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 August 31, 2023

or

☐ 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

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 183,662,681 shares of Class A Common Stock and 23,241 shares of Class 1 Common Stock outstanding as of September 30, 2023.

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. Derivative Instruments	7
	4. Fair Value of Financial Instruments	10
	5. Goodwill	13
	6. Intangible Assets	14
	7. Equity Method Investments	14
	8. Borrowings	16
	9. Income Taxes	17
	10. Stockholders' Equity	18
	11. Net Income (Loss) Per Common Share Attributable to CBI	19
	12. Comprehensive Income (Loss) Attributable to CBI	20
	13. Business Segment Information	23
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		26
Item 3. Quantitative and Qualitative Disclosures About Market Risk		49
Item 4. Controls and Procedures		50
PART II – OTHER INFORMATION
Item 1. Legal Proceedings		51
Item 1A. Risk Factors		51
Item 5. Other Information		52
Item 6. Exhibits		53
SIGNATURES		56

This Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. 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 MD&A.

Defined Terms

Unless the context otherwise requires, the terms “Company,” “CBI,” “we,” “our,” or “us” refer to Constellation Brands, Inc. and its subsidiaries. We use terms in this Form 10-Q and in our Notes that are specific to us or are abbreviations that may not be commonly known or used.

Term	Meaning
$	U.S. dollars
3.20% February 2018 Senior Notes	$600.0 million principal amount of 3.20% senior notes issued in February 2018, partially tendered in May 2022, and fully redeemed in June 2022, prior to maturity
4.25% May 2013 Senior Notes	$1,050.0 million principal amount of 4.25% senior notes issued in May 2013, partially tendered in May 2022, and fully redeemed in June 2022, prior to maturity
2021 Authorization	authority to repurchase up to $2.0 billion of our publicly traded common stock, authorized in January 2021 by our Board of Directors
2022 Credit Agreement	tenth amended and restated credit agreement, dated as of April 14, 2022, that provides for an aggregate revolving credit facility of $2.25 billion
2023 Annual Report	our Annual Report on Form 10-K for the fiscal year ended February 28, 2023
2023 Canopy Promissory Note	C$100.0 million principal amount of 4.25% promissory note issued to us by Canopy in April 2023
3-tier	distribution channel where products are sold to a distributor (wholesaler) who then sells to a retailer; the retailer sells the products to a consumer
3-tier eCommerce	digital commerce experience for consumers to purchase beverage alcohol from retailers
ABA	alternative beverage alcohol
Administrative Agent	Bank of America, N.A., as administrative agent for the senior credit facility and term loan credit agreements
Amended and Restated By-Laws	our amended and restated by-laws which became effective at the Effective Time
Amended and Restated Charter	our amended and restated certificate of incorporation which effectuated the Reclassification at the Effective Time
AOCI	accumulated other comprehensive income (loss)
April 2022 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 a five-year term loan facility, inclusive of amendments dated as of June 10, 2021, and April 14, 2022, now repaid in full
August 2022 Term Credit Agreement	term loan credit agreement, dated as of August 9, 2022, that provided for a $1.0 billion unsecured delayed draw three-year term loan facility, now repaid in full
Austin Cocktails	we made an initial investment in the Austin Cocktails business and subsequently acquired the remaining ownership interest
BioSteel	BioSteel Sports Nutrition Inc., a subsidiary of Canopy
C$	Canadian dollars
Canopy	we made an investment in Canopy Growth Corporation, an Ontario, Canada-based public company
Canopy Amendment	a proposed resolution authorizing amending Canopy’s share capital to create Exchangeable Shares and providing for the conversion of Canopy common shares into Exchangeable Shares on a one-for-one basis at any time and at the option of the holder of such shares
Canopy Debt Securities	debt securities issued by Canopy in June 2018
Canopy Equity Method Investment	an investment in Canopy common shares
Canopy Strategic Transaction(s)	any potential acquisition, divestiture, investment, or other similar transaction made by Canopy, including but not limited to the Canopy Transaction
Canopy Transaction	proposed corporate transaction by Canopy, including the creation of Exchangeable Shares, designed to consolidate its U.S. cannabis assets into Canopy USA

