	1,254.6	$	1,216.5	$	38.1	3	%


			The increase in Beer is primarily due to $58.2 million of higher marketing spend and $42.2 million of increased general and administrative expenses. The higher marketing spend was driven by our planned investments to support the growth of our Mexican beer portfolio through media and event sponsorships. The increase in general and administrative expenses was primarily driven by increased legal expense, increased depreciation and other costs related to the implementation of a new ERP, unfavorable foreign currency transaction losses, and higher compensation and benefits.


			The decrease in Wine and Spirits is primarily due to a $4.9 million decrease in selling expenses, partially offset by $2.7 million of higher marketing spend. The higher marketing spend was driven by timing and planned investments to support the growth of our brands.


			The decrease in Corporate Operations and Other is largely due to an approximate $15 million decrease in compensation and benefits, primarily related to favorable stock-based compensation as compared to Nine Months 2021, and $5 million of favorable foreign currency impact as compared to Nine Months 2021, partially offset by a $6 million increase in consulting services, primarily related to the implementation of a new ERP, and an increase in travel as compared to reduced travel in Nine Months 2021 resulting from COVID-19 containment measures.

Selling, general, and administrative expenses as a percent of net sales increased to 18.7% for Nine Months 2022 as compared with 18.3% for Nine Months 2021. The increase is driven largely by approximately 100 basis points of rate growth in connection with the recent wine and spirits divestitures, partially offset by the favorable change in Comparable Adjustments, contributing approximately 50 basis points of rate decline.


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Operating income (loss)


	Nine Months 2022		Nine Months 2021		Dollar Change		Percent Change
(in millions)
Beer	$	2,089.7	$	1,988.0	$	101.7	5	%
Wine and Spirits	348.9		507.8		(158.9)		(31	%)
Corporate Operations and Other	(161.7)		(171.3)		9.6		6	%
Canopy	(508.0)		(1,071.0)		563.0		53	%
Consolidation and eliminations	508.0		1,071.0		(563.0)		(53	%)
Comparable Adjustments	(622.7)		(92.7)		(530.0)		NM
Consolidated operating income (loss)	$	1,654.2	$	2,231.8	$	(577.6)	(26	%)


			The increase in Beer is largely attributable to the strong shipment volume growth within our Mexican beer portfolio and favorable pricing impact, partially offset by higher operational costs, marketing spend, and general and administrative expenses, as discussed above.


			The decrease in Wine and Spirits is largely attributable to the recent divestitures, partially offset by the increase in organic net sales, led by branded wine and spirits shipment volume growth, favorable pricing impact, bulk wine net sales, and favorable product mix shift.


			As previously discussed, the Corporate Operations and Other decrease in operating loss is largely due to the favorable stock-based compensation and favorable foreign currency impact, partially offset by the increase in consulting services and travel expense as compared to Nine Months 2021 .

Income (loss) from unconsolidated investments

General


	Nine Months 2022		Nine Months 2021		Dollar Change		Percent Change
(in millions)
Unrealized net gain (loss) on securities measured at fair value	$	(1,534.8)	$	524.7	$	(2,059.5)	NM
Equity in earnings (losses) from Canopy and related activities (1)	(39.5)		(421.0)		381.5		91	%
Equity in earnings (losses) from other equity method investees	32.5		26.8		5.7		21	%

	$	(1,541.8)	$	130.5	$	(1,672.3)	NM

(1)Includes $70.7 million and $251.5 million of costs designed to improve their organizational focus, streamline operations, and align production capability with projected demand for Nine Months 2022 and Nine Months 2021, respectively.


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			Canopy segment Canopy net sales increased to $332.4 million for Nine Months 2022 from $261.5 million for Nine Months 2021. This increase of $70.9 million, or 27%, is primarily attributable to an increase in Canadian recreational sales and other consumer product sales. The Canadian recreational sales for Nine Months 2022 benefited from (i) opening of retail stores across Canada, (ii) the removal of COVID-19 containment measures which adversely impacted Canopy’s results in Nine Months 2021, and (iii) growth in flower sales. The increase in other consumer product sales largely resulted from expanded U.S. distribution for (i) sales of sports nutrition beverages and mixes sold by BioSteel and (ii) vaporizers sold by Storz & Bickel GmbH & Co. KG, partially offset by supply chain challenges and shipping restrictions. Canopy gross profit (loss) improved to $(26.6) million for Nine Months 2022 from $(33.0) million for Nine Months 2021. This decrease in loss of $6.4 million is primarily driven by (i) inventory write-downs for Nine Months 2021 related to its organizational and strategic review of their business, (ii) payroll subsidies received from the Canadian government in Nine Months 2022 pursuant to a COVID-19 relief program, and (iii) increased net sales for Nine Months 2022. The improvements in Canopy’s gross profit (loss) were partially offset by (i) inventory write-downs for Nine Months 2022 related to excess Canadian cannabis, (ii) price compression in the Canadian recreational channel, and (iii) higher shipping and warehousing costs in North America. Canopy selling, general, and administrative expenses decreased $556.6 million primarily from a reduction in (i) asset impairment and restructuring charges related to their decision to close greenhouse facilities as well as other changes related to its organizational and strategic review of their business, (ii) expected credit losses on financial assets and related charges, and (iii)stock-based compensation expense, partially offset by an increase in sales and marketing expenses. The combination of these factors were the main contributors to the $563.0 million decrease in operating loss.

Interest expense

Interest expense decreased to $270.5 million for Nine Months 2022 from $295.9 million for Nine Months 2021. This decrease of $25.4 million, or 9%, is predominantly due to lower average borrowings of approximately $1.4 billion primarily attributable to the partial repayment of financing entered into in connection with the November 2018 Canopy Transaction.

Loss on extinguishment of debt

Loss on extinguishment of debt primarily consists of a make-whole payment in connection with the early redemption of our (i) 2.70% May 2017 Senior Notes and 2.65% November 2017 Senior Notes (Nine Months 2022) and (ii) 2.25% November 2017 senior notes (Nine Months 2021).

(Provision for) benefit from income taxes

Our effective tax rate for Nine Months 2022 was (115.8)% as compared with 20.2% for Nine Months 2021. In comparison to prior year, our taxes were impacted primarily by:

•valuation allowances on a portion of the unrealized net loss from the changes in fair value of our investment in Canopy and Canopy equity in earnings (losses);

•the effective tax rates applicable to our foreign businesses, including the impact of the long-lived asset impairment of brewery construction in progress; and

•a net income tax benefit from stock-based compensation award activity for Nine Months 2022 from changes in option exercise activity.

For additional information, refer to Note 11.

We expect our reported effective tax rate for Fiscal 2022 to be in the range of 87% to 89%. This range includes the impacts of the long-lived asset impairment of brewery construction in progress, net income tax benefits from stock-based compensation award activity, and the unrealized net losses from our Canopy investment for Nine Months 2022. For additional information, refer to Note 5. Since estimates are not currently available, this range does not reflect any future changes in the fair value of our Canopy investment measured at fair value and any future equity in earnings (losses) and related activities from the Canopy Equity Method Investment.


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Net income (loss) attributable to CBI

Net income (loss) attributable to CBI decreased to $(435.8) million for Nine Months 2022 from $1,615.1 million for Nine Months 2021. This decrease of $2,050.9 million is largely attributable to (i) the unrealized net loss from the changes in fair value of our investment in Canopy as compared with an unrealized net gain in Nine Months 2021, (ii) the impairment of long-lived assets for Nine Months 2022 in connection with certain assets at the Mexicali Brewery, (iii) the decrease in Wine and Spirits net sales due largely to the recent divestitures, and (iv) higher operational costs within the Beer segment, partially offset by strong shipment volume growth within the Beer segment and the decrease in the provision for income taxes.

