Item 8. Financial Statements and Supplementary Data

CONSTELLATION BRANDS, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2021

									Page
Management’s Annual Report on Internal Control Over Financial Reporting									55
Reports of Independent Registered Public Accounting Firm – KPMG LLP									56
Consolidated Balance Sheets									60
Consolidated Statements of Comprehensive Income (Loss)									61
Consolidated Statements of Changes in Stockholders’ Equity									62
Consolidated Statements of Cash Flows									63
Notes to Consolidated Financial Statements
			1.			Description of Business, Basis of Presentation, and Summary of Significant Accounting Policies			65
			2.			Acquisitions, Divestitures, and Business Transformation			70
			3.			Inventories			73
			4.			Prepaid Expenses and Other			74
			5.			Property, Plant, and Equipment			74
			6.			Derivative Instruments			75
			7.			Fair Value of Financial Instruments			78
			8.			Goodwill			84
			9.			Intangible Assets			84
			10.			Equity Method Investments			85
			11.			Other Accrued Expenses and Liabilities			88
			12.			Borrowings			88
			13.			Income Taxes			94
			14.			Deferred Income Taxes and Other Liabilities			97
			15.			Leases			98
			16.			Commitments and Contingencies			100
			17.			Stockholders' Equity			101
			18.			Stock-Based Employee Compensation			103
			19.			Net Income (Loss) Per Common Share Attributable to CBI			107
			20.			Accumulated Other Comprehensive Income (Loss)			108
			21.			Significant Customers and Concentration of Credit Risk			109
			22.			Business Segment Information			110
			23.			Subsequent Event			114
			24.			Selected Quarterly Financial Information (unaudited)			114

Constellation Brands, Inc. FY 2021 Form 10-K			#WORTHREACHINGFOR I 54

PART II			ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA			Table of Contents

Management’s Annual Report on Internal Control Over Financial Reporting

Management of Constellation Brands, Inc. and subsidiaries (the “Company”) is responsible for establishing and maintaining an adequate system of internal control over financial reporting. This system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Further, because of changes in conditions, effectiveness of internal controls over financial reporting may vary over time.

Management conducted an evaluation of the effectiveness of the system of internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. Based on that evaluation, management concluded that the Company’s internal control over financial reporting was effective as of February 28, 2021.

The effectiveness of the Company’s internal control over financial reporting has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Constellation Brands, Inc. FY 2021 Form 10-K			#WORTHREACHINGFOR I 55

PART II			ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA			Table of Contents

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Constellation Brands, Inc.:

Opinion on Internal Control Over Financial Reporting

We have audited Constellation Brands, Inc. and subsidiaries’ (the Company) internal control over financial reporting as of February 28, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of February 28, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of February 28, 2021 and February 29, 2020, the related consolidated statements of comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the fiscal years in the three-year period ended February 28, 2021, and the related notes (collectively, the consolidated financial statements), and our report dated April 20, 2021 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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PART II			ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA			Table of Contents

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP

Rochester, New York

April 20, 2021

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PART II			ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA			Table of Contents

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Constellation Brands, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Constellation Brands, Inc. and subsidiaries (the Company) as of February 28, 2021 and February 29, 2020, the related consolidated statements of comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the fiscal years in the three-year period ended February 28, 2021, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of February 28, 2021 and February 29, 2020, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended February 28, 2021, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of February 28, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated April 20, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting*.*

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Fair value measurement of the Canopy warrants

As discussed in Notes 1 and 7 to the consolidated financial statements, the Company established policies for measuring the fair value of financial instruments, including the November 2018 Canopy Warrants. As of February 28, 2021, the recorded balance of the Company’s investment in the November 2018 Canopy Warrants was $1,639.7 million. The Company uses option pricing models to estimate the fair value of the November 2018 Canopy Warrants using various market-based inputs.

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PART II			ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA			Table of Contents

We identified the evaluation of the fair value measurement of the November 2018 Canopy Warrants as a critical audit matter. Specifically, a high degree of subjective auditor judgment, including the involvement of valuation professionals with specialized skills and knowledge, was required in evaluating the determination of the expected volatility inputs used in the option pricing models for the November 2018 Canopy Warrants. Historical, implied, and peer group volatility levels provide a range of possible expected volatility inputs and the fair value estimates for the November 2018 Canopy Warrants were sensitive to the expected volatility inputs.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the fair value measurement of the November 2018 Canopy Warrants. This included controls related to the evaluation of observable market information used in the determination of the expected volatility inputs. We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the expected volatility inputs by comparing them against a volatility range that was independently developed in consideration of historical, implied, and peer group volatility information and in developing an estimate of the November 2018 Canopy Warrants’ fair value using the independently-developed volatility range and comparing it to the value determined by the Company.

Unrecognized tax benefits

As discussed in Notes 1 and 13 to the consolidated financial statements, the Company recognizes a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination. The Company has recorded unrecognized tax benefits of $236.1 million as of February 28, 2021.

We identified the evaluation of certain of the Company’s unrecognized tax benefits as a critical audit matter. Specifically, complex auditor judgment, including the involvement of tax and valuation professionals with specialized skills and knowledge, was required in evaluating the Company’s interpretation of tax law and its estimate of the ultimate resolution of its tax positions.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s process to evaluate uncertain tax positions. This included controls related to the interpretation of tax law, its application in the liability estimation process, and the review of activity that could result in changes to the Company’s unrecognized tax benefits. We involved tax professionals with specialized skills and knowledge, who assisted in evaluating the Company’s interpretation of tax law and tax authority rulings and in performing an independent assessment of certain of the Company’s tax positions and the amount of unrecognized tax benefit, if any, and comparing the results to the Company’s assessment. We also involved valuation professionals with specialized skills and knowledge, who assisted in assessing certain transfer pricing studies for compliance with applicable laws and regulations.

/s/ KPMG LLP

We have served as the Company’s auditor since 2002.

Rochester, New York

April 20, 2021

Constellation Brands, Inc. FY 2021 Form 10-K			#WORTHREACHINGFOR I 59

PART II			ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA			Table of Contents

CONSTELLATION BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share data)

			February 28, 2021						February 29, 2020
ASSETS
Current assets:
Cash and cash equivalents			$	460.6					$	81.4
Accounts receivable			785.3						864.8
Inventories			1,291.1						1,373.6
Prepaid expenses and other			507.5						535.8
Assets held for sale - current			—						628.5
Total current assets			3,044.5						3,484.1
Property, plant, and equipment			5,821.6						5,333.0
Goodwill			7,793.5						7,757.1
Intangible assets			2,732.1						2,718.9
Equity method investments			2,788.4						3,093.9
Securities measured at fair value			1,818.1						1,117.1
Deferred income taxes			2,492.5						2,656.3
Assets held for sale			—						552.1
Other assets			614.1						610.7
Total assets			$	27,104.8					$	27,323.2
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings			$	—					$	238.9
Current maturities of long-term debt			29.2						734.9
Accounts payable			460.0						557.6
Other accrued expenses and liabilities			779.9						780.4
Total current liabilities			1,269.1						2,311.8
Long-term debt, less current maturities			10,413.1						11,210.8
Deferred income taxes and other liabilities			1,493.5						1,326.3
Total liabilities			13,175.7						14,848.9
Commitments and contingencies (Note 17)
CBI stockholders’ equity:
Preferred Stock, $0.01 par value – Authorized, 1,000,000 shares; Issued, none			—						—
Class A Common Stock, $0.01 par value – Authorized, 322,000,000 shares; Issued, 187,204,280 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, 28,270,288 shares and 28,300,206 shares, respectively			0.3						0.3
Class 1 Common Stock, $0.01 par value – Authorized, 25,000,000 shares; Issued, 612,936 shares and 1,692,227 shares, respectively			—						—
Additional paid-in capital			1,604.2						1,514.6
Retained earnings			15,117.8						13,695.3
Accumulated other comprehensive income (loss)			(335.5)						(266.3)
			16,388.7						14,945.8
Less: Treasury stock –
Class A Common Stock, at cost, 17,070,550 shares and 18,256,826 shares, respectively			(2,787.6)						(2,811.8)
Class B Convertible Common Stock, at cost, 5,005,800 shares			(2.2)						(2.2)
			(2,789.8)						(2,814.0)
Total CBI stockholders’ equity			13,598.9						12,131.8
Noncontrolling interests			330.2						342.5
Total stockholders’ equity			13,929.1						12,474.3
Total liabilities and stockholders’ equity			$	27,104.8					$	27,323.2

The accompanying notes are an integral part of these statements.