Constellation Brands, Inc. Q2 FY 2024 Form 10-Q #WORTHREACHINGFOR    I    i

Term	Meaning
Canopy USA	a new U.S. holding company formed by Canopy
CB International	CB International Finance S.à r.l., a wholly-owned subsidiary of ours
Class 1 Stock	our Class 1 Convertible Common Stock, par value $0.01 per share
Class A Stock	our Class A Common Stock, par value $0.01 per share
Class B Stock	our Class B Convertible Common Stock, par value $0.01 per share, eliminated on November 10, 2022, pursuant to the Reclassification
CODM	chief operating decision maker
Comparable Adjustments	certain items affecting comparability that have been excluded by management
Consent Agreement	an agreement between Canopy and (i) Greenstar Canada Investment Limited Partnership and (ii) CBG Holdings LLC, our indirect, wholly-owned subsidiaries
CPG	consumer packaged goods
Craft Beer Divestitures	the Four Corners Divestiture and the Funky Buddha Divestiture, collectively
Daleville Facility	production facility located in Roanoke, Virginia
Depletions	represent U.S. domestic distributor shipments of our respective branded products to retail customers, based on third-party data
Digital Business Acceleration	a phased initiative by the Company to create a cohesive digital strategy and build an advanced digital business in the coming years
DTC	direct-to-consumer inclusive of (i) a digital commerce experience for consumers to purchase directly from brand websites with inventory coming straight from the supplier and (ii) consumer purchases at hospitality locations (tasting rooms and tap rooms) from the supplier
Effective Time	the time that the Amended and Restated Charter was duly filed with the Secretary of State of the State of Delaware on November 10, 2022
ESG	environmental, social, and governance
Exchangeable Shares	proposed new class of non-voting and non-participating exchangeable shares in Canopy which will be convertible into common shares of Canopy
Exchange Act	Securities Exchange Act of 1934, as amended
Financial Statements	our consolidated financial statements and notes thereto included herein
Fiscal 2023	the Company’s fiscal year ended February 28, 2023
Fiscal 2024	the Company’s fiscal year ending February 29, 2024
Fiscal 2025	the Company’s fiscal year ending February 28, 2025
Fiscal 2026	the Company’s fiscal year ending February 28, 2026
Fiscal 2027	the Company’s fiscal year ending February 28, 2027
Fiscal 2028	the Company’s fiscal year ending February 29, 2028
Fiscal 2029	the Company’s fiscal year ending February 28, 2029
Form 10-Q	this Quarterly Report on Form 10-Q for the quarterly period ended August 31, 2023, unless otherwise specified
Four Corners Divestiture	sale of the Four Corners Brewing Company LLC business
Funky Buddha Divestiture	sale of the Funky Buddha Brewery LLC business
GHG	greenhouse gas
IT	information technology
Lingua Franca	Lingua Franca, LLC business, acquired by us
May 2023 Senior Notes	$750.0 million aggregate principal amount of senior notes issued in May 2023
MD&A	Management’s Discussion and Analysis of Financial Condition and Results of Operations under Part I – Item 2. of this Form 10-Q
Mexicali Brewery	canceled brewery construction project located in Mexicali, Baja California, Mexico
Mexico Beer Projects	expansion, optimization, and/or construction activities at the Obregon Brewery, Nava Brewery, and Veracruz Brewery

Constellation Brands, Inc. Q2 FY 2024 Form 10-Q #WORTHREACHINGFOR    I    ii

Term	Meaning
M&T	Manufacturers and Traders Trust Company
NA	not applicable
Nava	Nava, Coahuila, Mexico
Nava Brewery	brewery located in Nava
Net sales	gross sales less promotions, returns and allowances, and excise taxes
NM	not meaningful
Note(s)	notes to the consolidated financial statements
November 2018 Canopy Warrants	warrants acquired in November 2018 which give us the option to purchase common shares of Canopy
Obregon	Obregon, Sonora, Mexico
Obregon Brewery	brewery located in Obregon
OCI	other comprehensive income (loss)
October 2022 Credit Agreement Amendment	amendment dated as of October 18, 2022, to the 2022 Credit Agreement
Pre-issuance hedge contracts	treasury lock and/or swap lock contracts designated as cash flow hedges entered into to hedge treasury rate volatility on future debt issuances
Reclassification	the reclassification, exchange, and conversion of the Company’s common stock to eliminate the Class B Stock pursuant to the terms and conditions of the Reclassification Agreement
Reclassification Agreement	reclassification agreement in support of the Reclassification, dated June 30, 2022, among the Company and the Sands Family Stockholders
RTD	ready-to-drink
Sands Family Stockholders	RES Master LLC, RES Business Holdings LP, SER Business Holdings LP, RHT 2015 Business Holdings LP, RSS Master LLC, RSS Business Holdings LP, SSR Business Holdings LP, RSS 2015 Business Holdings LP, RCT 2015 Business Holdings LP, RCT 2020 Investments LLC, NSDT 2009 STZ LLC, NSDT 2011 STZ LLC, RSS Business Management LLC, SSR Business Management LLC, LES Lauren Holdings LLC, MES Mackenzie Holdings LLC, Abigail Bennett, Zachary Stern, A&Z 2015 Business Holdings LP (subsequently liquidated), Marilyn Sands Master Trust, MAS Business Holdings LP, Sands Family Foundation, Richard Sands, Robert Sands, WildStar Partners LLC, Astra Legacy LLC, AJB Business Holdings LP, and ZMSS Business Holdings LP
SEC	Securities and Exchange Commission
Second Quarter 2023	the Company’s three months ended August 31, 2022
Second Quarter 2024	the Company’s three months ended August 31, 2023
Securities Act	Securities Act of 1933, as amended
Six Months 2023	the Company’s six months ended August 31, 2022
Six Months 2024	the Company’s six months ended August 31, 2023
SOFR	secured overnight financing rate administered by the Federal Reserve Bank of New York
U.S.	United States of America
Veracruz	Heroica Veracruz, Veracruz, Mexico
Veracruz Brewery	a new brewery being constructed in Veracruz
Wine Divestiture	sale of certain mainstream and premium wine brands and related inventory

Constellation Brands, Inc. Q2 FY 2024 Form 10-Q #WORTHREACHINGFOR    I    iii

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)