~~FINANCIAL LIQUIDITY AND CAPITAL RESOURCES~~Liquidity and Capital Resources

General

Our ability to consistently generate cash flow from operating activities is one of our most significant financial strengths. Our strong cash flows enable us to invest in our people and our brands, make appropriate capital investments, provide a quarterly cash dividend program, and from time-to-time, repurchase shares of our common stock, and make strategic investments and acquisitions that we believe will enhance stockholder value. Our primary source of liquidity has been cash flow from operating activities. Our ~~principal~~ability to consistently generate robust cash flow from our operations is one of our most significant financial strengths; it enables us to invest in our people and our brands, make capital investments and strategic acquisitions, provide a cash dividend program, and from time to time, repurchase shares of our common stock. Our largest use of cash in our ~~operating activities~~operations is for purchasing and carrying inventories and carrying seasonal accounts receivable. Historically, we have used this cash flow ~~from operating activities~~ to repay our short-term borrowings and fund capital expenditures. Additionally, ~~we have a~~our commercial paper program ~~which we use~~is used to fund our short-term borrowing requirements and to maintain our access to the capital markets. We ~~will continue to~~ use our short-term borrowings, including our commercial paper program, to support our working capital requirements and capital expenditures. COVID-19 has negatively impacted the global economy and financial markets which could interfere with our ability to access sources of liquidity at favorable rates and generate operating cash flows. We are taking advantage of opportunities to temporarily defer some payments including certain payroll taxes under the CARES Act.

We ~~have maintained~~seek to maintain adequate liquidity to meet working capital requirements, fund capital expenditures, and repay scheduled principal and interest payments on debt. Absent deterioration of market conditions, we believe that cash flows from operating activities and financing activities ~~primarily short-term borrowings,~~ will provide adequate resources to satisfy our working capital, scheduled principal and interest payments on debt, anticipated dividend payments, periodic share repurchases, and anticipated capital expenditure requirements for both our short-term and long-term capital needs.

WeAs of November 30, 2021, the exercise of all Canopy warrants held by us would have ~~completed~~required a cash outflow of approximately $5.9 billion based on the ~~Wine and Spirits Transactions in January 2021 and in December 2020, we received FTC clearance and plan to close the Paul Masson Transaction during the fourth quarter~~terms of ~~fiscal 2021. We intend to use the net cash proceeds from closing these transactions to repay the 3.75% May 2013 Senior Notes and for other general corporate purposes.~~

~~On May 1, 2020, we exercised~~ the November ~~2017~~2018 Canopy ~~Warrants at an exercise price of C$12.98 per warrant share for C$245.0 million, or $173.9 million. The May 2020 Canopy Transaction was funded with cash from operations.~~Warrants.

Cash flows


		Nine Months 2021		Nine Months 2020		Dollar Change			Nine Months 2022		Nine Months 2021		Dollar Change		Percent Change
(in millions)	(in millions)							(in millions)
Net cash provided by (used in):	Net cash provided by (used in):							Net cash provided by (used in):
Operating activities	Operating activities	$	2,363.6	$	2,076.3	$	287.3	Operating activities	$	2,444.1	$	2,363.6	$	80.5	3	%
Investing activities	Investing activities	(643.2)		(335.9)		(307.3)		Investing activities	(674.2)		(643.2)		(31.0)		(5)	%
Financing activities	Financing activities	(1,654.7)		(1,740.2)		85.5		Financing activities	(1,867.9)		(1,654.7)		(213.2)		(13)	%
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	5.8		(0.1)		5.9		Effect of exchange rate changes on cash and cash equivalents	(1.3)		5.8		(7.1)		(122)	%
Net increase (decrease) in cash and cash equivalents	Net increase (decrease) in cash and cash equivalents	$	71.5	$	0.1	$	71.4	Net increase (decrease) in cash and cash equivalents	$	(99.3)	$	71.5	$	(170.8)	NM

~~Operating activities~~

The increase in net cash provided by operating activities for Nine Months 2021 is largely due to strong cash flow from the Beer segment driven primarily by the segment’s solid operating results combined with the timing of collections for recoverable value-added taxes. Net cash provided by operating activities also benefited from reduced inventory levels for the Wine and Spirits segment as a result of the 2020 U.S. wildfires. The increase


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Operating activities

The increase in net cash provided by (used in) operating activities consists of:


	Nine Months 2022		Nine Months 2021		Dollar Change		Percent Change
(in millions)
Net income (loss)	$	(404.6)	$	1,641.2	$	(2,045.8)	(125)	%
Unrealized net (gain) loss on securities measured at fair value	1,534.8		(524.7)		2,059.5		NM
Equity in (earnings) losses of equity method investees and related activities, net of distributed earnings	6.0		403.0		(397.0)		(99)	%
Impairment of brewery construction in progress	665.9		—		665.9		NM
Other non-cash adjustments	439.3		659.4		(220.1)		(33)	%
Change in operating assets and liabilities, net of effects from purchase and sale of business	202.7		184.7		18.0		10	%
Net cash provided by (used in) operating activities	$	2,444.1	$	2,363.6	$	80.5	3	%

The net change in operating assets and liabilities was largely driven by benefits from (i) accounts payable primarily attributable to the timing of payments for both the Beer and Wine and Spirits segments, (ii) other accrued expenses and liabilities primarily from the timing of stock option exercise activity, and (iii) an exclusivity payment in connection with distribution arrangements for our U.S. wine and spirits brand portfolio. These benefits were partially offset by higher inventory levels for the Beer and Wine and Spirits segments largely resulting from COVID-19 related containment measures and the 2020 U.S. wildfires in Nine Months 2021. Additionally, the increase in net cash provided by operating activities was partially offset by higher income tax payments in Nine Months ~~2021 primarily due~~2022 as compared to ~~the receipt of a federal tax refund in~~ Nine Months ~~2020.~~2021.

Investing activities

Net cash used in investing activities ~~for Nine Months 2021~~ increased primarily due to (i) $131.0 million of higher capital expenditures, (ii) $38.3 million of lower proceeds from sale of business, and (iii) $38.3 million of ~~$226.8 million~~higher purchases of businesses for Nine Months ~~2021~~2022 as compared with Nine Months ~~2020 and~~2021. The increase was partially offset by the $173.9 million exercise of the November 2017 Canopy Warrants in May 2020. ~~The increase in net cash used in investing activities was partially offset by lower capital expenditures of $70.6 million for Nine Months 2021.~~

Financing activities

The ~~decrease~~increase in net cash provided by (used in) financing activities consists of:

Nine
Months
2021 Nine
Months
2020 Dollar
Change
(in millions)
Net proceeds from (payments of) debt, current and long-term, and related activities $ (1,236.5) $ (1,287.9) $ 51.4
Dividends paid (431.2) (427.0) (4.2)
Purchases of treasury stock — (50.0) 50.0
Net cash provided by stock-based compensation activities 35.5 24.7 10.8
Distributions to noncontrolling interests (22.5) — (22.5)
Net cash provided by (used in) financing activities $ (1,654.7) $ (1,740.2) $ 85.5

~~Debt~~

~~Total debt outstanding as of November 30, 2020, amounted to $10,984.5 million, a decrease of $1,200.1 million from February 29, 2020. This decrease consisted of:~~

~~Bank facilities~~

In March 2020, we entered into the 2020 Restatement Agreement that amended and restated the 2018 Credit Agreement. The 2020 Restatement Agreement resulted in (i) the removal of the subsidiary guarantees and termination of the guarantee agreement, (ii) the inclusion of the parent guaranty provisions in connection with the termination of the guarantee agreement, (iii) the removal of certain provisions pertaining to term loans since no term loans are outstanding, and (iv) the revision of the LIBOR successor rate provisions to permit the use of rates based on the SOFR administered by the Federal Reserve Bank of New York.


	Nine Months 2022		Nine Months 2021		Dollar Change		Percent Change
(in millions)
Net proceeds from (payments of) debt, current and long-term, and related activities	$	(159.9)	$	(1,236.5)	$	1,076.6	87	%
Dividends paid	(430.5)		(431.2)		0.7		0	%
Purchases of treasury stock	(1,390.5)		—		(1,390.5)		NM
Net cash provided by stock-based compensation activities	149.9		35.5		114.4		NM
Distributions to noncontrolling interests	(36.9)		(22.5)		(14.4)		(64)	%
Net cash provided by (used in) financing activities	$	(1,867.9)	$	(1,654.7)	$	(213.2)	(13)	%


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In March 2020, we entered into the Term Loan Restatement Agreement and the 2020 Term Loan Restatement Agreement, that amended and restated the Term Credit Agreement and the 2019 Term Credit Agreement, respectively. The Term Loan Restatement Agreement and the 2020 Term Loan Restatement Agreement each resulted in (i) the removal of the subsidiary guarantees and termination of the respective guarantee agreements and (ii) the revision of the LIBOR successor rate provisions in each to permit the use of rates based on SOFR.Debt

Total debt outstanding as of November 30, 2021, amounted to $10,332.5 million, a decrease of $109.8 million from February 28, 2021. This decrease consisted of:

Debt repayment

Debt issuance

Bank facilities

In ~~Second Quarter~~June 2021, ~~we prepaid~~ the ~~remaining outstanding Three-Year Term Facility~~Company and ~~Five-Year Term Facility borrowings under our~~the Administrative Agent and Lender further amended the March 2020 Term Credit Agreement.