Constellation Brands, Inc. FY 2021 Form 10-K			#WORTHREACHINGFOR I 60

PART II			ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA			Table of Contents

CONSTELLATION BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in millions, except per share data)

			For the Years Ended
			February 28, 2021						February 29, 2020						February 28, 2019
Sales			$	9,355.7					$	9,113.0					$	8,884.3
Excise taxes			(740.8)						(769.5)						(768.3)
Net sales			8,614.9						8,343.5						8,116.0
Cost of product sold			(4,148.9)						(4,191.6)						(4,035.7)
Gross profit			4,466.0						4,151.9						4,080.3
Selling, general, and administrative expenses			(1,665.1)						(1,621.8)						(1,668.1)
Impairment of assets held for sale			(24.0)						(449.7)						—
Gain (loss) on sale of business			14.2						74.1						—
Operating income (loss)			2,791.1						2,154.5						2,412.2
Income (loss) from unconsolidated investments			150.3						(2,668.6)						2,101.6
Interest expense			(385.7)						(428.7)						(367.1)
Loss on extinguishment of debt			(12.8)						(2.4)						(1.7)
Income (loss) before income taxes			2,542.9						(945.2)						4,145.0
(Provision for) benefit from income taxes			(511.1)						966.6						(685.9)
Net income (loss)			2,031.8						21.4						3,459.1
Net income (loss) attributable to noncontrolling interests			(33.8)						(33.2)						(23.2)
Net income (loss) attributable to CBI			$	1,998.0					$	(11.8)					$	3,435.9
Net income (loss) per common share attributable to CBI:
Basic – Class A Common Stock			$	10.44					$	(0.07)					$	18.24
Basic – Class B Convertible Common Stock			$	9.48					$	(0.07)					$	16.57
Diluted – Class A Common Stock			$	10.23					$	(0.07)					$	17.57
Diluted – Class B Convertible Common Stock			$	9.42					$	(0.07)					$	16.21
Weighted average common shares outstanding:
Basic – Class A Common Stock			170.239						168.329						167.249
Basic – Class B Convertible Common Stock			23.280						23.313						23.321
Diluted – Class A Common Stock			195.308						168.329						195.532
Diluted – Class B Convertible Common Stock			23.280						23.313						23.321
Cash dividends declared per common share:
Class A Common Stock			$	3.00					$	3.00					$	2.96
Class B Convertible Common Stock			$	2.72					$	2.72					$	2.68

Comprehensive income (loss):
Net income (loss)			$	2,031.8					$	21.4					$	3,459.1
Other comprehensive income (loss), net of income tax effect:
Foreign currency translation adjustments			(56.0)						60.8						(196.8)
Unrealized gain (loss) on cash flow hedges			(20.9)						40.4						11.4
Unrealized gain (loss) on available-for-sale debt securities			—						—						2.5
Pension/postretirement adjustments			(1.6)						(0.6)						0.5
Share of other comprehensive income (loss) of equity method investments			(1.8)						(10.1)						29.6
Other comprehensive income (loss), net of income tax effect			(80.3)						90.5						(152.8)
Comprehensive income (loss)			1,951.5						111.9						3,306.3
Comprehensive (income) loss attributable to noncontrolling interests			(22.7)						(36.1)						(21.4)
Comprehensive income (loss) attributable to CBI			$	1,928.8					$	75.8					$	3,284.9

The accompanying notes are an integral part of these statements.

Constellation Brands, Inc. FY 2021 Form 10-K			#WORTHREACHINGFOR I 61

PART II			ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA			Table of Contents

CONSTELLATION BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in millions)

			Common 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, 2018			$	2.6					$	0.3					$	2,825.3					$	9,157.2					$	(202.9)					$	(3,807.4)					$	16.6					$	7,991.7
Cumulative effect of change in accounting principle			—						—						—						2,242.0						—						—						—						2,242.0
Comprehensive income (loss):
Net income (loss)			—						—						—						3,435.9						—						—						23.2						3,459.1
Other comprehensive income (loss), net of income tax effect			—						—						—						—						(151.0)						—						(1.8)						(152.8)
Comprehensive income (loss)																																													3,306.3
Retirement of treasury shares			(0.7)						—						(1,522.3)						—						—						1,523.0						—						—
Repurchase of shares			—						—						—						—						—						(504.3)						—						(504.3)
Dividends declared			—						—						—						(558.9)						—						—						—						(558.9)
Conversion of long-term debt to noncontrolling equity interest			—						—						—						—						—						—						248.2						248.2
Shares issued under equity compensation plans			—						—						45.2						—						—						4.4						—						49.6
Stock-based compensation			—						—						62.6						—						—						—						—						62.6
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
Comprehensive income (loss):
Net income (loss)			—						—						—						(11.8)						—						—						33.2						21.4
Other comprehensive income (loss), net of income tax effect			—						—						—						—						87.6						—						2.9						90.5
Comprehensive income (loss)																																													111.9
Repurchase of shares			—						—						—						—						—						(50.0)						—						(50.0)
Dividends declared			—						—						—						(569.1)						—						—						—						(569.1)
Initial recognition of non-controlling interest			—						—						—						—						—						—						20.2						20.2
Shares issued under equity compensation plans			—						—						43.8						—						—						20.3						—						64.1
Stock-based compensation			—						—						60.0						—						—						—						—						60.0
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):
Net income (loss)			—						—						—						1,998.0						—						—						33.8						2,031.8
Other comprehensive income (loss), net of income tax effect			—						—						—						—						(69.2)						—						(11.1)						(80.3)
Comprehensive income (loss)																																													1,951.5
Dividends declared			—						—						—						(575.5)						—						—						—						(575.5)
Noncontrolling interest distributions			—						—						—						—						—						—						(35.0)						(35.0)
Shares issued under equity compensation plans			—						—						27.0						—						—						24.2						—						51.2
Stock-based compensation			—						—						62.6						—						—						—						—						62.6
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

The accompanying notes are an integral part of these statements.

Constellation Brands, Inc. FY 2021 Form 10-K			#WORTHREACHINGFOR I 62

PART II			ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA			Table of Contents

CONSTELLATION BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions)
			For the Years Ended
			February 28, 2021						February 29, 2020						February 28, 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)			$	2,031.8					$	21.4					$	3,459.1
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Unrealized net (gain) loss on securities measured at fair value			(802.0)						2,126.4						(1,971.2)
Deferred tax provision (benefit)			336.4						(1,153.7)						426.9
Depreciation			293.8						326.5						333.1
Stock-based compensation			63.0						60.4						64.1
Equity in (earnings) losses of equity method investees and related activities, net of distributed earnings			673.4						560.8						13.5
Noncash lease expense			83.3						88.3						—
Impairment and amortization of intangible assets			11.3						16.7						114.0
Amortization of debt issuance costs and loss on extinguishment of debt			24.3						16.1						29.4
Net (gain) loss on sale of unconsolidated investment			—						(0.4)						(99.8)
Impairment of assets held for sale			24.0						449.7						—
(Gain) loss on sale of business			(14.2)						(74.1)						—
Loss on inventory and related contracts associated with business optimization			25.8						123.0						—
Loss on settlement of treasury lock contracts			(29.3)						—						—
Net income tax benefit related to the Tax Cuts and Jobs Act			—						—						(37.6)
Change in operating assets and liabilities, net of effects from purchase and sale of business:
Accounts receivable			59.6						(22.0)						(71.9)
Inventories			193.7						(29.5)						(61.9)
Prepaid expenses and other current assets			65.7						8.1						(103.0)
Accounts payable			(95.7)						16.8						21.4
Other accrued expenses and liabilities			(75.0)						(58.5)						(22.1)
Other			(63.4)						75.1						152.3
Total adjustments			774.7						2,529.7						(1,212.8)
Net cash provided by (used in) operating activities			2,806.5						2,551.1						2,246.3
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant, and equipment			(864.6)						(726.5)						(886.3)
Purchase of business, net of cash acquired			(19.9)						(36.2)						(45.6)
Investments in equity method investees and securities			(222.4)						(48.2)						(4,081.5)
Proceeds from sale of assets			18.9						8.3						72.3
Proceeds from sale of unconsolidated investment			—						1.5						110.2
Proceeds from sale of business			999.5						269.7						—
Other investing activities			0.6						0.4						(0.9)
Net cash provided by (used in) investing activities			(87.9)						(531.0)						(4,831.8)

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CONSTELLATION BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions)
			For the Years Ended
			February 28, 2021						February 29, 2020						February 28, 2019
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt			1,194.7						1,291.3						3,657.6
Principal payments of long-term debt			(2,721.3)						(2,195.3)						(62.8)
Net proceeds from (repayments of) short-term borrowings			(238.9)						(552.6)						45.5
Dividends paid			(575.0)						(569.2)						(557.7)
Purchase of treasury stock			—						(50.0)						(504.3)
Proceeds from shares issued under equity compensation plans			58.9						78.2						63.2
Payments of minimum tax withholdings on stock-based payment awards			(7.7)						(14.3)						(13.6)
Payments of debt issuance, debt extinguishment, and other financing costs			(22.3)						(8.2)						(34.6)
Distributions to noncontrolling interests			(35.0)						—						—
Payment of contingent consideration			—						(11.3)						—
Net cash provided by (used in) financing activities			(2,346.6)						(2,031.4)						2,593.3
Effect of exchange rate changes on cash and cash equivalents			7.2						(0.9)						(4.5)
Net increase (decrease) in cash and cash equivalents			379.2						(12.2)						3.3
Cash and cash equivalents, beginning of year			81.4						93.6						90.3
Cash and cash equivalents, end of year			$	460.6					$	81.4					$	93.6
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year
Interest, net of interest capitalized			$	418.5					$	448.9					$	324.8
Income taxes, net of refunds received			$	189.7					$	85.3					$	186.2
Noncash investing and financing activities
Additions to property, plant, and equipment			$	101.1					$	70.4					$	141.7
Conversion of long-term debt to noncontrolling equity interest			$	—					$	—					$	248.2

The accompanying notes are an integral part of these statements.

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CONSTELLATION BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2021

1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of business

Constellation Brands, Inc. and its subsidiaries operate primarily in the beverage alcohol industry. We are an international beverage alcohol company with a powerful portfolio of consumer-connected, high-end imported beer brands, and higher-end wine and spirits brands.