	August 31, 2023		February 28, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	83.3	$	133.5
Accounts receivable	933.2		901.6
Inventories	1,814.0		1,898.7
Prepaid expenses and other	603.8		562.3
Total current assets	3,434.3		3,496.1
Property, plant, and equipment	7,580.3		6,865.2
Goodwill	7,985.6		7,925.4
Intangible assets	2,734.5		2,728.1
Equity method investments	277.1		663.3
Deferred income taxes	2,147.6		2,193.3
Other assets	770.6		790.9
Total assets	$	24,930.0	$	24,662.3
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings	$	467.4	$	1,165.3
Current maturities of long-term debt	558.3		9.5
Accounts payable	978.8		941.5
Other accrued expenses and liabilities	853.0		852.0
Total current liabilities	2,857.5		2,968.3
Long-term debt, less current maturities	10,680.8		11,286.5
Deferred income taxes and other liabilities	1,667.7		1,673.6
Total liabilities	15,206.0		15,928.4
Commitments and contingencies
CBI stockholders’ equity:
Class A Stock, $0.01 par value – Authorized, 322,000,000 shares; Issued, 212,697,728 shares and 212,697,428 shares, respectively	2.1		2.1
Additional paid-in capital	1,998.8		1,903.0
Retained earnings	12,842.7		12,343.9
Accumulated other comprehensive income (loss)	434.4		28.5
	15,278.0		14,277.5
Less: Treasury stock –
Class A Stock, at cost, 29,038,592 shares and 29,498,426 shares, respectively	(5,887.2)		(5,863.9)
Total CBI stockholders’ equity	9,390.8		8,413.6
Noncontrolling interests	333.2		320.3
Total stockholders’ equity	9,724.0		8,733.9
Total liabilities and stockholders’ equity	$	24,930.0	$	24,662.3

The accompanying notes are an integral part of these statements.

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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 Six Months Ended August 31,				For the Three Months Ended August 31,
	2023		2022		2023		2022
Sales	$	5,752.5	$	5,405.0	$	3,053.0	$	2,864.3
Excise taxes	(400.8)		(386.7)		(216.2)		(209.2)
Net sales	5,351.7		5,018.3		2,836.8		2,655.1
Cost of product sold	(2,644.0)		(2,437.4)		(1,386.9)		(1,329.2)
Gross profit	2,707.7		2,580.9		1,449.9		1,325.9
Selling, general, and administrative expenses	(964.3)		(951.4)		(471.2)		(512.8)
Operating income (loss)	1,743.4		1,629.5		978.7		813.1
Income (loss) from unconsolidated investments	(435.6)		(1,907.0)		(20.2)		(1,719.1)
Interest expense	(228.8)		(182.8)		(110.6)		(94.3)
Loss on extinguishment of debt	(0.7)		(23.3)		—		(8.0)
Income (loss) before income taxes	1,078.3		(483.6)		847.9		(1,008.3)
(Provision for) benefit from income taxes	(238.4)		(257.8)		(147.2)		(132.4)
Net income (loss)	839.9		(741.4)		700.7		(1,140.7)
Net (income) loss attributable to noncontrolling interests	(14.0)		(20.3)		(10.7)		(10.5)
Net income (loss) attributable to CBI	$	825.9	$	(761.7)	$	690.0	$	(1,151.2)
Comprehensive income (loss)	$	1,266.0	$	(675.9)	$	901.5	$	(1,334.2)
Comprehensive (income) loss attributable to noncontrolling interests	(34.2)		(28.5)		(20.0)		(6.1)
Comprehensive income (loss) attributable to CBI	$	1,231.8	$	(704.4)	$	881.5	$	(1,340.3)
Net income (loss) per common share attributable to CBI:
Basic – Class A Stock	$	4.50	$	(4.13)	$	3.76	$	(6.30)
Basic – Class B Stock	NA		$	(3.77)	NA		$	(5.73)
Diluted – Class A Stock	$	4.49	$	(4.13)	$	3.74	$	(6.30)
Diluted – Class B Stock	NA		$	(3.77)	NA		$	(5.73)
Weighted average common shares outstanding:
Basic – Class A Stock	183.384		163.532		183.498		161.730
Basic – Class B Stock	NA		23.206		NA		23.206
Diluted – Class A Stock	184.074		163.532		184.277		161.730
Diluted – Class B Stock	NA		23.206		NA		23.206
Cash dividends declared per common share:
Class A Stock	$	1.78	$	1.60	$	0.89	$	0.80
Class B Stock	NA		$	1.44	NA		$	0.72

The accompanying notes are an integral part of these statements.

Constellation Brands, Inc. Q2 FY 2024 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)
	Class A Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Non-controlling Interests		Total
Balance at February 28, 2023	$	2.1	$	1,903.0	$	12,343.9	$	28.5	$	(5,863.9)	$	320.3	$	8,733.9
Comprehensive income (loss):
Net income (loss)	—		—		135.9		—		—		3.3		139.2
Other comprehensive income (loss), net of income tax effect	—		—		—		214.4		—		10.9		225.3
Comprehensive income (loss)													364.5
Repurchase of shares	—		—		—		—		(35.0)		—		(35.0)
Dividends declared	—		—		(163.1)		—		—		—		(163.1)
Noncontrolling interest distributions	—		—		—		—		—		(11.3)		(11.3)
Shares issued under equity compensation plans	—		0.6		—		—		4.1		—		4.7
Stock-based compensation	—		14.5		—		—		—		—		14.5
Balance at May 31, 2023	2.1		1,918.1		12,316.7		242.9		(5,894.8)		323.2		8,908.2
Comprehensive income (loss):
Net income (loss)	—		—		690.0		—		—		10.7		700.7
Other comprehensive income (loss), net of income tax effect	—		—		—		191.5		—		9.3		200.8
Comprehensive income (loss)													901.5
Dividends declared	—		—		(164.0)		—		—		—		(164.0)
Noncontrolling interest distributions	—		—		—		—		—		(10.0)		(10.0)
Shares issued under equity compensation plans	—		62.6		—		—		7.6		—		70.2
Stock-based compensation	—		18.1		—		—		—		—		18.1
Balance at August 31, 2023	$	2.1	$	1,998.8	$	12,842.7	$	434.4	$	(5,887.2)	$	333.2	$	9,724.0