Senior ~~notes~~Notes

In ~~April 2020,~~July 2021, we issued the ~~April 2020~~2.25% July 2021 Senior Notes. Proceeds from this offering, net of discount and debt issuance costs, of ~~$1,183.3~~$987.2 million were ~~primarily~~ used ~~for~~towards the repayment of our ~~2.25% November~~2.70% May 2017 Senior Notes and ~~the repayment of a portion of the Three-Year Term Facility outstanding obligations under our 2020 Term Credit Agreement.~~

In2.65% November ~~2020, we repaid the~~2017 Senior ~~Floating Rate Notes with cash on hand. In January 2021, we gave notice for full redemption of the 3.75% May 2013 Senior Notes utilizing cash proceeds from the Wine and Spirits Transactions.~~Notes.

General

The majority of our outstanding borrowings as of November 30, ~~2020,~~2021, consisted of fixed-rate senior unsecured notes, with maturities ranging from calendar ~~2021~~2023 to calendar 2050, and a variable-rate senior unsecured term loan facility under our ~~March 2020~~June 2021 Term Credit Agreement, originally entered into in June 2019, with a calendar 2024 maturity date.

Additionally, we have a commercial paper program which provides for the issuance of up to an aggregate principal amount of $2.0 billion of commercial paper. Our commercial paper program is backed by unused commitments under our revolving credit facility under our 2020 Credit Agreement. Accordingly, outstanding borrowings under our commercial paper program reduce the amount available under our revolving credit ~~facility under our 2020 Credit Agreement.~~facility.

We do not have purchase commitments from buyers for our commercial paper and, therefore, our ability to issue commercial paper is subject to market demand. If the commercial paper market is not available to us for any reason when ~~outstanding~~ commercial paper borrowings mature, we ~~will~~intend to utilize unused commitments under our revolving credit facility under our 2020 Credit Agreement to repay commercial paper borrowings. We do not expect that fluctuations in demand for commercial paper will affect our liquidity given our borrowing capacity available under our revolving credit facility under our 2020 Credit Agreement.


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We had the following remaining borrowing capacity available under our 2020 Credit Agreement:


		Remaining Borrowing Capacity
		November 30, 2020		December 31, 2020			November 30, 2021		December 31, 2021
(in millions)	(in millions)					(in millions)
Revolving Credit Facility (1)		$	1,948.2	$	1,988.2
Revolving credit facility (1)						Revolving credit facility (1)	$	1,744.8	$	1,813.8

(1)Net of outstanding revolving credit facility borrowings and outstanding letters of credit under our 2020 Credit Agreement and outstanding borrowings under our commercial paper program.

The financial institutions participating in our 2020 Credit Agreement have complied with prior funding requests and we believe ~~such financial institutions~~they will comply with any future funding requests. However, there can be no assurances that any particular financial institution will continue to do so.

We and our subsidiaries are subject to covenants that are contained in our 2020 Credit Agreement, including those restricting the incurrence of additional indebtedness, additional liens, mergers and consolidations,


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transactions with affiliates, and sale and leaseback transactions, in each case subject to numerous conditions, exceptions, and thresholds. The financial covenants are limited to a minimum interest coverage ratio and a maximum net leverage ratio, both as defined in our 2020 Credit Agreement. As of November 30, ~~2020,~~2021, under our 2020 Credit Agreement, the minimum interest coverage ratio was 2.5x and the maximum net leverage ratio was ~~4.5x.~~4.0x.

The representations, warranties, covenants, and events of default set forth in our ~~March 2020~~June 2021 Term Credit Agreement are substantially similar to those set forth in our 2020 Credit Agreement.

Our indentures relating to our outstanding senior notes contain certain covenants, including, but not limited to: (i) a limitation on liens on certain assets, (ii) a limitation on certain sale and leaseback transactions, and (iii) restrictions on mergers, consolidations, and the transfer of all or substantially all of our assets to another person.

As of November 30, ~~2020,~~2021, we were in compliance with our covenants under our 2020 Credit Agreement, our ~~March 2020~~June 2021 Term Credit Agreement, and our indentures, and have met all debt payment obligations.

For a complete discussion and presentation of all borrowings and available sources of borrowing, refer to Note 1312 of our consolidated financial statements included in our ~~2020~~2021 Annual Report and Note ~~9 of the Financial Statements.~~10.

Common stock dividends

On January ~~6, 2021,~~5, 2022, our Board of Directors declared a quarterly cash dividend of ~~$0.75~~$0.76 per share of Class A Common Stock, ~~$0.68~~$0.69 per share of Class B Convertible Common Stock, and ~~$0.68~~$0.69 per share of Class 1 Common Stock payable on February 23, ~~2021,~~2022, to stockholders of record of each class as of the close of business on February 9, ~~2021.~~2022.

We currently expect to continue to pay a regular quarterly cash dividend to stockholders of our common stock in the future, but such payments are subject to approval of our Board of Directors and are dependent upon our financial condition, results of operations, capital requirements, and other factors, including those set forth under Item 1A “Risk Factors” of our ~~2020~~2021 Annual Report.

Share Repurchase Program

Our Board of Directors ~~have~~ authorized the repurchase of up to $3.0 billion of our Class A Common Stock and Class B Convertible Common Stock under the 2018 Authorization and ~~the~~an additional repurchase of up to $2.0 billion of our Class A Common Stock and Class B Convertible Common Stock under the 2021 Authorization. ~~Shares repurchased under the 2018 Authorization have become treasury shares and no~~No shares have been repurchased under the 2021 Authorization. No


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During Nine Months 2022, we repurchased 6,179,015 shares ~~were~~of Class A Common Stock pursuant to the 2018 Authorization at an aggregate cost of $1,390.5 million, or an average cost of $225.04 per share, through a combination of open market transactions and an ASR that was announced in June 2021. The shares repurchased ~~during Third Quarter 2021.~~pursuant to the ASR, at an average purchase price paid of $223.17 per share, include (i) 1,731,752 shares of Class A Common Stock received in July 2021 and (ii) 508,645 shares of Class A Common Stock received in August 2021 in connection with the early termination of the calculation period for the ASR by the counterparty to the ASR transaction. We primarily used cash on hand to pay the purchase price for the repurchased shares.

As of November 30, ~~2020,~~2021, total shares repurchased under the 2018 Authorization and 2021 Authorization are as follows:


				Class A Common Shares						Class A Common Shares
		Repurchase Authorization		Dollar Value of Shares Repurchased		Number of Shares Repurchased		Repurchase Authorization		Dollar Value of Shares Repurchased		Number of Shares Repurchased
(in millions, except share data)	(in millions, except share data)						(in millions, except share data)

2018 Authorization	2018 Authorization	$	3,000.0	$	1,045.9	4,897,605	2018 Authorization	$	3,000.0	$	2,436.4	11,076,620

2021 Authorization							2021 Authorization	$	2,000.0	$	—	—

Share repurchases under the 2018 Authorization and 2021 Authorization may be accomplished at management’s discretion from time to time based on market conditions, our cash and debt position, and other factors as determined by management. Shares may be repurchased through open market or privately negotiated transactions. We may fund future share repurchases with cash generated from operations and/or proceeds from borrowings. Any repurchased shares ~~will~~ become treasury ~~shares.~~shares, including shares repurchased under the 2018 Authorization.


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We currently expect to continue to repurchase shares in the future, but such repurchases are dependent upon our financial condition, results of operations, capital requirements, and other factors, including those set forth under Item 1A “Risk Factors” of our ~~2020~~2021 Annual Report.