Basis of presentation

Principles of consolidation

Our consolidated financial statements include our accounts and our majority-owned and controlled domestic and foreign subsidiaries. In addition, we have an equally-owned joint venture with Owens-Illinois. The joint venture owns and operates a state-of-the-art glass production plant which provides bottles exclusively for the Nava Brewery. We have determined that we are the primary beneficiary of this variable interest entity and accordingly, the results of operations of the joint venture are reported in the Beer segment and are included in our consolidated results of operations. All intercompany accounts and transactions are eliminated in consolidation.

Equity method investments

If we are not required to consolidate our investment in another entity, we use the equity method when we (i) can exercise significant influence over the other entity and (ii) hold common stock and/or in-substance common stock of the other entity. Under the equity method, investments are carried at cost, plus or minus our equity in the increases and decreases in the investee’s net assets after the date of acquisition. We monitor our equity method investments for factors indicating other-than-temporary impairment. Dividends received from the investee reduce the carrying amount of the investment.

Management’s use of estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Summary of significant accounting policies

Revenue recognition

Our revenue (referred to in our financial statements as “sales”) consists primarily of the sale of beer, wine, and spirits domestically in the U.S. Sales of products are for cash or otherwise agreed-upon credit terms. Our payment terms vary by location and customer, however, the time period between when revenue is recognized and when payment is due is not significant. Our customers consist primarily of wholesale distributors. Our revenue generating activities have a single performance obligation and are recognized at the point in time when control transfers and our obligation has been fulfilled, which is when the related goods are shipped or delivered to the customer, depending upon the method of distribution, and shipping terms. We have elected to treat shipping as a fulfillment activity. Revenue is measured as the amount of consideration we expect to receive in exchange for the sale of our product. Our sales terms do not allow for a right of return except for matters related to any manufacturing defects on our part. Amounts billed to customers for shipping and handling are included in sales.

As noted, the majority of our revenues are generated from the domestic sale of beer, wine, and spirits to wholesale distributors in the U.S. Our other revenue generating activities include the export of certain of our products to select international markets, as well as the sale of our products through state alcohol beverage control agencies and on-premise, retail locations in certain markets. We have evaluated these other revenue generating activities under the disaggregation disclosure criteria outlined within the amended guidance and concluded that

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these other revenue generating activities are immaterial for separate disclosure. See Note 22 for disclosure of net sales by product type.

Sales reflect reductions attributable to consideration given to customers in various customer incentive programs, including pricing discounts on single transactions, volume discounts, promotional and advertising allowances, coupons, and rebates. This variable consideration is recognized as a reduction of the transaction price based upon expected amounts at the time revenue for the corresponding product sale is recognized. For example, customer promotional discount programs are entered into with certain distributors for certain periods of time. The amount ultimately reimbursed to distributors is determined based upon agreed-upon promotional discounts which are applied to distributors’ sales to retailers. Other common forms of variable consideration include volume rebates for meeting established sales targets, and coupons and mail-in rebates offered to the end consumer. The determination of the reduction of the transaction price for variable consideration requires that we make certain estimates and assumptions that affect the timing and amounts of revenue and liabilities recognized. We estimate this variable consideration by taking into account factors such as the nature of the promotional activity, historical information, and current trends, availability of actual results and expectations of customer and consumer behavior.

Excise taxes remitted to tax authorities are government-imposed excise taxes on our beverage alcohol products. Excise taxes are shown on a separate line item as a reduction of sales and are recognized in our results of operations when the related product sale is recognized. Excise taxes are recognized as a current liability in other accrued expenses and liabilities, with the liability subsequently reduced when the taxes are remitted to the tax authority.

Cost of product sold

The types of costs included in cost of product sold are raw materials, packaging materials, manufacturing costs, plant administrative support and overheads, and freight and warehouse costs (including distribution network costs). Distribution network costs include inbound freight charges and outbound shipping and handling costs, purchasing and receiving costs, inspection costs, warehousing and internal transfer costs.

Selling, general, and administrative expenses

The types of costs included in selling, general, and administrative expenses consist predominately of advertising and non-manufacturing administrative and overhead costs. Distribution network costs are included in cost of product sold. We expense advertising costs as incurred, shown, or distributed. Advertising expense for the years ended February 28, 2021, February 29, 2020, and February 28, 2019, was $805.0 million, $769.5 million, and $700.8 million, respectively.

Foreign currency translation

The functional currency of our foreign subsidiaries is generally the respective local currency. The translation from the applicable foreign currencies to U.S. dollars is performed for balance sheet accounts using exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted average exchange rate for the period. The resulting translation adjustments are recognized as a component of AOCI. Gains or losses resulting from foreign currency denominated transactions are included in selling, general, and administrative expenses.

Cash and cash equivalents

Cash equivalents consist of highly liquid investments with an original maturity when purchased of three months or less and are stated at cost, which approximates fair value.

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.

Bulk wine inventories are included as in-process inventories within current assets, in accordance with the general practices of the wine industry, although a portion of such inventories may be aged for periods greater than one year. A substantial portion of barreled whiskey and brandy will not be sold within one year because of the

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duration of the aging process. All barreled whiskey and brandy are classified as in-process inventories and are included in current assets, in accordance with industry practice. Warehousing, insurance, value added taxes, and other carrying charges applicable to barreled whiskey and brandy held for aging are included in inventory costs.

We assess the valuation of our inventories and reduce the carrying value of those inventories that are obsolete or in excess of our forecasted usage to their estimated net realizable value based on analyses and assumptions including, but not limited to, historical usage, future demand, and market requirements.

Property, plant, and equipment

Property, plant, and equipment is stated at cost. Major additions and improvements are recognized as an increase to the property accounts, while maintenance and repairs are expensed as incurred. The cost of properties sold or otherwise disposed of and the related accumulated depreciation are eliminated from the balance sheet accounts at the time of disposal and resulting gains and losses are included as a component of operating income.

Interest incurred relating to expansion, construction, and optimization of facilities is capitalized to construction in progress. We cease the capitalization of interest when construction activities are substantially completed and the facility and related assets are available for their intended use. At this point, construction in progress is transferred to the appropriate asset class.

Depreciation

Depreciation is computed primarily using the straight-line method over the following estimated useful lives:

			Years
Land improvements			15 to 32
Vineyards			16 to 26
Buildings and improvements			10 to 50
Machinery and equipment			3 to 35
Motor vehicles			3 to 8

Derivative instruments

We enter into derivative instruments to manage our exposure to fluctuations in foreign currency exchange rates, commodity prices, and interest rates. We enter into derivatives for risk management purposes only, including derivatives designated in hedge accounting relationships as well as those derivatives utilized as economic hedges. We do not enter into derivatives for trading or speculative purposes. We recognize all derivatives as either assets or liabilities and measure those instruments at estimated fair value (see Notes 6 and 7). We present our derivative positions gross on our balance sheets.

The change in the fair value of outstanding cash flow hedges is deferred in stockholders’ equity as a component of AOCI. For all periods presented herein, gains or losses deferred in stockholders’ equity as a component of AOCI are recognized in our results of operations in the same period in which the hedged items are recognized and on the same financial statement line item as the hedged items.

Changes in fair values for derivative instruments not designated in a hedge accounting relationship are recognized directly in our results of operations each period and on the same financial statement line item as the hedged item. For purposes of measuring segment operating performance, the net gain (loss) from the changes in fair value of our undesignated commodity derivative contracts, prior to settlement, is reported outside of segment operating results until such time that the underlying exposure is recognized in the segment operating results. Upon 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 our operating segment results to reflect the economic effects of the commodity derivative contracts without the resulting unrealized mark to fair value volatility.

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Cash flows from the settlement of derivatives, including both economic hedges and those designated in hedge accounting relationships, appear on our statements of cash flows in the same categories as the cash flows of the hedged items.

Fair value of financial instruments

We calculate the estimated fair value of financial instruments using quoted market prices whenever available. When quoted market prices are not available, we use standard pricing models for various types of financial instruments (such as forwards, options, swaps, and convertible debt) which take into account the present value of estimated future cash flows (see Note 7).

Goodwill and other intangible assets

Goodwill is allocated to the reporting unit in which the business that created the goodwill resides. A reporting unit is an operating segment, or a business unit one level below that operating segment, for which discrete financial information is prepared and regularly reviewed by segment management. We review our goodwill and indefinite-lived intangible assets annually for impairment, or sooner, if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. We use January 1 as our annual impairment test measurement date. Indefinite-lived intangible assets consist principally of trademarks. Intangible assets determined to have a finite life, primarily customer relationships, are amortized over their estimated useful lives and are subject to review for impairment when events or circumstances indicate that the carrying amount of an asset may not be recoverable. Note 9 provides a summary of intangible assets segregated between amortizable and nonamortizable amounts.

Income taxes

We use the asset and liability method of accounting for income taxes. This method accounts for deferred income taxes by applying statutory rates in effect at the balance sheet date to the difference between the financial reporting and tax bases of assets and liabilities. Certain income earned by foreign subsidiaries, GILTI, is subject to U.S. tax. We treat the tax effect of GILTI as a current period tax expense when incurred. We provide deferred income taxes, consisting primarily of foreign withholding and state taxes, on all applicable unremitted earnings of our foreign subsidiaries. Interest and penalties are recognized as a component of (provision for) benefit from income taxes.

We recognize a tax benefit from an uncertain tax position when it is more likely than not the position will be sustained upon examination. We measure and recognize the tax benefit from such a position based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the unrecognized tax benefit liabilities. In addition, changes in existing tax laws or rates could significantly change our current estimate of our unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which they are determined. Changes in current estimates, if significant, could have a material adverse impact on our financial statements.