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FINANCIAL STATEMENTS Table of Contents

CONSTELLATION BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (in millions) (unaudited)
	Stock				Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Non-controlling Interests		Total
	Class A		Class B
Balance at February 28, 2022	$	1.9	$	0.3	$	1,808.9	$	14,505.4	$	(412.7)	$	(4,171.9)	$	315.9	$	12,047.8
Comprehensive income (loss):
Net income (loss)	—		—		—		389.5		—		—		9.8		399.3
Other comprehensive income (loss), net of income tax effect	—		—		—		—		246.4		—		12.6		259.0
Comprehensive income (loss)															658.3
Repurchase of shares	—		—		—		—		—		(1,007.6)		—		(1,007.6)
Dividends declared	—		—		—		(148.7)		—		—		—		(148.7)
Noncontrolling interest distributions	—		—		—		—		—		—		(11.2)		(11.2)
Shares issued under equity compensation plans	—		—		(0.6)		—		—		3.8		—		3.2
Stock-based compensation	—		—		16.7		—		—		—		—		16.7
Balance at May 31, 2022	1.9		0.3		1,825.0		14,746.2		(166.3)		(5,175.7)		327.1		11,558.5
Comprehensive income (loss):
Net income (loss)	—		—		—		(1,151.2)		—		—		10.5		(1,140.7)
Other comprehensive income (loss), net of income tax effect	—		—		—		—		(189.1)		—		(4.4)		(193.5)
Comprehensive income (loss)															(1,334.2)
Repurchase of shares	—		—		—		—		—		(392.9)		—		(392.9)
Dividends declared	—		—		—		(146.6)		—		—		—		(146.6)
Noncontrolling interest distributions	—		—		—		—		—		—		(11.3)		(11.3)
Shares issued under equity compensation plans	—		—		14.5		—		—		2.0		—		16.5
Stock-based compensation	—		—		20.9		—		—		—		—		20.9
Balance at August 31, 2022	$	1.9	$	0.3	$	1,860.4	$	13,448.4	$	(355.4)	$	(5,566.6)	$	321.9	$	9,710.9

The accompanying notes are an integral part of these statements.

Constellation Brands, Inc. Q2 FY 2024 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 Six Months Ended August 31,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	839.9	$	(741.4)
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	74.4		31.7
Deferred tax provision (benefit)	26.3		208.6
Depreciation	213.7		183.5
Stock-based compensation	32.5		37.8
Equity in (earnings) losses of equity method investees and related activities, net of distributed earnings	226.5		815.6
Noncash lease expense	43.3		44.4
Amortization of debt issuance costs and loss on extinguishment of debt	6.1		28.2
Impairment of equity method investments	135.8		1,060.3
Gain (loss) on settlement of Pre-issuance hedge contracts	1.2		20.7
Change in operating assets and liabilities, net of effects from purchase and sale of business:
Accounts receivable	(30.0)		(84.8)
Inventories	81.3		(86.3)
Prepaid expenses and other current assets	(47.9)		165.6
Accounts payable	(56.4)		188.9
Deferred revenue	17.6		9.5
Other accrued expenses and liabilities	(33.9)		(287.7)
Other	91.6		59.7
Total adjustments	782.1		2,395.7
Net cash provided by (used in) operating activities	1,622.0		1,654.3
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant, and equipment	(582.0)		(435.0)
Purchase of business, net of cash acquired	(7.5)		(37.2)
Investments in equity method investees and securities	(27.6)		(21.0)
Proceeds from sale of assets	14.8		6.6
Proceeds from sale of business	5.4		—
Other investing activities	(4.0)		0.6
Net cash provided by (used in) investing activities	(600.9)		(486.0)

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FINANCIAL STATEMENTS Table of Contents

CONSTELLATION BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)

	For the Six Months Ended August 31,
	2023		2022
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt	744.8		1,846.8
Principal payments of long-term debt	(805.1)		(1,654.7)
Net proceeds from (repayments of) short-term borrowings	(697.9)		340.9
Dividends paid	(327.6)		(295.3)
Purchases of treasury stock	(35.0)		(1,400.5)
Proceeds from shares issued under equity compensation plans	86.2		30.5
Payments of minimum tax withholdings on stock-based payment awards	(11.2)		(10.5)
Payments of debt issuance, debt extinguishment, and other financing costs	(5.3)		(33.3)
Distributions to noncontrolling interests	(21.3)		(22.5)
Net cash provided by (used in) financing activities	(1,072.4)		(1,198.6)
Effect of exchange rate changes on cash and cash equivalents	1.1		(4.0)
Net increase (decrease) in cash and cash equivalents	(50.2)		(34.3)
Cash and cash equivalents, beginning of period	133.5		199.4
Cash and cash equivalents, end of period	$	83.3	$	165.1
Supplemental disclosures of noncash investing and financing activities
Additions to property, plant, and equipment	$	206.0	$	69.1

The accompanying notes are an integral part of these statements.