For additional information, refer to Note 1817 of our consolidated financial statements included in our ~~2020~~2021 Annual Report and Note ~~11 of the Financial Statements.~~12.

Capital expenditures

Management reviews the capital expenditure program periodically and modifies it as required to meet current and projected future business needs. We have recently updated our Mexico capacity investment plan that will provide the long-term flexibility needed to support the expected future growth of our high-end Mexican beer portfolio.

For Nine Months 2022 we have spent $598.7 million for capital expenditures, including approximately $500 million for the Beer segment. We continue to plan to spend from ~~$800 million~~$1.0 billion to ~~$900 million~~$1.1 billion for capital expenditures ~~for~~in Fiscal ~~2021,~~2022, including ~~$650 million to $750~~approximately $900 million for the Beer ~~Segment~~segment associated primarily with ~~our Obregon Brewery expansion project in Mexico.~~the Mexico Beer Projects. The remaining Fiscal ~~2021~~2022 capital expenditures consist of improvements ofto existing operating facilities and replacements of existing equipment and/or buildings.

InTotal capital expenditures for the Beer segment are now expected to be $5.0 billion to $5.5 billion over Fiscal 2023 to Fiscal 2026, with the majority of spend expected to occur in the first three years of that timeframe. This updated capital investment includes the previously disclosed capital expenditure expectations of $700 million to $900 million annually over the next three fiscal ~~2017, we began~~years. This investment will support an additional 25 million to 30 million hectoliters of total capacity and includes construction of the ~~Mexicali Brewery. In March 2020,~~Southeast Mexico Brewery where there is ample water and a ~~public consultation on the construction of~~skilled workforce to meet our ~~Mexicali Brewery was held. We are in discussions with government officials in Mexico regarding next steps for our brewery construction project~~long-term needs, as well as continued expansion and options elsewhere in the country following the negative result of the public consultation. These discussions have been positive and we intend to continue working with government officials to mutually agree upon a path forward. At this time, we have paused all construction activitiesoptimization at our ~~Mexicali Brewery. We are continuing to evaluate a variety of alternatives for the Mexicali Brewery and related assets, including transferring certain assets to different~~current brewery locations in Mexico, where possible. Future impairments may result for any capitalized amounts that are not deemed recoverable based upon our plans for these assets. As of November 30, 2020, we have approximately $710 million of capitalized fixed assets remaining at the Mexicali Brewery.Nava and Obregon.

~~Guidance~~


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Accounting guidance

~~Accounting guidance~~

Accounting guidance adopted for Nine Months ~~2021~~2022 did not have a material impact on our ~~consolidated financial statements.~~

~~Disclosure guidance~~

In May 2020, the Securities and Exchange Commission (“SEC”) issued a final rule that amends business acquisition and disposition financial disclosure requirements. Among other modifications, the amendments change certain criteria in the significance tests used to determine audited financial statements and related pro forma financial information requirements, the periods audited financial statements must cover, and the form and content of the pro forma financial information. We are required to comply with this rule for our annual and interim periods beginning March 1, 2021, however early compliance is permitted. We are currently assessing the impact of this rule on our SEC filings.Financial Statements.

~~INFORMATION REGARDING FORWARD-LOOKING STATEMENTS~~Information Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those set forth in, or implied by, such forward-looking statements. All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q are forward-looking statements, including without limitation:

•The statements regarding the future reclassification of net losses from AOCI.

•The statements regarding the current global COVID-19 pandemic.

•The statements regarding the potential impact to supply, production levels, and costs due to ~~wildfires.~~wildfires, severe weather events, global supply chain logistics, and transportation.


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•The statements under Part I - Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding:

◦our business strategy, future operations, new products, future financial position, ~~future effective tax rate,~~ future net sales and expected volume and inventory trends, future marketing spend, future effective tax rates and anticipated tax liabilities, prospects, plans, and objectives of management;

◦information concerning expected or potential actions of third parties, including potential changes to international trade agreements, tariffs, taxes, ~~and~~ other governmental rules and ~~regulations;~~regulations, anticipated inflationary pressures and our responses thereto, and expected purchase accounting allocations;

◦information concerning the future expected balance of supply and demand for and inventory levels of our products;

◦timing and source of funds for operating activities and November 2018 Canopy Warrant exercises, if any;

◦the manner, timing, and duration of the share repurchase program and source of funds for share repurchases; and

◦the amount and timing of future dividends.

•The statements regarding our beer expansion, ~~construction,~~optimization, and ~~optimization~~construction activities, including anticipated scope, capacity, costs, capital expenditures, and timeframes for completion, discussions with government officials in Mexico, and potential future impairment of non-recoverable brewery construction ~~assets.~~assets and other costs.

•The statements regarding:

◦the volatility of the fair value of our ~~investments~~investment in Canopy measured at fair value;

◦our activities surrounding our ~~investments~~investment in Canopy;

◦our targeted leverage ratio;

◦the November 2018 Canopy Warrants; and

◦our future ownership level in Canopy and our future share of Canopy’s reported earnings and losses.

•The statements regarding the Wine and Spirits ~~Transactions, Paul Masson Transaction, and Concentrate Business Transaction,~~Divestitures, including ~~expected form and~~potential amount of contingent consideration, ~~amount~~ and ~~use~~the optimization of ~~expected proceeds, estimated remaining costs,~~our wine and ~~any expected restructuring charge.~~spirits portfolio.

•The statements regarding Canopy’s expectations and the ~~transactions~~transaction with ~~Acreage and Canopy Rivers.~~Acreage.

When used in this Quarterly Report on Form 10-Q, the words “anticipate,” “intend,” “expect,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. All forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to update or revise any forward-looking statements, whether as a


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result of new information, future events, or otherwise. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. In addition to the risks and uncertainties of ordinary business operations and conditions in the general economy and markets in which we compete, our forward-looking statements contained in this Quarterly Report on Form 10-Q are also subject to the risk and uncertainty that:

•the duration and impact of the COVID-19 pandemic, including but not limited to the impact and severity of new variants, vaccine efficacy and immunization rates, the closure of non-essential businesses, which may include our manufacturing facilities, and other associated governmental containment actions, quarantines, or curfews, may vary from our current ~~expectations;~~expectations, and the increase in cyber-security attacks that have occurred while non-production employees work remotely;

•raw material and water supply, production, or shipment difficulties could adversely affect our ability to supply our customers;

•the actual impact to supply, production levels, and costs due to wildfires, severe weather events, global supply chain logistics, and transportation challenges may vary from our current expectations due to, among other reasons, the actual severity and geographical reach of ~~wildfires;~~wildfires and severe weather events and actual supply chain and transportation performance;

•the actual balance of supply and demand for our products ~~will~~and percentage of our portfolio distributed through any particular distributor may vary from current expectations due to, among other reasons, actual raw material and water supply, actual shipments to distributors, and actual consumer demand;

•the actual demand, net sales, and volume trends for our products ~~will~~may vary from current expectations due to, among other reasons, actual shipments to distributors and actual consumer demand;

•the amount, timing, and source of funds for any share repurchases or Canopy warrant exercises, if any, may vary due to market conditions; our cash and debt position; the impact of the beer operations expansion, optimization, and construction activities; the impact of our ~~investments~~investment in Canopy; any future exercise of the November 2018 Canopy Warrants; the expected impacts of the Wine and Spirits ~~Transactions, Paul Masson Transaction, and Concentrate Business Transaction;~~Divestitures; and other factors as determined by management from time to time;


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•the amount and timing of future dividends are subject to the determination and discretion of our Board of Directors and may differ from our current expectations if our ability to use cash flow to fund dividends is affected by unanticipated increases in total net debt, we are unable to generate cash flow at anticipated levels, or we fail to generate expected earnings;

•the fair value of our ~~investments~~investment in Canopy may vary due to market and economic conditions in Canopy’s markets and business locations;

•the accuracy of management’s projections relating to the Canopy investment may vary from management’s current expectations due to Canopy’s actual results ~~of operations~~ and market and economic conditions;

•the timeframe and actual costs associated with the beer operations expansion, optimization, and construction activities and amount of impairment ~~if any, for~~or other costs and expenses from non-recoverable brewery construction assets in Mexico may vary from management’s current expectations due to market conditions, our cash and debt position, receipt of required regulatory approvals by the expected dates and on the expected terms, results of discussions with government officials in Mexico, actual amount of non-recoverable brewery construction assets and other costs and expenses, and other factors as determined by management;