Leases

We recognize right-of-use assets and lease liabilities on our balance sheet in accordance with the FASB guidance for accounting for leases. We assess service arrangements to determine if an asset is explicitly or implicitly specified in the agreement and if we have the right to control the use of the identified asset.

The right-of-use asset and lease liability are initially measured at the present value of future lease payments, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, our secured incremental borrowing rate. The incremental borrowing rates are determined using a portfolio approach based on publicly available information in connection with our unsecured borrowing rates. We elected to recognize expenses for leases with a term of 12 months or less on a straight-line basis over the lease term and not to recognize these short-term leases on the balance sheet.

The right-of-use asset and lease liability are calculated including options to extend or to terminate the lease when we determine that it is reasonably certain that we will exercise those options. In making that

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determination, we consider various existing economic and market factors, business strategies as well as the nature, length, and terms of the agreement. Based on our evaluation using these factors, we concluded that the exercise of renewal options or early termination options would not be reasonably certain in determining the lease term at commencement for leases we currently have in place. Assumptions made at the commencement date are re-evaluated upon occurrence of certain events such as a lease modification.

Certain of our contractual arrangements may contain both lease and non-lease components. We elected to measure the lease liability by combining the lease and non-lease components as a single lease component for all asset classes.

Certain of our leases include variable lease payments, including payments that depend on an index or rate, as well as variable payments for items such as raw materials, labor, property taxes, insurance, maintenance, and other operating expenses associated with leased assets. Certain grape purchasing arrangements include variable payments based on actual tonnage and price of grapes. In addition, certain third-party logistics arrangements include variable payments that vary depending on throughput. Such variable lease payments are excluded from the calculation of the right-of-use asset and the lease liability and are recognized in the period in which the obligation is incurred.

Indemnification liabilities

We have indemnified respective parties against certain liabilities that may arise in connection with certain acquisitions and divestitures. Indemnification liabilities are recognized when probable and estimable and included in deferred income taxes and other liabilities (see Note 16).

Stock-based employee compensation

We have two stock-based employee compensation plans (see Note 18). We apply grant date fair-value-based measurement methods in accounting for our stock-based payment arrangements and recognize all costs resulting from stock-based payment transactions, net of expected forfeitures, ratably over the requisite service period. Stock-based awards are subject to specific vesting conditions, generally time vesting, or upon retirement, disability, or death of the employee (as defined by the plan), if earlier. For awards granted to retirement-eligible employees, we recognize compensation expense ratably over the period from the date of grant to the date of retirement-eligibility.

Net income (loss) per common share attributable to CBI

We have two classes of common stock with a material number of shares outstanding: Class A Common Stock and Class B Convertible Common Stock (see Note 17). In addition, we have another class of common stock with an immaterial number of shares outstanding: Class 1 Common Stock (see Note 17). If we pay a cash dividend on Class B Convertible Common Stock, each share of Class A Common Stock will receive an amount at least ten percent greater than the amount of the cash dividend per share paid on Class B Convertible Common Stock. Class B Convertible Common Stock shares are convertible into shares of Class A Common Stock on a one-to-one basis at any time at the option of the holder.

We use the two-class method for the computation and presentation of net income (loss) per common share attributable to CBI (hereafter referred to as “net income (loss) per common share”) (see Note 19). The two-class method is an earnings allocation formula that calculates basic and diluted net income (loss) per common share for each class of common stock separately based on dividends declared and participation rights in undistributed earnings as if all such earnings had been distributed during the period. Under the two-class method, Class A Common Stock is assumed to receive a ten percent greater participation in undistributed earnings (losses) than Class B Convertible Common Stock, in accordance with the respective minimum dividend rights of each class of stock.

Net income (loss) per common share – basic excludes the effect of common stock equivalents and is computed using the two-class method. Net income (loss) per common share – diluted for Class A Common Stock reflects the potential dilution that could result if securities or other contracts to issue common stock were exercised or converted into common stock. Net income (loss) per common share – diluted for Class A Common Stock is computed using the more dilutive of the if-converted or two-class method. Net income (loss) per common

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share – diluted for Class A Common Stock is computed using the if-converted method for the years ended February 28, 2021 and February 28, 2019, 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 year ended February 29, 2020, net income (loss) per common share - diluted for Class A Common Stock is computed using the two-class method. Net income (loss) per common share – diluted for Class B Convertible Common Stock is computed using the two-class method and does not assume conversion of Class B Convertible Common Stock into shares of Class A Common Stock.

2. ACQUISITIONS, DIVESTITURES, AND BUSINESS TRANSFORMATION

Acquisitions

Copper & Kings

In September 2020, we acquired the remaining ownership interest in Copper & Kings American Brandy Company. This acquisition included a collection of traditional and craft batch-distilled American brandies and other select spirits. The transaction primarily included the acquisition of inventory and property, plant, and equipment. The results of operations of Copper & 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 which strengthens our position in the direct-to-consumer and 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 Tennessee-based 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 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 year ended February 29, 2020, 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.

Other acquisitions

During the year ended February 28, 2019, we completed the acquisitions of other businesses, including the Four Corners business, which included a portfolio of high-quality, dynamic, and bicultural, Texas-based craft beers, and a business in Italy, which provided additional processing and sourcing capabilities for our Italian wine portfolio. The purchase price for the Four Corners acquisition was primarily allocated to goodwill, property, plant, and equipment, and trademarks, plus an earn-out over five years based on the performance of the brands. The purchase price for the acquired business in Italy was primarily allocated to a production facility, vineyards, and inventory. The results of operations of these acquired businesses are reported in the respective segment and have been included in our consolidated results of operations from their respective date of acquisition.

Divestitures

Paul Masson Divestiture

On January 12, 2021, we sold the Paul Masson Grande Amber Brandy brand, related inventory, and interests in certain contracts. We received cash proceeds of $267.4 million, subject to certain post-closing adjustments. The net cash proceeds were used for general corporate purposes. Prior to the Paul Masson

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Divestiture, we recorded the results of operations of our Paul Masson Grande Amber Brandy business in the Wine and Spirits segment. In connection with the Paul Masson Divestiture, we entered into a transition services agreement with Sazerac Company whereby our retained Mission Bell facility will provide certain bulk wine processing services at market rates for a period of up to three years. The following table summarizes the net gain recognized in connection with this divestiture for the year ended February 28, 2021:

(in millions)
Cash received from buyer			$	267.4
Net assets sold			(201.3)
Contract termination			(4.0)
Direct costs to sell			(3.2)
Gain on sale of business			$	58.9

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 net cash proceeds of $538.4 million, from the Wine and Spirits Divestiture, subject to certain post-closing adjustments. 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.

On January 5, 2021, in a separate, but related transaction with the same buyer, Gallo, we also sold the New Zealand-based Nobilo Wine brand and certain related assets. We received cash proceeds of $129.0 million, from the Nobilo Wine Divestiture, subject to certain post-closing adjustments.

In connection with the Wine and Spirits Divestitures, we entered into certain transition services agreements with Gallo whereby we provide certain cellar, package, and storage services primarily at Mission Bell. We recorded a $13.0 million liability related to the unfavorable transition services agreements, which was included in the net loss on sale of business and is being amortized over the expected term of the contracts to selling, general, and administrative expenses both within our consolidated results of operations.

The cash proceeds from the Wine and Spirits Divestitures were utilized to repay the 3.75% May 2013 Senior Notes (as defined in Note 12) and for other general corporate purposes. Prior to the Wine and Spirits Divestitures, we recorded the results of operations for this portion of our business in the Wine and Spirits segment. The following table summarizes the net loss recognized in connection with these divestitures for the year ended February 28, 2021:

(in millions)
Cash received from buyer			$	667.4
Net assets sold			(671.7)
Transition services agreements			(13.0)
Direct costs to sell			(8.1)
AOCI reclassification adjustments, primarily foreign currency translation			(5.1)
Other			(5.2)
Loss on sale of business			$	(35.7)

Concentrate Business Divestiture

On December 29, 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 Concentrate Business Divestiture, we recorded the results of operations of our concentrates and high-color concentrate business in the Wine and Spirits segment.

Ballast Point Divestiture

On March 2, 2020, we sold the Ballast Point craft beer business, including a number of its associated production facilities and brewpubs. Prior to the Ballast Point Divestiture, we recorded the results of operations of

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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.

Black Velvet Divestiture

On November 1, 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. We received cash proceeds of $266.7 million, net of post-closing adjustments which were utilized to partially repay the 2.00% November 2017 Senior Notes (as defined in Note 12). In total, we recognized a $70.5 million net gain associated with the Black Velvet Divestiture, with $(3.6) million and $74.1 million recognized for the years ended February 28, 2021, and February 29, 2020, respectively. Prior to the Black Velvet Divestiture, we recorded the results of operations of our Black Velvet Canadian Whisky business in the Wine and Spirits segment. The following table summarizes the net gain recognized in connection with this divestiture:

(in millions)
Cash received from buyer			$	266.7
Net assets sold			(213.3)
AOCI reclassification adjustments, primarily foreign currency translation			20.9
Direct costs to sell			(3.8)
Gain on sale of business			$	70.5

Sale of Accolade Wine Investment

In May 2018, we completed the sale of our Accolade Wine Investment. We received cash proceeds, net of direct costs to sell, of $111.7 million. This interest consisted of an investment accounted for under the cost method and AFS debt securities. We recognized net gains of $0.4 million and $99.8 million in connection with this transaction for the years ended February 29, 2020, and February 28,2019, respectively. These net gains are included in income (loss) from unconsolidated investments.