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CONSTELLATION BRANDS, INC. AND SUBSIDIARIES

AUGUST 31, 2023

(unaudited)

1.    BASIS OF PRESENTATION

We have prepared the Financial Statements, without audit, pursuant to the rules and regulations of the 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 Financial Statements should be read in conjunction with the consolidated financial statements and related notes included in the 2023 Annual Report. Results of operations for interim periods are not necessarily indicative of annual results.

Effective May 31, 2023, we changed our internal management financial reporting to consist of two business divisions: (i) Beer and (ii) Wine and Spirits and we now report our operating results in three segments: (i) Beer, (ii) Wine and Spirits, and (iii) Corporate Operations and Other following the removal of the Canopy operating segment. All financial information for the six months and three months ended August 31, 2022, has been restated to conform to the new segment presentation. For additional information, refer to Note 13.

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:

	August 31, 2023		February 28, 2023
(in millions)
Raw materials and supplies	$	226.4	$	245.5
In-process inventories	930.2		967.8
Finished case goods	657.4		685.4
	$	1,814.0	$	1,898.7

3.    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 2023 Annual Report and have not changed significantly for the six months and three months ended August 31, 2023.

We have an investment 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 7). This investment is included in other assets and is accounted for at fair value, with the net gain (loss) from the changes in fair value of this investment recognized in income (loss) from unconsolidated investments (see Note 4). We intend to surrender this investment for cancellation upon completion of the Canopy Transaction and if we elect to convert our Canopy common shares into Exchangeable Shares.

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

	August 31, 2023		February 28, 2023
(in millions)
Derivative instruments designated as hedging instruments
Foreign currency contracts	$	1,904.9	$	1,969.5
Derivative instruments not designated as hedging instruments
Foreign currency contracts	$	810.9	$	831.7
Commodity derivative contracts	$	344.6	$	416.5

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 August 31, 2023, the estimated fair value of derivative instruments in a net liability position due to counterparties was $1.7 million. If we were required to settle the net liability position under these derivative instruments on August 31, 2023, 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 4):

Assets					Liabilities
	August 31, 2023		February 28, 2023			August 31, 2023		February 28, 2023
(in millions)
Derivative instruments designated as hedging instruments
Foreign currency contracts:
Prepaid expenses and other	$	156.0	$	109.1	Other accrued expenses and liabilities	$	7.6	$	9.8
Other assets	$	173.8	$	134.5	Deferred income taxes and other liabilities	$	2.0	$	3.5
Derivative instruments not designated as hedging instruments
Foreign currency contracts:
Prepaid expenses and other	$	5.0	$	5.9	Other accrued expenses and liabilities	$	2.7	$	3.9
Commodity derivative contracts:
Prepaid expenses and other	$	14.6	$	21.2	Other accrued expenses and liabilities	$	22.2	$	19.5
Other assets	$	3.3	$	4.6	Deferred income taxes and other liabilities	$	6.2	$	8.3

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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 Six Months Ended August 31, 2023
Foreign currency contracts	$	149.9	Sales	$	(0.2)
			Cost of product sold	65.7
Pre-issuance hedge contracts	0.6		Interest expense	(0.3)
	$	150.5		$	65.2
For the Six Months Ended August 31, 2022
Foreign currency contracts	$	71.3	Sales	$	(1.2)
			Cost of product sold	21.9
Pre-issuance hedge contracts	15.7		Interest expense	(0.6)
	$	87.0		$	20.1
For the Three Months Ended August 31, 2023
Foreign currency contracts	$	70.6	Sales	$	(0.2)
			Cost of product sold	39.3
Pre-issuance hedge contracts	—		Interest expense	(0.1)
	$	70.6		$	39.0
For the Three Months Ended August 31, 2022
Foreign currency contracts	$	(8.2)	Sales	$	(0.6)
			Cost of product sold	10.8
Pre-issuance hedge contracts	—		Interest expense	(0.1)
	$	(8.2)		$	10.1

We expect $130.3 million of net gains, net of income tax effect, to be reclassified from 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 Six Months Ended August 31, 2023
Commodity derivative contracts	Cost of product sold	$	(15.6)
Foreign currency contracts	Selling, general, and administrative expenses	22.5
		$	6.9

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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 Six Months Ended August 31, 2022
Commodity derivative contracts	Cost of product sold	$	33.1
Foreign currency contracts	Selling, general, and administrative expenses	(2.6)
		$	30.5
For the Three Months Ended August 31, 2023
Commodity derivative contracts	Cost of product sold	$	19.1
Foreign currency contracts	Selling, general, and administrative expenses	9.8
		$	28.9
For the Three Months Ended August 31, 2022
Commodity derivative contracts	Cost of product sold	$	(15.4)
Foreign currency contracts	Selling, general, and administrative expenses	(8.8)
		$	(24.2)

4.    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 or 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 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 Pre-issuance hedge 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 investment

In April 2023, we extended the maturity of the remaining C$100.0 million principal amount of our Canopy Debt Securities by exchanging them for the 2023 Canopy Promissory Note. As such, our investment in Canopy is comprised of the (i) Canopy Equity Method Investment, (ii) November 2018 Canopy Warrants, and (iii) 2023

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Canopy Promissory Note. The November 2018 Canopy Warrants and the 2023 Canopy Promissory Note are measured at fair value. Effective as of May 31, 2023, we determined that neither of these instruments had future economic value given Canopy’s stock price relative to the exercise price of the warrants and the substantial doubt about Canopy’s ability to continue as a going concern, as disclosed by Canopy, prior to the maturity of the note. Accordingly, the fair value of the remaining balances for these instruments were determined to be zero. This reduction in fair value is included in income (loss) from unconsolidated investments within our consolidated results of operations for the six months ended August 31, 2023. If the Canopy Amendment is authorized by Canopy’s shareholders, we intend to negotiate an exchange of the 2023 Canopy Promissory Note for Exchangeable Shares, although neither we nor Canopy has any binding obligation to do so, and we also intend to surrender the November 2018 Canopy Warrants for cancellation upon completion of the Canopy Transaction and if we elect to convert our Canopy common shares into Exchangeable Shares.