•~~any consummation of the Paul Masson Transaction and its actual date of consummation may vary from our current expectations;~~

•~~the actual restructuring charge, if any, will vary based on management’s final plans; and~~ the amount of ~~additional loss,~~contingent consideration, if any, received in the Wine and Spirits Divestitures will depend on ~~the future write-down of assets held for sale will vary based on the form of consideration, amount of consideration actually received, and~~actual future brand performance;

•the ~~effect of our reliance upon complex information systems and third party global networks, our~~ ability to ~~withstand cyber-attacks,~~respond to anticipated inflationary pressures and ~~our success in~~pass along rising costs through increased selling prices may vary from management’s current expectations;

•purchase accounting with respect to any transaction, or the ~~design,~~assumptions used regarding the assets purchased and ~~ongoing implementation of our new ERP system~~liabilities assumed to determine their fair value, may vary from management’s current expectations;

•any impact of U.S. federal laws on ~~the transaction between Acreage and~~ Canopy Strategic Transactions or upon the implementation of ~~that transaction,~~such Canopy Strategic Transactions, or the impact of ~~the Acreage Transaction or the~~any Canopy ~~Rivers~~Strategic Transaction upon our future ownership level in Canopy or our future share of Canopy’s reported earnings and losses, may vary from management’s current expectations; and


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•our targeted leverage ratio may vary from management’s current expectations due to market conditions, our ability to generate cash flow at expected levels and our ability to generate expected earnings.

~~The Paul Masson Transaction is subject to the satisfaction of certain closing conditions.~~ For additional information about risks and uncertainties that could adversely affect our forward looking statements, please refer to Item 1A. “Risk Factors” of our ~~2020~~2021 Annual Report.


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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

As a result of our global operating, investment, acquisition, divestiture, and financing activities, we are exposed to market risk associated with changes in foreign currency exchange rates, commodity prices, interest rates, and equity prices. To manage the volatility relating to these risks, we periodically purchase and/or sell derivative instruments including foreign currency forward and option contracts, commodity swap contracts, interest rate swap contracts, and treasury lock contracts. We use derivative instruments to reduce earnings and cash flow volatility resulting from shifts in market rates, as well as to hedge economic exposures. We do not enter into derivative instruments for trading or speculative purposes.

Foreign currency and commodity price risk

Foreign currency derivative instruments are or may be used to hedge existing foreign currency denominated assets and liabilities, forecasted foreign currency denominated sales/purchases to/from third parties as well as intercompany sales/purchases, intercompany principal and interest payments, and in connection with investments, acquisitions, or divestitures outside the U.S. As of November 30, ~~2020,~~2021, we had exposures to foreign currency risk primarily related to the Mexican peso, euro, Canadian dollar, and New Zealand dollar. Approximately 100% of our balance sheet exposures and ~~70%~~79% of our forecasted transactional exposures for the remaining three months of ~~fiscal 2021~~Fiscal 2022 were hedged as of November 30, ~~2020.~~2021.

Commodity derivative instruments are or may be used to hedge forecasted commodity purchases from third parties as either economic hedges or accounting hedges. As of November 30, ~~2020,~~2021, exposures to commodity price risk which we are currently hedging include aluminum, corn, diesel fuel, and natural gas ~~and wheat~~ prices. Approximately ~~73%~~75% of our forecasted transactional exposures for the remaining three months of ~~fiscal 2021~~Fiscal 2022 were hedged as of November 30, ~~2020.~~2021.

We have performed a sensitivity analysis to estimate our exposure to market risk of foreign exchange rates and commodity prices reflecting the impact of a hypothetical 10% adverse change in the applicable market. The volatility of the applicable rates and prices is dependent on many factors which cannot be forecasted with reliable accuracy. Gains or losses from the revaluation or settlement of the related underlying positions would substantially offset such gains or losses on the derivative instruments. The aggregate notional value, estimated fair value, and sensitivity analysis for our open foreign currency and commodity derivative instruments are summarized as follows:


		Aggregate Notional Value				Fair Value, Net Asset (Liability)				Increase (Decrease) in Fair Value – Hypothetical 10% Adverse Change					Aggregate Notional Value				Fair Value, Net Asset (Liability)				Increase (Decrease) in Fair Value – Hypothetical 10% Adverse Change
		November 30, 2020		November 30, 2019		November 30, 2020		November 30, 2019		November 30, 2020		November 30, 2019			November 30, 2021		November 30, 2020		November 30, 2021		November 30, 2020		November 30, 2021		November 30, 2020
(in millions)	(in millions)													(in millions)
Foreign currency contracts	Foreign currency contracts	$	2,013.6	$	2,921.2	$	87.8	$	33.9	$	(149.6)	$	(208.8)	Foreign currency contracts	$	2,244.8	$	2,013.6	$	(50.8)	$	87.8	$	156.4	$	(149.6)
Commodity derivative contracts	Commodity derivative contracts	$	226.9	$	261.5	$	(9.9)	$	(18.5)	$	20.3	$	18.2	Commodity derivative contracts	$	243.5	$	226.9	$	41.7	$	(9.9)	$	(26.5)	$	20.3

Interest rate risk

The estimated fair value of our fixed interest rate debt is subject to interest rate risk, credit risk, and foreign currency risk. In addition, we also have variable interest rate debt outstanding (primarily LIBOR-based), certain of which includes a fixed margin subject to the same risks identified for our fixed interest rate debt.

As of November 30, 2019, we had $375.0 million of outstanding cash flow designated interest rate swap agreements which fixed LIBOR interest rates (to minimize interest rate volatility) on our floating LIBOR rate debt. There were no cash flow designated interest rate swap contracts outstanding as of November 30, 2020. As of November 30, 2020, and November 30, 2019, there were no undesignated interest rate swap contracts outstanding.


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~~As of November 30, 2020, and November 30, 2019, we had no treasury lock contracts outstanding.~~

We have performed a sensitivity analysis to estimate our exposure to market risk of interest rates reflecting the impact of a hypothetical 1% increase in the prevailing interest rates. The volatility of the applicable rates is dependent on many factors which cannot be forecasted with reliable accuracy.


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The aggregate notional value, estimated fair value, and sensitivity analysis for our outstanding fixed-rate debt, including current maturities, ~~and open interest rate derivative instruments~~ are summarized as follows:


		Aggregate Notional Value				Fair Value, Net Asset (Liability)				Increase (Decrease) in Fair Value – Hypothetical 1% Rate Increase					Aggregate Notional Value				Fair Value, Net Asset (Liability)				Increase (Decrease) in Fair Value – Hypothetical 1% Rate Increase
		November 30, 2020		November 30, 2019		November 30, 2020		November 30, 2019		November 30, 2020		November 30, 2019			November 30, 2021		November 30, 2020		November 30, 2021		November 30, 2020		November 30, 2021		November 30, 2020
(in millions)	(in millions)													(in millions)
Fixed interest rate debt	Fixed interest rate debt	$	10,564.5	$	10,076.3	$	(12,026.2)	$	(10,692.7)	$	(891.1)	$	(697.9)	Fixed interest rate debt	$	9,868.5	$	10,564.5	$	(10,695.5)	$	(12,026.2)	$	(818.9)	$	(891.1)

Interest rate swap contracts		$	—	$	375.0	$	—	$	(0.6)	$	—	$	(1.2)

A 1% hypothetical change in the prevailing interest rates would have increased interest expense on our variable interest rate debt by ~~$11.2~~$3.6 million and ~~$21.1~~$11.2 million for the nine months ended November 30, ~~2020,~~2021, and November 30, ~~2019,~~2020, respectively.

Equity price risk

The estimated fair value of our ~~investments~~investment in the November 2018 Canopy ~~warrants~~Warrants and the Canopy ~~convertible debt securities~~Debt Securities are subject to equity price risk, interest rate risk, credit risk, and foreign currency risk. ~~These investments are~~This investment is recognized at fair value utilizing various option-pricing models and ~~have~~has the potential to fluctuate from, among other items, changes in the quoted market price of the underlying equity security. We manage our equity price risk exposure by closely monitoring the financial condition, performance, and outlook of Canopy.