Business transformation

We have committed to a business transformation strategy which aligns our portfolio with consumer-led premiumization trends and growing segments of the Wine and Spirits and Beer markets. For the years ended February 28, 2021, and February 29, 2020, long-lived asset impairments of $24.0 million and $449.7 million were recognized, respectively. For additional information refer to Note 7.

Assets held for sale

Primarily in contemplation of the Paul Masson Divestiture, the Wine and Spirits Divestitures, the Concentrate Business Divestiture, and the Ballast Point Divestiture noted above, certain net assets met the held for sale criteria as of February 29, 2020. The carrying value of assets held for sale consisted of the following:

			February 29, 2020
			Beer						Wine and Spirits						Consolidated
(in millions)
Assets
Accounts receivable			$	2.4					$	—					$	2.4
Inventories			13.7						576.9						590.6
Prepaid expenses and other			2.8						32.7						35.5
Assets held for sale - current			18.9						609.6						628.5

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			February 29, 2020
			Beer						Wine and Spirits						Consolidated
(in millions)
Property, plant, and equipment			55.9						172.6						228.5
Goodwill			4.7						304.3						309.0
Intangible assets			28.2						384.0						412.2
Equity method investments			—						1.0						1.0
Other assets			24.8						26.3						51.1
Less: Reserve for assets held for sale			(42.7)						(407.0)						(449.7)
Assets held for sale			70.9						481.2						552.1
Liabilities
Accounts payable			0.2						0.6						0.8
Other accrued expenses and liabilities			11.0						17.8						28.8
Deferred income taxes and other liabilities			33.3						—						33.3
Liabilities held for sale (1)			44.5						18.4						62.9
Net assets held for sale			$	45.3					$	1,072.4					$	1,117.7

(1)Liabilities held for sale are included in the Consolidated Balance Sheet as of February 29, 2020, within the respective liability line items noted above.

Wine and spirits optimization

We recognized restructuring and other strategic business development costs 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 Years Ended
			Results of Operations Location			February 28, 2021						February 29, 2020
(in millions)
Contract termination costs			Cost of product sold			$	20.9					$	20.1
Loss on inventory write-downs			Cost of product sold			4.7						102.9
Employee termination costs			Selling, general, and administrative expenses			4.1						12.5
Other costs			Selling, general, and administrative expenses			9.7						8.4
Impairment of long-lived assets			Impairment of assets held for sale			24.0						407.0
						$	63.4					$	550.9

3. INVENTORIES

The components of inventories are as follows:

			February 28, 2021						February 29, 2020 (1)
(in millions)
Raw materials and supplies			$	151.1					$	171.7
In-process inventories			735.9						814.7
Finished case goods			404.1						387.2
			$	1,291.1					$	1,373.6

(1)The inventories balance at February 29, 2020, excludes amounts reclassified to assets held for sale.

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4. PREPAID EXPENSES AND OTHER

The major components of prepaid expenses and other are as follows:

			February 28, 2021						February 29, 2020 (1)
(in millions)
Value added taxes receivable			$	257.8					$	315.2
Derivative assets			48.7						57.3
Income taxes receivable			45.4						35.2
Prepaid excise and sales taxes			40.9						38.8
Other			114.7						89.3
			$	507.5					$	535.8

(1)The prepaid expenses and other balance at February 29, 2020, excludes amounts reclassified to assets held for sale.

5. PROPERTY, PLANT, AND EQUIPMENT

The major components of property, plant, and equipment are as follows:

			February 28, 2021						February 29, 2020 (1)
(in millions)
Land and land improvements			$	434.0					$	440.2
Vineyards			226.0						215.8
Buildings and improvements			983.4						975.1
Machinery and equipment			3,696.9						3,627.9
Motor vehicles			131.3						109.5
Construction in progress (2)			2,084.2						1,422.7
			7,555.8						6,791.2
Less – Accumulated depreciation			(1,734.2)						(1,458.2)
			$	5,821.6					$	5,333.0

(1)The property, plant, and equipment balance at February 29, 2020, excludes amounts reclassified to assets held for sale.

(2)Interest costs incurred during the expansion, construction, and optimization of facilities are capitalized to construction in progress. We capitalized interest costs of $31.5 million, $37.2 million, and $23.1 million for the years ended February 28, 2021, February 29, 2020, and February 28, 2019, respectively, primarily due to the Mexico Beer Projects.

Mexicali Brewery

In fiscal 2017, we began construction of the Mexicali Brewery. In March 2020, a public consultation was held on the construction of the Mexicali Brewery. Following the negative result of the public consultation, we are in discussions with government officials in Mexico regarding next steps for our brewery construction project and options elsewhere in the country. We intend to continue working with government officials to mutually agree upon a path forward. As of February 28, 2021, we have suspended all Mexicali Brewery construction activities and have approximately $710 million of capitalized fixed assets remaining at the location. In addition to the capitalized costs, we have incurred other expenses in establishing the Mexicali Brewery. See Note 23 for further discussion.

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6. DERIVATIVE INSTRUMENTS

Overview

We are exposed to market risk from changes in foreign currency exchange rates, commodity prices, interest rates, and equity prices that could affect our results of operations and financial condition. The impact on our results and financial position and the amounts reported in our financial statements will vary based upon the currency, commodity, interest rate, and equity market movements during the period, the effectiveness and level of derivative instruments outstanding, and whether they are designated and qualify for hedge accounting.

The estimated fair values of our derivative instruments change with fluctuations in currency rates, commodity prices, interest rates, and/or equity prices and are expected to offset changes in the values of the underlying exposures. Our derivative instruments are held solely to manage our exposures to the aforementioned market risks as part of our normal business operations. We follow strict policies to manage these risks and do not enter into derivative instruments for trading or speculative purposes.

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 10). This investment is 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 this investment recognized in income (loss) from unconsolidated investments (see Note 7).

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

			February 28, 2021						February 29, 2020
(in millions)
Derivative instruments designated as hedging instruments
Foreign currency contracts			$	1,558.0					$	1,831.0
Interest rate swap contracts			$	—					$	375.0
Treasury lock contracts			$	—					$	300.0
Derivative instruments not designated as hedging instruments
Foreign currency contracts			$	704.7					$	1,180.2
Commodity derivative contracts			$	221.6					$	282.8

Cash flow hedges

Our derivative instruments designated in hedge accounting relationships are designated as cash flow hedges. We are exposed to foreign denominated cash flow fluctuations primarily in connection with third party and intercompany sales and purchases. We primarily use foreign currency forward contracts to hedge certain of these risks. In addition, we utilize interest rate swap and treasury lock contracts periodically to manage our exposure to changes in interest rates. Derivatives managing our cash flow exposures generally mature within three years or less, with a maximum maturity of five years.

To qualify for hedge accounting treatment, the details of the hedging relationship must be formally documented at inception of the arrangement, including the risk management objective, hedging strategy, hedged item, specific risk that is being hedged, the derivative instrument, how effectiveness is being assessed, and how ineffectiveness will be measured. The derivative must be highly effective in offsetting changes in the cash flows of the risk being hedged. Throughout the term of the designated cash flow hedge relationship on at least a quarterly basis, a retrospective evaluation and prospective assessment of hedge effectiveness is performed based on quantitative and qualitative measures. All components of our derivative instruments’ gains or losses are included in the assessment of hedge effectiveness.

When we determine that a derivative instrument which qualified for hedge accounting treatment has ceased to be highly effective as a hedge, we discontinue hedge accounting prospectively. In the event the relationship is no longer effective, we recognize the change in the fair value of the hedging derivative instrument from the date the hedging derivative instrument became no longer effective immediately in our results of

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operations. We also discontinue hedge accounting prospectively when (i) a derivative expires or is sold, terminated, or exercised; (ii) it is no longer probable that the forecasted transaction will occur; or (iii) we determine that designating the derivative as a hedging instrument is no longer appropriate. When we discontinue hedge accounting prospectively, but the original forecasted transaction continues to be probable of occurring, the existing gain or loss of the derivative instrument remains in AOCI and is reclassified into earnings (losses) when the forecasted transaction occurs. When it becomes probable that the forecasted transaction will not occur, any remaining gain or loss in AOCI is recognized immediately in our results of operations.

We expect $26.3 million of net gains, net of income tax effect, to be reclassified from AOCI to our results of operations within the next 12 months.

Undesignated hedges

Certain of our derivative instruments do not qualify for hedge accounting treatment; for others, we choose not to maintain the required documentation to apply hedge accounting treatment. These undesignated instruments are primarily used to economically hedge our exposure to fluctuations in the value of foreign currency denominated receivables and payables; foreign currency investments, primarily consisting of loans to subsidiaries and foreign-denominated investments, and cash flows related primarily to the repatriation of those loans or investments; and commodity prices, including aluminum, corn, diesel fuel, natural gas, and wheat prices. We primarily use foreign currency forward and option contracts, generally less than 12 months in duration, and commodity swap contracts, generally less than 36 months in duration, with a maximum maturity of five years, to hedge some of these risks. In addition, from time to time, we utilize interest rate swap contracts, generally less than six months in duration, to economically hedge our exposure to changes in interest rates associated with the financing of significant investments and acquisitions. Our derivative policy permits the use of undesignated derivatives as approved by senior management.