Short-term borrowings

Our short-term borrowings consist of our commercial paper program and the revolving credit facility under our senior credit facility. The revolving 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). For these short-term borrowings, the carrying value approximates the fair value.

Long-term debt

The fair value of our 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). As of August 31, 2023, the carrying amount of long-term debt, including the current portion, was $11,239.1 million, compared with an estimated fair value of $10,311.8 million. As of February 28, 2023, the carrying amount of long-term debt, including the current portion, was $11,296.0 million, compared with an estimated fair value of $10,236.0 million.

The carrying amounts of certain of our financial instruments, including cash and cash equivalents, accounts receivable, and accounts payable, approximate fair value as of August 31, 2023, and February 28, 2023, due to the relatively short maturity of these instruments.

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
	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
(in millions)
August 31, 2023
Assets:
Foreign currency contracts	$	—	$	334.8	$	—	$	334.8
Commodity derivative contracts	$	—	$	17.9	$	—	$	17.9
Liabilities:
Foreign currency contracts	$	—	$	12.3	$	—	$	12.3
Commodity derivative contracts	$	—	$	28.4	$	—	$	28.4

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	Fair Value Measurements Using
	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
(in millions)
February 28, 2023
Assets:
Foreign currency contracts	$	—	$	249.5	$	—	$	249.5
Commodity derivative contracts	$	—	$	25.8	$	—	$	25.8
November 2018 Canopy Warrants	$	—	$	0.2	$	—	$	0.2
Canopy Debt Securities	$	—	$	69.6	$	—	$	69.6
Liabilities:
Foreign currency contracts	$	—	$	17.2	$	—	$	17.2
Commodity derivative contracts	$	—	$	27.8	$	—	$	27.8

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
	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Losses
(in millions)
For the Six Months Ended August 31, 2023
Equity method investments (1)	$	97.8	$	2.6	$	—	$	135.8
For the Six Months Ended August 31, 2022
Equity method investments	$	634.8	$	—	$	—	$	1,060.3

(1)As of August 31, 2023, the carrying value of the Canopy Equity Method Investment exceeded the fair value (Level 1 fair value measurement). We evaluated and determined there was not an other-than-temporary impairment. Our conclusion was based primarily on the period of time for which the fair value had been less than the carrying value, including Canopy’s stock price recovery above our carrying value following quarter-end. We will continue to evaluate the Canopy Equity Method Investment for an other-than-temporary impairment.

Equity method investments

As of August 31, 2023, we evaluated certain equity method investments, made through our corporate venture capital function, and determined there were other-than-temporary impairments due to business underperformance. Investments with a carrying value of $14.9 million were written down to an estimated fair value of $2.6 million, resulting in an impairment of $12.3 million. These investments are part of the Corporate Operations and Other segment. This loss from impairment was included in income (loss) from unconsolidated investments within our consolidated results for the six months and three months ended August 31, 2023. The estimated fair value was based largely on observable prices for similar assets.

We evaluated the Canopy Equity Method Investment as of May 31, 2023, and determined there was an other-than-temporary impairment. Our conclusion was based on several contributing factors, including: (i) the fair value being less than the carrying value and the uncertainty surrounding Canopy’s stock price recovering in the

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near-term, (ii) Canopy recorded significant costs in its fourth quarter of fiscal 2023 results designed to align its Canadian cannabis operations and resources in response to continued unfavorable market trends, (iii) the substantial doubt about Canopy’s ability to continue as a going concern, as disclosed by Canopy, and (iv) Canopy’s identification of material misstatements in certain of its previously reported financial results related to sales in its BioSteel reporting unit that were accounted for incorrectly, including the recording of a goodwill impairment during its restated second quarter of fiscal 2023. As a result, the Canopy Equity Method Investment with a carrying value of $266.2 million was written down to its estimated fair value of $142.7 million, resulting in an impairment of $123.5 million. This loss from impairment was included in income (loss) from unconsolidated investments within our consolidated results for the six months ended August 31, 2023. The estimated fair value was determined based on the closing price of the underlying equity security as of May 31, 2023.

We evaluated the Canopy Equity Method Investment as of August 31, 2022, and determined there was an other-than-temporary impairment based on several contributing factors, including: (i) the period of time for which the fair value had been less than the carrying value and the uncertainty surrounding Canopy’s stock price recovering in the near-term, (ii) Canopy recording a significant impairment of goodwill related to its cannabis operations during its three months ended June 30, 2022, and (iii) the uncertainty of U.S. federal cannabis permissibility. As a result, the Canopy Equity Method Investment with a carrying value of $1,695.1 million was written down to its estimated fair value of $634.8 million, resulting in an impairment of $1,060.3 million. This loss from impairment was included in income (loss) from unconsolidated investments within our consolidated results for the six months and three months ended August 31, 2022. The estimated fair value was determined based on the closing price of the underlying equity security as of August 31, 2022.