As of November 30, ~~2020,~~2021, the fair value of our ~~investments~~investment in the November 2018 Canopy ~~warrants~~Warrants and the Canopy ~~convertible debt securities~~Debt Securities was ~~$1,536.2~~$289.8 million, with an unrealized net gain (loss) on ~~these investments~~this investment of ~~$524.7~~$(1,534.8) million recognized in our results of operations for the nine months ended November 30, ~~2020.~~2021. We have performed a sensitivity analysis to estimate our exposure to market risk of the equity price reflecting the impact of a hypothetical 10% adverse change in the quoted market price of the underlying equity security. As of November 30, ~~2020,~~2021, such a hypothetical 10% adverse change would have resulted in a decrease in fair value of ~~$234.0~~$33.0 million.

For additional discussion on our market risk, refer to Notes 4 and ~~5 of the Financial Statements.~~5.

Item 4. Controls and Procedures.

Disclosure controls and procedures

Our Chief Executive Officer and our Chief Financial Officer have concluded, based on their evaluation as of the end of the period covered by this report, that the Company’s “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) are effective to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 (i) is recorded, processed, summarized, and reported within the time periods specified in the ~~Securities and Exchange Commission’s~~SEC’s rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.


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Internal control over financial reporting

Although most of our corporate and non-production workforce are working remotely due to COVID-19, we have not experienced a material impact to our internal control over financial reporting. We continue to monitor the pandemic and its effects on the design and operating effectiveness of our internal controls.

We ~~are in~~have completed the ~~process~~implementation of ~~implementing~~ a new global ERP ~~system~~ across our business units using a phased ~~approach in future periods. There~~approach. As a result of this implementation, certain internal controls over financial reporting have been automated, modified, or implemented to address the new control environment associated with this ERP. While we believe this new system will ~~be changes in~~strengthen our internal controls, there are inherent risks in implementing any new


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system, and we will continue to evaluate these control changes as ~~this system becomes operational at each business unit.~~part of our assessment of internal control over financial reporting throughout Fiscal 2022.

In connection with the foregoing evaluation by our Chief Executive Officer and our Chief Financial Officer, no other changes were identified in the Company’s “internal control over financial reporting” (as defined in the Securities Exchange Act of 1934 Rules 13a-15(f) and 15d-15(f)) that occurred during our fiscal quarter ended November 30, ~~2020,~~2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities


Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of a Publicly Announced Program	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (1)(2)
September 1 – 30, 2021 (3)	402,642	$	212.44	402,642	$	2,563,568,601
October 1 – 31, 2021	—	$	—	—	$	2,563,568,601
November 1 – 30, 2021	—	$	—	—	$	2,563,568,601
Total	402,642	$	212.44	402,642

(1)In January 2018, we announced that our Board of Directors authorized the repurchase of up to an aggregate amount of $3.0 billion of our Class A Common Stock and Class B Convertible Common Stock under the 2018 Authorization. The Board of Directors did not specify a date upon which the 2018 Authorization would expire. Share repurchases for the periods included herein were effected through open market transactions.

(2)In January 2021, we announced that our Board of Directors authorized an additional repurchase of up to an aggregate amount of $2.0 billion of our Class A Common Stock and Class B Convertible Common Stock under the 2021 Authorization. The Board of Directors did not specify a date upon which the 2021 Authorization would expire. No shares have been repurchased under the 2021 Authorization.

(3)Repurchases from September 1, 2021, through September 30, 2021, were made pursuant to a Rule 10b5-1 trading plan.

Item 6. Exhibits.

Exhibits required to be filed by Item 601 of Regulation S-K.

For the exhibits that are filed herewith or incorporated herein by reference, see the Index to Exhibits immediately following.


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INDEX TO EXHIBITS


Exhibit No.
2.1						Subscription Agreement, dated as of August 14, 2018, by and between CBG Holdings LLC and Canopy Growth Corporation, including, among other things, a form of the Amended and Restated Investor Rights Agreement (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K dated August 14, 2018, filed August 16, 2018, and incorporated herein by reference). †

2.2						Foreign Exchange Rate Agreement dated October 26, 2018 between CBG Holdings LLC and Canopy Growth Corporation (filed as Exhibit 2.2 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 2018 and incorporated herein by reference).

2.3						Asset Purchase Agreement made and entered into by and between the Company and E. & J. Gallo Winery (no longer outstanding) (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K dated April 3, 2019, filed April 8, 2019 and incorporated herein by reference). †

2.4						Binding Letter Agreement dated December 11, 2019 and effective December 11, 2019 between Constellation Brands, Inc. and E. & J. Gallo Winery regarding the Modified Transaction (including the Form of Amended Agreement) (no longer outstanding) (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K dated December 11, 2019, filed December 17, 2019 and incorporated herein by reference). †‡

2.5						Second Amended and Restated Asset Purchase Agreement made and entered into as of May 22, 2020, by and between Constellation Brands, Inc. and E. & J. Gallo Winery (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K dated May 22, 2020, filed May 29, 2020 and incorporated herein by reference). †‡

2.6						First Amendment dated September 28, 2020 and effective September 28, 2020, to Second Amended and Restated Asset Purchase Agreement made and entered into as of May 22, 2020, by and between Constellation Brands, Inc. and E. & J. Gallo Winery (filed as Exhibit 2.6 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended August 31, 2020 and incorporated herein by reference).

2.7						Nobilo Binding Letter Agreement dated December 11, 2019 and effective December 11, 2019 between Constellation Brands, Inc. and E. & J. Gallo Winery regarding the Nobilo Transaction (including the Form of Nobilo Asset Purchase Agreement) (no longer outstanding) (filed as Exhibit 2.2 to the Company’s Current Report on Form 8-K dated December 11, 2019, filed December 17, 2019 and incorporated herein by reference). †

2.8						Amendment dated May 22, 2020 and effective May 22, 2020, to Nobilo Binding Letter Agreement dated December 11, 2019 and effective December 11, 2019 between Constellation Brands, Inc. and E. & J. Gallo Winery regarding the Nobilo Transaction (no longer outstanding) (filed as Exhibit 2.7 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended May 31, 2020 and incorporated herein by reference).

2.9						Asset Purchase Agreement made and entered into as of June 22, 2020, by and between Constellation Brands, Inc. and E. & J. Gallo Winery regarding the Nobilo Transaction (filed as Exhibit 2.1 to the Company’s Current Form 8-K dated June 22, 2020, filed June 25, 2020 and incorporated herein by reference). †

3.1						Restated Certificate of Incorporation of the Company (filed as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended August 31, 2009 and incorporated herein by reference). #

3.2						Certificate of Amendment to the Certificate of Incorporation of the Company (filed as Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended August 31, 2009 and incorporated herein by reference).#

3.3						By-Laws of the Company, amended and restated as of October 3, 2018 (filed as Exhibit 3.3 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended August 31, 2018 and incorporated herein by reference).


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4.1						Indenture, dated as of April 17, 2012, by and among the Company, as Issuer, certain subsidiaries, as Guarantors, and Manufacturers and Traders Trust Company, as Trustee (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated April 17, 2012, filed April 23, 2012 and incorporated herein by reference). #

4.2						Supplemental Indenture No. 1, with respect to 6.0% Senior Notes due May 2022, dated as of April 17, 2012, among the Company, as Issuer, certain subsidiaries, as Guarantors, and Manufacturers and Traders Trust Company, as Trustee (no longer outstanding) (filed as Exhibit 4.1.1 to the Company’s Current Report on Form 8-K dated April 17, 2012, filed April 23, 2012 and incorporated herein by reference).#

4.3						Supplemental Indenture No. 3, with respect to 3.75% Senior Notes due May 2021, dated as of May 14, 2013, among the Company, as Issuer, certain subsidiaries, as Guarantors, and Manufacturers and Traders Trust Company, as Trustee (no longer outstanding) (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated May 14, 2013, filed May 16, 2013 and incorporated herein by reference).


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Exhibit No.