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 February 28, 2021, the estimated fair value of derivative instruments in a net liability position due to counterparties was $0.1 million. If we were required to settle the net liability position under these derivative instruments on February 28, 2021, we would have had sufficient available liquidity on hand to satisfy this obligation.

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Results of period derivative activity

The estimated fair value and location of our derivative instruments on our balance sheets are as follows (see Note 7):

Assets															Liabilities
			February 28, 2021						February 29, 2020									February 28, 2021						February 29, 2020
(in millions)
Derivative instruments designated as hedging instruments
Foreign currency contracts:
Prepaid expenses and other			$	32.0					$	47.8					Other accrued expenses and liabilities			$	3.5					$	13.0
Other assets			$	41.3					$	39.5					Deferred income taxes and other liabilities			$	2.7					$	7.1
Interest rate swap contracts:
Prepaid expenses and other			$	—					$	—					Other accrued expenses and liabilities			$	—					$	0.8
Treasury lock contracts:
Prepaid expenses and other			$	—					$	—					Other accrued expenses and liabilities			$	—					$	7.6
Derivative instruments not designated as hedging instruments
Foreign currency contracts:
Prepaid expenses and other			$	3.3					$	9.0					Other accrued expenses and liabilities			$	3.5					$	14.3
Commodity derivative contracts:
Prepaid expenses and other			$	13.4					$	0.5					Other accrued expenses and liabilities			$	3.9					$	25.4
Other assets			$	7.8					$	0.1					Deferred income taxes and other liabilities			$	1.4					$	15.5

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 Year Ended February 28, 2021
Foreign currency contracts						$	(31.1)					Sales						$	1.4
												Cost of product sold						(25.4)
Interest rate swap contracts						(0.6)						Interest expense						(1.1)
Treasury lock contracts						(16.1)						Interest expense						(1.8)
						$	(47.8)											$	(26.9)

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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 Year Ended February 29, 2020
Foreign currency contracts						$	66.8					Sales						$	—
												Cost of product sold						20.2
Interest rate swap contracts						(0.5)						Interest expense						—
Treasury lock contracts						(5.7)						Interest expense						—
						$	60.6											$	20.2
For the Year Ended February 28, 2019
Foreign currency contracts						$	15.9					Sales						$	0.4
												Cost of product sold						4.1
						$	15.9											$	4.5

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 Year Ended February 28, 2021
Commodity derivative contracts												Cost of product sold						$	25.1
Foreign currency contracts												Selling, general, and administrative expenses						(17.4)
																		$	7.7
For the Year Ended February 29, 2020
Commodity derivative contracts												Cost of product sold						$	(49.0)
Foreign currency contracts												Selling, general, and administrative expenses						(7.8)
																		$	(56.8)
For the Year Ended February 28, 2019
Commodity derivative contracts												Cost of product sold						$	1.8
Foreign currency contracts												Selling, general, and administrative expenses						(60.8)
Interest rate swap contracts												Interest expense						35.0
																		$	(24.0)

7. 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

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• 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 investment

Equity securities, Warrants – The inputs used to estimate the fair value of the Canopy warrants are as follows:

			February 28, 2021 (1)(2)												February 29, 2020 (2)
			Tranche A Warrants (3)						Tranche B Warrants (4)						Tranche A Warrants (3)						Tranche B Warrants (4)						November 2017 Canopy Warrants (3)
Exercise price (5)			C$	50.40					C$	76.68					C$	50.40					C$	76.68					C$	12.98
Valuation date stock price (6)			C$	41.90					C$	41.90					C$	25.17					C$	25.17					C$	25.17
Remaining contractual term (7)			2.7 years						5.7 years						3.7 years						6.7 years						0.2 years
Expected volatility (8)			70.0		%				70.0		%				70.0		%				70.0		%				105.3		%
Risk-free interest rate (9)			0.5		%				1.1		%				1.1		%				1.1		%				1.5		%
Expected dividend yield (10)			0.0		%				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 February 28, 2021. For additional information on the November 2017 Canopy Warrants and the related exercise, refer to Note 10.

(2)The exercise price for the Tranche C Warrants is based on the VWAP Exercise Price and are not included in the table as there is no fair value 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.

(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:

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.

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(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 the Canopy Debt Securities for C$200.0 million, or $150.5 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 market spreads using bond data as of the valuation date.

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

			February 28, 2021						February 29, 2020
Conversion price (1)			C$	48.17					C$	48.17
Valuation date stock price (2)			C$	41.90					C$	25.17
Remaining term (3)			2.4 years						3.4 years
Expected volatility (4)			57.6		%				58.2		%
Risk-free interest rate (5)			0.4		%				1.1		%
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 historical volatility levels of the underlying equity security, reduced for certain risks associated with debt securities.

(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 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 our commercial paper, are variable interest rate bearing notes for which the carrying value approximates the fair value.

Long-term debt

The term loan under our March 2020 Term Credit Agreement 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, accounts payable, and short-term borrowings, approximate fair value as of February 28, 2021, and February 29, 2020, due to the relatively short maturity of these instruments. As of February 28, 2021, the carrying amount of long-term debt, including the current portion, was $10,442.3 million, compared with an

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estimated fair value of $11,580.9 million. As of February 29, 2020, the carrying amount of long-term debt, including the current portion, was $11,945.7 million, compared with an estimated fair value of $12,935.9 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
			Quoted Prices in Active Markets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)						Total
(in millions)
February 28, 2021
Assets:
Foreign currency contracts			$	—					$	76.6					$	—					$	76.6
Commodity derivative contracts			$	—					$	21.2					$	—					$	21.2
Equity securities (1)			$	—					$	1,639.7					$	—					$	1,639.7
Canopy Debt Securities (1)			$	—					$	176.3					$	—					$	176.3
Liabilities:
Foreign currency contracts			$	—					$	9.7					$	—					$	9.7
Commodity derivative contracts			$	—					$	5.3					$	—					$	5.3
February 29, 2020
Assets:
Foreign currency contracts			$	—					$	96.3					$	—					$	96.3
Commodity derivative contracts			$	—					$	0.6					$	—					$	0.6
Equity securities (1)			$	—					$	991.5					$	—					$	991.5
Canopy Debt Securities (1)			$	—					$	125.6					$	—					$	125.6
Liabilities:
Foreign currency contracts			$	—					$	34.4					$	—					$	34.4
Commodity derivative contracts			$	—					$	40.9					$	—					$	40.9
Interest rate swap contracts			$	—					$	0.8					$	—					$	0.8
Treasury lock contracts			$	—					$	7.6					$	—					$	7.6

(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:
									February 28, 2021						February 29, 2020
			(in millions)
			November 2017 Canopy Warrants (i)						(61.8)						(543.7)
			November 2018 Canopy Warrants (ii)						823.3						(1,488.1)
			Canopy Debt Securities						40.5						(94.6)
									$	802.0					$	(2,126.4)
			(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 10.
			(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 10. For the year ended February 29, 2020, amounts are net of a $1,176.0 million unrealized gain resulting from the June 2019 Warrant Modification.

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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 Year Ended February 28, 2021
Long-lived assets held for sale			$	—					$	—					$	—					$	24.0
Trademarks			—						—						4.0						6.0
			$	—					$	—					$	4.0					$	30.0
For the Year Ended February 29, 2020
Long-lived assets held for sale			$	—					$	—					$	949.3					$	449.7
Trademarks (1)			—						—						—						11.0
			$	—					$	—					$	949.3					$	460.7
For the Year Ended February 28, 2019
Trademarks			$	—					$	—					$	28.0					$	108.0

(1) The balance at February 29, 2020, has been reclassified to assets held for sale (see “Trademarks” below for further discussion).

Long-lived assets held for sale

For the year ended February 28, 2021, primarily in connection with the Wine and Spirits Divestitures and the Concentrate Business Divestiture, 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. 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 estimated fair value was determined as of November 30, 2020, primarily based on the expected proceeds from the Wine and Spirits Divestitures and the Concentrate Business Divestiture, excluding the contingent consideration, which we will recognize when it is determined to be realizable.

For the year ended February 29, 2020, in connection with the Wine and Spirits Divestitures and the Concentrate Business Divestiture, long-lived assets held for sale with a carrying value of $1,291.2 million were written down to their estimated fair value of $908.2 million, less costs to sell, resulting in a total loss of $407.0 million. 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 as of February 29, 2020, based on the expected proceeds from the Wine and Spirits Divestitures and the Concentrate Business Divestiture, excluding the contingent consideration.

For the year ended February 29, 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 $41.1 million, less costs to sell. As a result, a loss of $42.7 million, inclusive of costs to sell and other losses was included in impairment of assets held for sale for the year ended February 29, 2020. 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 February 29, 2020. Ballast Point was a component of the Beer segment and was

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included in our beer reporting unit through the 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

For the year ended February 28, 2021, certain negative trends within our Beer segment’s Four Corners craft beer portfolio, including slower growth rates and increased competition, resulted in updated long-term financial forecasts. The updated forecasts indicated it was more likely than not the fair value of our indefinite-lived intangible asset associated with the Four Corners trademark might be below its carrying value. Accordingly, we performed a quantitative assessment for impairment. As a result of this assessment, the Four Corners trademark asset with a carrying value of $10.0 million was written down to its estimated fair value of $4.0 million, resulting in an impairment of $6.0 million. This impairment was included in selling, general, and administrative expenses within our consolidated results of operations for the year ended February 28, 2021.

For the year ended February 29, 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 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 year ended February 29, 2020.