5.    GOODWILL

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

	Beer		Wine and Spirits		Consolidated
(in millions)
Balance, February 28, 2022	$	5,120.7	$	2,741.7	$	7,862.4
Purchase accounting allocations (1)	—		26.3		26.3
Wine Divestiture	—		(24.5)		(24.5)
Foreign currency translation adjustments	68.2		(7.0)		61.2
Balance, February 28, 2023	5,188.9		2,736.5		7,925.4
Purchase accounting allocations (2)	—		4.2		4.2
Foreign currency translation adjustments	58.1		(2.1)		56.0
Balance, August 31, 2023	$	5,247.0	$	2,738.6	$	7,985.6

(1)Purchase accounting allocations associated with the acquisitions of Austin Cocktails, Lingua Franca, and My Favorite Neighbor, LLC.

(2)Preliminary purchase accounting allocation associated with the June 2023 acquisition of the Domaine Curry wine brand.

Divestitures

Craft Beer Divestitures

In June 2023, we completed the Craft Beer Divestitures. Prior to the Craft Beer Divestitures, we recorded the results of operations of such craft beer brands in the Beer segment.

Wine Divestiture

On October 6, 2022, we sold certain of our mainstream and premium wine brands and related inventory. The net cash proceeds from the Wine Divestiture were utilized primarily to reduce outstanding borrowings. Prior to the Wine Divestiture, we recorded the results of operations of these brands in the Wine and Spirits segment.

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Acquisitions

Austin Cocktails

In April 2022, we acquired the remaining 73% ownership interest in Austin Cocktails, which included a portfolio of small batch, RTD cocktails. This transaction primarily included the acquisition of goodwill and a trademark. In addition, the purchase price for Austin Cocktails includes an earn-out over five years based on performance. The results of operations of Austin Cocktails are reported in the Wine and Spirits segment and have been included in our consolidated results of operations from the date of acquisition.

Lingua Franca

In March 2022, we acquired the Lingua Franca business, including a collection of Oregon-based luxury wines, a vineyard, and a production facility. This transaction also included the acquisition of a trademark and inventory. In addition, the purchase price for Lingua Franca includes an earn-out over seven years based on performance. The results of operations of Lingua Franca are reported in the Wine and Spirits segment and have been included in our consolidated results of operations from the date of acquisition.

6.    INTANGIBLE ASSETS

The major components of intangible assets are as follows:

	August 31, 2023				February 28, 2023
	Gross Carrying Amount		Net Carrying Amount		Gross Carrying Amount		Net Carrying Amount
(in millions)
Amortizable intangible assets
Customer relationships	$	85.3	$	16.8	$	85.7	$	17.7
Other	20.4		—		20.8		—
Total	$	105.7	16.8		$	106.5	17.7
Nonamortizable intangible assets
Trademarks			2,717.7				2,710.4
Total intangible assets			$	2,734.5			$	2,728.1

We did not incur costs to renew or extend the term of acquired intangible assets for the six months and three months ended August 31, 2023, and August 31, 2022. Net carrying amount represents the gross carrying value net of accumulated amortization.

7.    EQUITY METHOD INVESTMENTS

Our equity method investments are as follows:

	August 31, 2023				February 28, 2023
	Carrying Value		Ownership Percentage		Carrying Value		Ownership Percentage
(in millions)
Canopy Equity Method Investment (1)	$	134.8	27.4	%	$	485.8	34.7	%
Other equity method investments	142.3		20%-50%		177.5		20%-50%
	$	277.1			$	663.3

(1)The fair value based on the closing price of the underlying equity security as of August 31, 2023, and February 28, 2023, was $97.8 million and $398.4 million, respectively.

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Canopy Equity Method Investment

We have an investment in Canopy, a provider of medical and adult-use cannabis products. The Canopy Equity Method Investment consists of 171.5 million Canopy common shares. Equity in earnings (losses) from the Canopy Equity Method Investment and related activities is determined by recording the effect of basis differences. Amounts included in our consolidated results of operations for each period are as follows:

	For the Six Months Ended August 31,				For the Three Months Ended August 31,
	2023		2022		2023		2022
(in millions)
Equity in earnings (losses) from Canopy and related activities	$	(231.8)	$	(815.7)	$	(12.0)	$	(650.7)

Plan to convert Canopy common stock ownership

In October 2022, we entered into a Consent Agreement with Canopy pursuant to which we have provided our consent, subject to certain conditions, to the Canopy Transaction. Canopy only holds non-voting and non-participating exchangeable shares of Canopy USA which are convertible into Class B shares of Canopy USA. A third-party investor holds 100% of the common shares of Canopy USA.

In connection with the Canopy Transaction, Canopy has proposed to amend its share capital to (i) create Exchangeable Shares and (ii) restate the rights of Canopy common shares to provide for their conversion into Exchangeable Shares through the Canopy Amendment. Canopy has stated its intention to hold a special meeting of its shareholders to consider the Canopy Amendment. We have entered into a voting support agreement with Canopy to vote in favor of the Canopy Amendment.

If the Canopy Transaction is completed and the Canopy Amendment is authorized by Canopy’s shareholders and adopted by Canopy, we intend, subject to a final decision in our sole discretion, to exercise our right to convert our Canopy common shares into Exchangeable Shares.