4.4						Supplemental Indenture No. 4, with respect to 4.25% Senior Notes due May 2023, dated as of May 14, 2013, among the Company, as Issuer, certain subsidiaries, as Guarantors, and Manufacturers and Traders Trust Company, as Trustee (filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K dated May 14, 2013, filed May 16, 2013 and incorporated herein by reference). #

4.5						Supplemental Indenture No. 5, dated as of June 7, 2013, among the Company, Constellation Brands Beach Holdings, Inc., Crown Imports LLC, and Manufacturers and Traders Trust Company, as Trustee (filed as Exhibit 4.4 to the Company’s Current Report on Form 8-K dated June 7, 2013, filed June 11, 2013 and incorporated herein by reference). #

4.6						Supplemental Indenture No. 6, dated as of May 28, 2014, among the Company, Constellation Marketing Services, Inc., and Manufacturers and Traders Trust Company, as Trustee (filed as Exhibit 4.21 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended May 31, 2014 and incorporated herein by reference). #

4.7						Supplemental Indenture No. 7, with respect to 3.875% Senior Notes due 2019, dated as of November 3, 2014, among the Company, as Issuer, certain subsidiaries, as Guarantors, and Manufacturers and Traders Trust Company, as Trustee (no longer outstanding) (filed as Exhibit 4.1 to the Company’s Current Report on ~~Form~~form 8-K dated November 3, 2014, filed November 7, 2014 and incorporated herein by reference). #

4.8						Supplemental Indenture No. 8, with respect to 4.750% Senior Notes due 2024, dated as of November 3, 2014, among the Company, as Issuer, certain subsidiaries, as Guarantors, and Manufacturers and Traders Trust Company, as Trustee (filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K dated November 3, 2014, filed November 7, 2014 and incorporated herein by reference). #

4.9						Supplemental Indenture No. 9, with respect to 4.750% Senior Notes due 2025, dated as of December 4, 2015, among the Company, as Issuer, certain subsidiaries, as Guarantors, and Manufacturers and Traders Trust Company, as Trustee (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated December 4, 2015, filed December 8, 2015 and incorporated herein by reference). #

4.10						Supplemental Indenture No. 10, dated as of January 15, 2016, among the Company, Home Brew Mart, Inc. and Manufacturers and Traders Trust Company, as Trustee (filed as Exhibit 4.26 to the Company’s Annual Report on Form 10-K for the fiscal year ended February 29, 2016 and incorporated herein by reference).

4.11						Supplemental Indenture No. 11 with respect to 3.700% Senior Notes due 2026, dated as of December 6, 2016, among the Company, as Issuer, certain subsidiaries, as Guarantors, and Manufacturers and Traders Trust Company, as Trustee, (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated December 6, 2016, filed December 6, 2016 and incorporated herein by reference).

4.12						Supplemental Indenture No. 12 with respect to 2.700% Senior Notes due 2022, dated as of May 9, 2017, among the Company, as Issuer, certain subsidiaries, as Guarantors, and Manufacturers and Traders Trust Company, as Trustee (no longer outstanding) (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated May 9, 2017, filed May 9, 2017 and incorporated herein by reference).


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4.13						Supplemental Indenture No. 13 with respect to 3.500% Senior Notes due 2027, dated as of May 9, 2017, among the Company, as Issuer, certain subsidiaries, as Guarantors, and Manufacturers and Traders Trust Company, as Trustee (filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K dated May 9, 2017, filed May 9, 2017 and incorporated herein by reference).

4.14						Supplemental Indenture No. 14 with respect to 4.500% Senior Notes due 2047, dated as of May 9, 2017, among the Company, as Issuer, certain subsidiaries, as Guarantors, and Manufacturers and Traders Trust Company, as Trustee (filed as Exhibit 4.3 to the Company’s Current Report on Form 8-K dated May 9, 2017, filed May 9, 2017 and incorporated herein by reference).

4.15						Supplemental Indenture No. 15 with respect to 2.000% Senior Notes due 2019, dated as of November 7, 2017, among the Company, as Issuer, certain subsidiaries, as Guarantors, and Manufacturers and Traders Trust Company, as Trustee (no longer outstanding) (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated November 7, 2017, filed November 7, 2017 and incorporated herein by reference).

4.16						Supplemental Indenture No. 16 with respect to 2.250% Senior Notes due 2020, dated as of November 7, 2017, among the Company, as Issuer, certain subsidiaries, as Guarantors, and Manufacturers and Traders Trust Company, as Trustee (no longer outstanding) (filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K dated November 7, 2017, filed November 7, 2017 and incorporated herein by reference).

4.17						Supplemental Indenture No. 17 with respect to 2.650% Senior Notes due 2022, dated as of November 7, 2017, among the Company, as Issuer, certain subsidiaries, as Guarantors, and Manufacturers and Traders Trust Company, as Trustee (no longer outstanding) (filed as Exhibit 4.3 to the Company’s Current Report on Form 8-K dated November 7, 2017, filed November 7, 2017 and incorporated herein by reference).


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Exhibit No.
4.18						Supplemental Indenture No. 18 with respect to 3.200% Senior Notes due 2023, dated as of February 7, 2018, among the Company, as Issuer, certain subsidiaries, as Guarantors, and Manufacturers and Traders Trust Company, as Trustee (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated February 7, 2018 filed February 7, 2018 and incorporated herein by reference).

4.19						Supplemental Indenture No. 19 with respect to 3.600% Senior Notes due 2028, dated as of February 7, 2018, among the Company, as Issuer, certain subsidiaries, as Guarantors, and Manufacturers and Traders Trust Company, as Trustee (filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K dated February 7, 2018 filed February 7, 2018 and incorporated herein by reference).

4.20						Supplemental Indenture No. 20 with respect to 4.100% Senior Notes due 2048, dated as of February 7, 2018, among the Company, as Issuer, certain subsidiaries, as Guarantors, and Manufacturers and Traders Trust Company, as Trustee (filed as Exhibit 4.3 to the Company’s Current Report on Form 8-K dated February 7, 2018 filed February 7, 2018 and incorporated herein by reference).

4.21						Supplemental Indenture No. 21 with respect to Senior Floating Rate Notes due 2021, dated as of October 29, 2018, among the Company, as Issuer, certain subsidiaries, as Guarantors, and Manufacturers and Traders Trust Company, as Trustee (no longer outstanding) (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated October 29, 2018, filed October 29, 2018, and incorporated herein by reference).

4.22						Supplemental Indenture No. 22 with respect to 4.400% Senior Notes due 2025, dated as of October 29, 2018, among the Company, as Issuer, certain subsidiaries, as Guarantors, and Manufacturers and Traders Trust Company, as Trustee (filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K dated October 29, 2018, filed October 29, 2018, and incorporated herein by reference).

4.23						Supplemental Indenture No. 23 with respect to 4.650% Senior Notes due 2028, dated as of October 29, 2018, among the Company, as Issuer, certain subsidiaries, as Guarantors, and Manufacturers and Traders Trust Company, as Trustee (filed as Exhibit 4.3 to the Company’s Current Report on Form 8-K dated October 29, 2018, filed October 29, 2018 and incorporated herein by reference).

4.24						Supplemental Indenture No. 24 with respect to 5.250% Senior Notes due 2048, dated as of October 29, 2018, among the Company, as Issuer, certain subsidiaries, as Guarantors, and Manufacturers and Traders Trust Company, as Trustee (filed as Exhibit 4.4 to the Company’s Current Report on Form 8-K dated October 29, 2018, filed October 29, 2018 and incorporated herein by reference).


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4.25						Supplemental Indenture No. 25 with respect to 3.150% Senior Notes due 2029, dated as of July 29, 2019, among the Company, as Issuer, certain subsidiaries, as Guarantors, and Manufacturers and Traders Trust Company, as Trustee (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated July 29, 2019, filed July 29, 2019 and incorporated herein by reference).

4.26						Supplemental Indenture No. 26 with respect to 2.875% Senior Notes due 2030, dated as of April 27, 2020, among the Company, as Issuer and Manufacturers and Traders Trust Company, as Trustee (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated April 27, 2020, filed April 27, 2020 and incorporated herein by reference).

4.27						Supplemental Indenture No. 27 with respect to 3.750% Senior Notes due 2050, dated as of April 27, 2020, among the Company, as Issuer and Manufacturers and Traders Trust Company, as Trustee (filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K dated April 27, 2020, filed April 27, 2020 and incorporated herein by reference).