For the year ended February 28, 2019, in connection with certain continuing negative trends within our Beer segment’s Ballast Point craft beer portfolio, including slower growth rates and increased competition, we implemented a change in strategy for our Ballast Point craft beer portfolio. This change in strategy, when combined with the continuing negative trends, indicated that it was more likely than not the fair value of our indefinite-lived intangible asset associated with the craft beer trademark might be below its carrying value. The change in strategy for our Ballast Point craft beer portfolio focuses on improving profitability by rationalizing the number of product offerings while targeting distribution growth in select strategic markets. This change in strategy resulted in updated long-term financial forecasts with lower revenues, and cash flows for the related portfolio. Accordingly, we performed a quantitative assessment for impairment of the Ballast Point craft beer trademark asset. As a result of this assessment, the Ballast Point craft beer trademark asset with a carrying value of $136.0 million was written down to its estimated fair value of $28.0 million, resulting in an impairment of $108.0 million.

When performing a quantitative assessment for impairment of a trademark asset, we measure the amount of impairment by calculating the amount by which the carrying value of the trademark asset exceeds its estimated fair value. The estimated fair value is determined based on an income approach using the relief from royalty method, which assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to exploit the related benefits of the trademark asset. The cash flow projections we use to estimate the fair value of our trademark assets involve several assumptions, including (i) projected revenue growth rates, (ii) estimated royalty rates, (iii) after-tax royalty savings expected from ownership of the trademarks, and (iv) discount rates used to derive the estimated fair value of the trademark assets.

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8. 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)			—						58.8												58.8
Black Velvet Divestiture			—						(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)			—						14.3												14.3
Foreign currency translation adjustments			(38.7)						15.9												(22.8)
Reclassified (to) 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

(1)Purchase accounting allocations associated primarily with the acquisition of Nelson’s Green Brier.

(2)Primarily in connection with the Wine and Spirits Divestitures, goodwill associated with the businesses being sold was reclassified (to) from assets held for sale based on the 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.

9. INTANGIBLE ASSETS

The major components of intangible assets are as follows:

			February 28, 2021												February 29, 2020
			Gross Carrying Amount						Net Carrying Amount						Gross Carrying Amount						Net Carrying Amount
(in millions)
Amortizable intangible assets
Customer relationships			$	87.2					$	26.3					$	87.4					$	31.8
Other			21.1						0.2						20.2						0.3
Total			$	108.3					26.5						$	107.6					32.1
Nonamortizable intangible assets
Trademarks									2,705.6												2,686.8
Total intangible assets									$	2,732.1											$	2,718.9

The intangible assets balance at 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 years ended February 28, 2021, February 29, 2020, and February 28, 2019. Net carrying amount represents the gross carrying value net of accumulated amortization. Amortization expense for intangible assets was $5.3 million, $5.7 million, and $6.0 million for the years ended February 28, 2021, February 29, 2020, and February 28, 2019, respectively.

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Estimated amortization expense for each of the five succeeding fiscal years and thereafter is as follows:

(in millions)
2022			$	5.1
2023			$	3.2
2024			$	1.4
2025			$	1.4
2026			$	1.4
Thereafter			$	14.0

10. EQUITY METHOD INVESTMENTS

Our equity method investments are as follows:

			February 28, 2021												February 29, 2020
			Carrying Value						Ownership Percentage						Carrying Value						Ownership Percentage
(in millions)
Canopy Equity Method Investment			$	2,578.8					38.1		%				$	2,911.7					35.3		%
Other equity method investments (1)			209.6						20%-50%						182.2						20%-50%
			$	2,788.4											$	3,093.9

(1)The other equity method investments balance at 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 Canopy, an Ontario, Canada-based public company and leading provider of medicinal and recreational cannabis products, plus warrants which gave us the option to purchase an additional 18.9 million common shares of Canopy. 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 accounted 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 “May 2020 Canopy Investment” and “Canopy Equity Method Investment” below.

In November 2018, we increased our ownership interest in Canopy by acquiring an additional 104.5 million common shares (see “Canopy Equity Method Investment” below), plus warrants which give us the option to purchase an additional 139.7 million common shares of Canopy 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 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 year ended February 28, 2021, we recognized net losses on the foreign currency forward contracts of $7.5 million, in selling, general, 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 year ended February 28, 2021.

We account for the November 2017 Canopy Investment, the November 2018 Canopy Investment, and the May 2020 Canopy Investment, each of which represents an investment in common shares of Canopy, collectively, under the equity method. 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

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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, 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 of $409.0 million.

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

			For the Years Ended
			February 28, 2021						February 29, 2020						February 28, 2019
(in millions)
Equity in earnings (losses) from Canopy and related activities			$	(679.0)					$	(575.9)					$	(2.6)

In June 2019, the Canopy shareholders approved the modification of the terms of the warrants originally obtained in November 2018 and certain other rights, 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 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. These changes are the result of Canopy’s intention to acquire Acreage upon U.S. federal cannabis legalization, subject to certain conditions. In connection with the Acreage Transaction, Canopy had a call option to acquire 100% of the shares of Acreage.

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 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.

The inputs used to estimate the fair value of the November 2018 Canopy Warrants as of the June 27, 2019 modification date, were as follows:

			Tranche A Warrants (1)						Tranche B Warrants (1)
Exercise price			$	50.40					$	76.68
Valuation date stock price			$	53.36					$	53.36
Remaining contractual term			4.3 years						7.3 years
Expected volatility			66.7		%				66.7		%
Risk-free interest rate			1.4		%				1.4		%
Expected dividend yield			0.0		%				0.0		%

(1)Refer to Note 7 for input descriptions.

Accordingly, we recognized a $1,176.0 million unrealized gain from unconsolidated investments within our consolidated results of operations for the second quarter of fiscal 2020 from the June 2019 Warrant Modification. Approximately $322.5 million of the unrealized gain was associated with the Tranche A Warrants and $853.5 million was associated with the Tranche B Warrants. No value was associated with the Tranche C Warrants as they have a VWAP Exercise Price.

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In September 2020, the Acreage shareholders approved the modification of the Acreage Transaction and related Acreage Financial Instrument, 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 remaining 30% of Acreage shares will be subject to a floating exchange ratio and Canopy, at its sole discretion, will have the option to acquire these shares with Canopy shares, cash, or a combination thereof.

In February 2021, Canopy sold its ownership interest in RIV Capital 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. As additional consideration for the assets being transferred and termination of the royalty agreement, Canopy made a cash payment of C$115 million and issued 3,647,902 Canopy shares. The RIV Capital Divestiture has a minor dilutive impact on our ownership interest in Canopy which we will reflect in our first quarter of fiscal 2022 results.

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 February 28, 2021, 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, 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%.

As of February 28, 2021, the exercise of all Canopy warrants held by us would have required a cash outflow of approximately $6.3 billion based on the terms of the November 2018 Canopy Warrants. Additionally, as of February 28, 2021, the fair value of the Canopy Equity Method Investment was $4,679.3 million based on the closing price of the underlying equity security as of that date.

The following tables present summarized financial information for Canopy prepared 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 (i) January through December 2020 in our year ended February 28, 2021 results, (ii) January through December 2019 in our year ended February 29, 2020, results, and (iii) November and December 2018, in our year ended February 28, 2019 results. The amounts shown represent 100% of Canopy’s financial position and results of operations, for the respective periods, however, the results of operations for the year ended February 29, 2020, exclude the impact of the June 2019 Warrant Modification Loss because it was recorded by Canopy within equity. The year ended February 28, 2021, includes costs designed to improve Canopy’s organizational focus, streamline operations, and align production capability with projected demand.

			February 28, 2021						February 29, 2020
(in millions)
Current assets			$	1,706.6					$	2,232.9
Noncurrent assets			$	3,251.5					$	3,751.6
Current liabilities			$	273.7					$	322.0
Noncurrent liabilities			$	1,308.8					$	867.9
Noncontrolling interests			$	179.0					$	210.5

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			For the Years Ended
			February 28, 2021						February 29, 2020						February 28, 2019 (1)
(in millions)
Net sales			$	378.6					$	290.2					$	48.6
Gross profit (loss)			$	(14.1)					$	45.4					$	11.2
Net income (loss)			$	(1,775.3)					$	(327.0)					$	(39.6)
Net income (loss) attributable to Canopy			$	(1,750.0)					$	(312.6)					$	(27.8)

(1)For the period November 1, 2018, through December 31, 2018.

Other equity method investment

Booker Vineyard

In April 2020, we invested in My Favorite Neighbor, LLC, also known as Booker Vineyard, a super-luxury, direct-to-consumer focused wine business which we account 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.