Assuming the completion of the Canopy Transaction and the transactions contemplated by the Consent Agreement and that we elect to convert our Canopy common shares into Exchangeable Shares:

•we intend to surrender our November 2018 Canopy Warrants to Canopy for cancellation;

•we will only have an interest in Exchangeable Shares, which are non-voting and non-participating securities, and our 2023 Canopy Promissory Note (for which we intend to negotiate an exchange of the principal amount for Exchangeable Shares, although neither we nor Canopy has any binding obligation to do so);

•we intend to terminate all legacy agreements and commercial arrangements between ourselves and Canopy, including the investor rights agreement but excluding the Consent Agreement and certain termination agreements;

•we will have no further governance rights in relation to Canopy, including rights to nominate members to the board of directors of Canopy, or approval rights related to certain transactions;

•all of our nominees will resign from the board of directors of Canopy; and

•as our investment in Canopy common shares makes up our Canopy Equity Method Investment, we expect to no longer apply the equity method to our investment in Canopy, which we expect to instead be accounted for at fair value with changes reported in income (loss) from unconsolidated investments within our consolidated results.

If we do not convert our Canopy common shares into Exchangeable Shares:

•Canopy and its subsidiaries will not be permitted to exercise any rights to acquire shares and interests in entities carrying on cannabis-related business in the U.S.;

•Canopy USA will be required to exercise its repurchase rights to acquire the interests in Canopy USA held by its third-party investors; and

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•we will continue to have all existing rights under our agreements with Canopy that predate the Consent Agreement, including governance rights in respect of Canopy (such as board nomination rights and approval rights in respect of certain transactions).

8.    BORROWINGS

Borrowings consist of the following:

	August 31, 2023						February 28, 2023
	Current		Long-term		Total		Total
(in millions)
Short-term borrowings
Commercial paper	$	467.4					$	1,165.3
	$	467.4					$	1,165.3
Long-term debt
Term loan credit facilities	$	—	$	—	$	—	$	799.2
Senior notes	549.2		10,667.2		11,216.4		10,470.6
Other	9.1		13.6		22.7		26.2
	$	558.3	$	10,680.8	$	11,239.1	$	11,296.0

Bank facilities

The Company, CB International, the Administrative Agent, and certain other lenders are parties to the 2022 Credit Agreement. The Company, the Administrative Agent, and certain lenders were also parties to two term credit agreements. In May 2023, we repaid the outstanding three-year term loan facility borrowings under our August 2022 Term Credit Agreement with proceeds from the May 2023 Senior Notes (see “Senior notes” below). In August 2023, we repaid the outstanding five-year term loan facility borrowings under our April 2022 Term Credit Agreement with proceeds from commercial paper borrowings.

In October 2022, the Company, CB International, the Administrative Agent, and certain other lenders agreed to amend the 2022 Credit Agreement. The October 2022 Credit Agreement Amendment revises certain defined terms and covenants and will become effective upon (i) the amendment by Canopy of its Articles of Incorporation, (ii) the conversion of our Canopy common shares into Exchangeable Shares, and (iii) the resignation of our nominees from the board of directors of Canopy.

As of August 31, 2023, information with respect to borrowings under the 2022 Credit Agreement is as follows:

	Outstanding borrowings		Interest rate		SOFR margin		Outstanding letters of credit		Remaining borrowing capacity (1)
(in millions)
2022 Credit Agreement
Revolving credit facility (2) (3)	$	—	—	%	—	%	$	11.5	$	1,770.5

(1)Net of outstanding revolving credit facility borrowings and outstanding letters of credit under the 2022 Credit Agreement and outstanding borrowings under our commercial paper program of $468.0 million (excluding unamortized discount) (see “Commercial paper program” below).

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

(3)We and/or CB International are the borrower under the $2,250.0 million revolving credit facility with a maturity date of April 14, 2027. Includes a sub-facility for letters of credit of up to $200.0 million.

Constellation Brands, Inc. Q2 FY 2024 Form 10-Q #WORTHREACHINGFOR    I    16

FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Table of Contents

We and our subsidiaries are subject to covenants that are contained in the 2022 Credit Agreement, including those restricting the incurrence of additional subsidiary 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 $2.25 billion of commercial paper. Our commercial paper program is backed by unused commitments under our revolving credit facility under our 2022 Credit Agreement. Accordingly, outstanding borrowings under our commercial paper program reduce the amount available under our revolving credit facility. As of August 31, 2023, we had $467.4 million of outstanding borrowings, net of unamortized discount, under our commercial paper program with a weighted average annual interest rate of 5.8% and a weighted average remaining term of nine days.

Senior notes

In May 2023, we issued $750.0 million aggregate principal amount of 4.90% senior notes due May 2033. Proceeds from this offering, net of discount and debt issuance costs, were $739.8 million. Interest on the 4.90% May 2023 Senior Notes is payable semiannually on May 1 and November 1 of each year, beginning November 1, 2023. The 4.90% May 2023 Senior Notes are redeemable, in whole or in part, at our option at any time prior to February 1, 2033, 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 25 basis points. On or after February 1, 2033, we may redeem the 4.90% May 2023 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 4.90% May 2023 Senior Notes are senior unsecured obligations which rank equally in right of payment to all of our existing and future senior unsecured indebtedness.

Debt payments

As of August 31, 2023, the required principal repayments under long-term debt obligations (excluding unamortized debt issuance costs and unamortized discounts of $59.1 million and $24.5 million, respectively) for the remaining six months of Fiscal 2024 and for each of the five succeeding fiscal years and thereafter are as follows:

(in millions)
Fiscal 2024	$	5.6
Fiscal 2025	956.6
Fiscal 2026	1,405.0
Fiscal 2027	603.8
Fiscal 2028	1,801.6