4.28						Supplemental Indenture No. 28 with respect to 2.250% Senior Notes due 2031, dated as of July 26, 2021, among the Company, as Issuer and Manufacturers and Traders Trust Company, as Trustee (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated July 26, 2021, filed July 26, 2021 and incorporated herein by reference).

4.29						Restatement Agreement, dated as of March 26, 2020 by and among the Company, CB International Finance S.à r.l., certain of the Company’s subsidiaries as guarantors, Bank of America, N.A., as Administrative Agent, and the Lenders party thereto, including the Ninth Amended and Restated Credit Agreement dated as of March 26, 2020, by and among the Company, CB International Financing S.à r.l., Bank of America, N.A., as Administrative Agent, and the Lenders party thereto (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated March 26, 2020, filed March 31, 2020 and incorporated herein by reference). †

~~4.29~~4.30						2020 Term Loan Restatement Agreement, dated as of March 26, 2020, by and among the Company, certain of the Company’s subsidiaries as guarantors, Bank of America, N.A., as administrative agent and lender, including the Amended and Restated Term Loan Credit Agreement, dated March 26, 2020, by and between the Company and Bank of America, N.A., as administrative agent and lender (filed as Exhibit 4.3 to the ~~Company~~Company’s Current Report on Form 8-K dated March 26, 2020, filed March 31, 2020 and incorporated herein by reference). †


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Exhibit No.
4.31						~~Description~~Amendment No. 1, dated as of ~~Compensation Arrangements~~June 10, 2021, to Amended and Restated Term Loan Credit Agreement, dated March 26, 2020, by and between the Company and Bank of America, N.A., as administrative agent and lender (filed as Exhibit 4.30 to the Company’s Quarterly Report on Form 10-Q for ~~Non-Management Directors (filed herewith)~~the fiscal quarter ended May 31, 2021 and incorporated herein by reference). *



31.1						Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended (filed herewith).

31.2						Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended (filed herewith).

32.1						Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 (filed herewith).

32.2						Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (filed herewith).

99.1						Consent Agreement, dated April 18, 2019, by and between CBG Holdings LLC and Canopy Growth Corporation (incorporated herein by reference to Exhibit 99.4 of Canopy Growth Corporation’s Form 6-K filed April 30, 2019).

99.2						Second Amended and Restated Investor Rights Agreement, dated April 18, 2019, by and among Greenstar Canada Investment Limited Partnership, CBG Holdings LLC and Canopy Growth Corporation (incorporated herein by reference to Exhibit 99.3 of Canopy Growth Corporation’s Form 6-K filed April 30, 2019).

101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document (filed herewith).

101.SCH						XBRL Taxonomy Extension Schema Document (filed herewith).

101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith).

101.DEF						XBRL Taxonomy Extension Definition Linkbase Document (filed herewith).

101.LAB						XBRL Taxonomy Extension Labels Linkbase Document (filed herewith).

101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith).

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).


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*			~~Designates management contract or compensatory plan or arrangement.~~
#			~~Company’s Commission File No. 001-08495.~~
†			The exhibits, disclosure schedules, and other schedules, as applicable, have been omitted pursuant to Item 601(a)(5) of Regulation S-K. ~~Constellation Brands, Inc. agrees to furnish supplementally a copy of such exhibits, disclosure schedules, and other schedules, as applicable, or any section thereof, to the SEC upon request.~~
‡			Portions of this exhibit are redacted pursuant to Item 601(b)(2)(ii) of Regulation S-K.

The Company agrees, upon request of the ~~Securities and Exchange Commission,~~SEC, to furnish copies of each instrument that defines the rights of holders of long-term debt of the Company or its subsidiaries that is not filed herewith pursuant to Item 601(b)(4)(iii)(A) because the total amount of long-term debt authorized under such instrument does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis.


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		CONSTELLATION BRANDS, INC.

Date:	January ~~7, 2021~~6, 2022	By:	/s/ Kenneth W. Metz
			Kenneth W. Metz, Vice President and Controller

Date:	January ~~7, 2021~~6, 2022	By:	/s/ Garth Hankinson
			Garth Hankinson, Executive Vice President and Chief Financial Officer (principal financial officer and principal accounting officer)


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		For the Nine Months Ended November 30,				For the Three Months Ended November 30,
	Results of Operations Location	2020		2019		2020		2019
(in millions)
Loss on inventory write-downs	Cost of product sold	$	4.7	$	102.6	$	0.7	$	61.7
Contract termination costs	Cost of product sold	16.9		20.1		0		0
Employee termination costs	Selling, general, and administrative expenses	3.5		12.3		1.0		0.2
Other costs	Selling, general, and administrative expenses	9.7		8.0		8.7		1.7
Impairment of long-lived assets	Impairment of assets held for sale	24.0		367.0		21.0		340.0
		$	58.8	$	510.0	$	31.4	$	403.6


	2020 Credit Agreement			March 2020 Term Credit Agreement
	Revolving Credit Facility				2019 Five- Year Term Facility (1)
(in millions)
Outstanding borrowings	$	0			$	460.5
Interest rate	0		%		1.0		%
LIBOR margin	0		%		0.88		%
Outstanding letters of credit	$	11.8
Remaining borrowing capacity (2)	$	1,948.2


	For the Nine Months Ended
	November 30, 2020				November 30, 2019
	Common Stock				Common Stock
	Class A		Class B		Class A		Class B
(in millions, except per share data)
Net income (loss) attributable to CBI allocated – basic	$	1,436.5	$	178.6	$	(364.0)	$	(46.2)
Conversion of Class B common shares into Class A common shares	178.6		0		0		0
Effect of stock-based awards on allocated net income (loss)	0		(1.2)		0		0
Net income (loss) attributable to CBI allocated – diluted	$	1,615.1	$	177.4	$	(364.0)	$	(46.2)

Weighted average common shares outstanding – basic	170.083		23.284		168.258		23.316
Conversion of Class B common shares into Class A common shares (1)	23.284		0		0		0
Stock-based awards, primarily stock options (1)	1.734		0		0		0
Weighted average common shares outstanding – diluted	195.101		23.284		168.258		23.316

Net income (loss) per common share attributable to CBI – basic	$	8.44	$	7.67	$	(2.17)	$	(1.98)
Net income (loss) per common share attributable to CBI – diluted	$	8.28	$	7.62	$	(2.17)	$	(1.98)


	Foreign Currency Translation Adjustments		Net Unrealized Gain (Loss) on Derivative Instruments		Pension/ Postretirement Adjustments		Share of OCI of Equity Method Investments		Accumulated Other Comprehensive Income (Loss)
(in millions)
Balance, February 29, 2020	$	(345.7)	$	62.5	$	(2.6)	$	19.5	$	(266.3)
Other comprehensive income (loss):
Other comprehensive income (loss) before reclassification adjustments	(101.8)		(35.9)		(0.4)		15.3		(122.8)
Amounts reclassified from accumulated other comprehensive income (loss)	0		31.7		0		0		31.7
Other comprehensive income (loss)	(101.8)		(4.2)		(0.4)		15.3		(91.1)
Balance, November 30, 2020	$	(447.5)	$	58.3	$	(3.0)	$	34.8	$	(357.4)


(1)	Primarily includes the following:
		For the Nine Months Ended November 30,
		2020		2019
	Gain on vineyard sale	$	8.8	$	0

	Increase in our ownership interest in Nelson’s Green Brier	$	0	$	11.8
	(Increase) in estimated fair value of a contingent liability associated with a prior period acquisition	$	0	$	(11.4)


	Nine Months 2021		Nine Months 2020		Fiscal 2020
(in millions)
Net sales	$	578.4	$	638.0	$	874.9
Gross profit	$	229.5	$	247.0	$	335.6
Marketing (1)	$	12.4	$	13.1	$	17.7


Date of Investment	Investment	Third Quarter 2021		Third Quarter 2020		Nine Months 2021		Nine Months 2020
(in millions)
Nov 2017	Warrants (1)	$	—	$	(91.9)	$	(61.8)	$	(542.7)
Jun 2018	Convertible debt securities	27.7		(15.6)		25.2		(97.0)
Nov 2018	Warrants (2)	741.9		(426.8)		561.3		(1,561.2)
		$	769.6	$	(534.3)	$	524.7	$	(2,200.9)