11. OTHER ACCRUED EXPENSES AND LIABILITIES

The major components of other accrued expenses and liabilities are as follows:

			February 28, 2021						February 29, 2020
(in millions)
Salaries, commissions, and payroll benefits and withholdings			$	232.1					$	182.2
Promotions and advertising			159.9						191.7
Accrued interest			93.4						94.3
Operating lease liability			68.8						76.6
Income taxes payable			24.7						24.9
Derivative liabilities			10.9						61.1
Other			190.1						149.6
			$	779.9					$	780.4

12. BORROWINGS

Borrowings consist of the following:

			February 28, 2021																		February 29, 2020
			Current						Long-term						Total						Total
(in millions)
Short-term borrowings
Commercial paper			$	—																	$	238.9
			$	—																	$	238.9
Long-term debt
Term loan credit facilities			$	24.6					$	429.8					$	454.4					$	1,295.7
Senior notes			—						9,972.4						9,972.4						10,624.7
Other			4.6						10.9						15.5						25.3
			$	29.2					$	10,413.1					$	10,442.3					$	11,945.7

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Bank facilities

Senior credit facility

In August 2018, the Company, CIH, CB International, certain of the Company’s subsidiaries as guarantors, the Administrative Agent, and certain other lenders entered into the August 2018 Restatement Agreement that amended and restated our then-existing senior credit facility (as amended and restated by the August 2018 Restatement Agreement, the August 2018 Credit Agreement). The principal changes effected by the August 2018 Restatement Agreement were:

• the removal of CIH as a borrower under the August 2018 Credit Agreement;

• the termination of a cross-guarantee agreement by CIH and CB International; and

• the addition of a mechanism to provide for the replacement of LIBOR with an alternative benchmark rate in certain circumstances where LIBOR cannot be adequately ascertained or available.

In September 2018, the Company, CB International, certain of the Company’s subsidiaries as guarantors, the Administrative Agent, and certain other lenders entered into the 2018 Restatement Agreement that amended and restated the August 2018 Credit Agreement (as amended and restated by the 2018 Restatement Agreement, the 2018 Credit Agreement). The primary change effected by the 2018 Restatement Agreement was the increase of the revolving credit facility from $1.5 billion to $2.0 billion and extension of its maturity to September 14, 2023. The 2018 Restatement Agreement also modified certain financial covenants in connection with the November 2018 Canopy Transaction and added various representations and warranties, covenants, and an event of default related to the November 2018 Canopy Transaction.

In June 2019, we repaid the outstanding obligations under the U.S. Term A-1 loan facility under the 2018 Credit Agreement with proceeds from the 2019 Term Credit Agreement.

In March 2020, the Company, CB International, certain of the Company’s subsidiaries as guarantors, the Administrative Agent, and certain other lenders entered into the 2020 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:

• the removal of the subsidiary guarantees and termination of the guarantee agreement;

• 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 SOFR administered by the Federal Reserve Bank of New York.

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.

2020 Term Credit Agreement

In September 2018, the Company, the Administrative Agent, and certain other lenders entered into the Term Credit Agreement. The Term Credit Agreement provided for aggregate credit facilities of $1.5 billion, consisting of the $500.0 million three-year term loan facility and a $1.0 billion five-year term loan facility.

In March 2020, the Company, certain of the Company’s subsidiaries as guarantors, the Administrative Agent, and certain other lenders entered into the Term Loan Restatement Agreement that amended and restated the Term Credit Agreement (as amended and restated by the Term Loan Restatement Agreement, the 2020 Term Credit Agreement). The principal changes effected by the 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.

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In August 2020, we prepaid the outstanding Three-Year Term Facility borrowings and in July 2020, we prepaid the outstanding Five-Year Term Facility borrowings, both under our 2020 Term Credit Agreement.

March 2020 Term Credit Agreement

In June 2019, the Company and the Administrative Agent and Lender entered into the 2019 Term Credit Agreement. The 2019 Term Credit Agreement provides for the creation of a $491.3 million five-year term loan facility. The 2019 Five-Year Term Facility will be repaid in quarterly payments of principal equal to 1.25% of the original aggregate principal amount of the 2019 Five-Year Term Facility, with the balance due and payable at maturity.

In March 2020, the Company, certain of the Company’s subsidiaries as guarantors, and the Lender entered into the 2020 Term Loan Restatement Agreement that amended and restated the 2019 Term Credit Agreement (as amended and restated by the 2020 Term Loan Restatement Agreement, the March 2020 Term Credit Agreement). 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.

General

We and our subsidiaries are subject to covenants that are contained in the 2020 Credit Agreement and the March 2020 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.

Our senior credit facility permits us to elect, subject to the willingness of existing or new lenders to fund such increase or term loans and other customary conditions, to increase the revolving credit commitments or add one or more tranches of additional term loans. The Incremental Facilities may be an unlimited amount so long as our leverage ratio, as defined and computed pursuant to our senior credit facility, is no greater than 4.00 to 1.00 subject to certain limitations for the period defined pursuant to our senior credit facility.

As of February 28, 2021, aggregate credit facilities under the 2020 Credit Agreement and the March 2020 Term Credit Agreement consist of the following:

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

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As of February 28, 2021, information with respect to borrowings under the 2020 Credit Agreement and the March 2020 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			$	—																	$	454.4
Interest rate			—		%																1.0		%
LIBOR margin			—		%																0.88		%
Outstanding letters of credit			$	11.7
Remaining borrowing capacity (2)			$	1,988.3

(1)Outstanding term loan facility 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 (excluding unamortized discount) (see “Commercial paper program”).

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. As of February 28, 2021, we had no outstanding borrowings under our commercial paper program. Information with respect to our outstanding commercial paper borrowings as of February 29, 2020, is as follows:

(in millions)
Outstanding borrowings (1)									$	238.9
Weighted average annual interest rate									1.9		%
Weighted average remaining term									8 days

(1)Outstanding commercial paper borrowings are net of unamortized discount.

Interest rate swap contracts

In June 2019, we entered into interest rate swap agreements, which were designated as cash flow hedges for $375.0 million of our floating LIBOR rate debt. As a result of these hedges, we fixed our interest rates on $375.0 million of our floating LIBOR rate debt at an average rate of 1.9% (exclusive of borrowing margins) from July 1, 2019, through July 1, 2020.

Treasury lock contracts

In February and March 2020, we entered into treasury lock agreements, which were designated as cash flow hedges. As a result of these hedges, we fixed our 10-year treasury rates on $500.0 million of future debt issuances at an average rate of 1.2% (exclusive of borrowing margins). In April 2020, prior to the issuance of the 2.875% Senior Notes and 3.75% Senior Notes, 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) within our consolidated balance sheets. This loss is being amortized over 10 years to interest expense within our consolidated results of operations. See “Senior notes” below.

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Senior notes

Our outstanding senior notes are as follows:

									Date of																		Outstanding Balance (1)
			Principal						Issuance						Maturity						Interest Payments						February 28, 2021						February 29, 2020
(in millions)
3.75% Senior Notes (2) (3)			$	500.0					May 2013						May 2021						May/Nov						$	—					$	499.2
4.25% Senior Notes (2) (4)			$	1,050.0					May 2013						May 2023						May/Nov						1,047.5						1,046.4
4.75% Senior Notes (2) (4)			$	400.0					Nov 2014						Nov 2024						May/Nov						397.6						397.0
4.75% Senior Notes (2) (4)			$	400.0					Dec 2015						Dec 2025						Jun/Dec						396.9						396.3
3.70% Senior Notes (2) (5)			$	600.0					Dec 2016						Dec 2026						Jun/Dec						596.5						595.9
2.70% Senior Notes (2) (5)			$	500.0					May 2017						May 2022						May/Nov						498.8						497.8
3.50% Senior Notes (2) (5)			$	500.0					May 2017						May 2027						May/Nov						496.5						496.1
4.50% Senior Notes (2) (5)			$	500.0					May 2017						May 2047						May/Nov						493.1						493.0
2.25% Senior Notes (2) (6)			$	700.0					Nov 2017						Nov 2020						May/Nov						—						698.7
2.65% Senior Notes (2) (5)			$	700.0					Nov 2017						Nov 2022						May/Nov						697.1						695.5
3.20% Senior Notes (2) (5)			$	600.0					Feb 2018						Feb 2023						Feb/Aug						598.0						597.0
3.60% Senior Notes (2) (5)			$	700.0					Feb 2018						Feb 2028						Feb/Aug						695.0						694.3
4.10% Senior Notes (2) (5)			$	600.0					Feb 2018						Feb 2048						Feb/Aug						592.3						592.1
Senior Floating Rate Notes (2) (7)			$	650.0					Oct 2018						Nov 2021						Quarterly						—						647.9
4.40% Senior Notes (2) (5)			$	500.0					Oct 2018						Nov 2025						May/Nov						496.6						496.0
4.65% Senior Notes (2) (5)			$	500.0					Oct 2018						Nov 2028						May/Nov						495.6						495.2
5.25% Senior Notes (2) (5)			$	500.0					Oct 2018						Nov 2048						May/Nov						493.1						493.0
3.15% Senior Notes (2) (5)			$	800.0					Jul 2019						Aug 2029						Feb/Aug						793.9						793.3
2.875% Senior Notes (2) (5)			$	600.0					Apr 2020						May 2030						May/Nov						594.3						—
3.75% Senior Notes (2) (5)			$	600.0					Apr 2020						May 2050						May/Nov						589.6						—
																											$	9,972.4					$	10,624.7

(1)Amounts are net of unamortized debt issuance costs and unamortized discounts, where applicable.

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

(3)Redeemed prior to maturity in February 2021 at a redemption price equal to 100% of the outstanding principal amount, plus accrued and unpaid interest and a make-whole payment of $3.8 million. The make-whole payment is included in loss on extinguishment of debt within our consolidated results of operations.

(4)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 and a make-whole payment based on the present value of the future payments at the adjusted Treasury Rate plus 50 basis points.

(5)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 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 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.

			Redemption
			Stated Redemption Date						Stated Basis Points
3.70% Senior Notes due December 2026			Sept 2026						25
2.70% Senior Notes due May 2022			Apr 2022						15

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3.50% Senior Notes due May 2027			Feb 2027						20
4.50% Senior Notes due May 2047			Nov 2046						25
2.65% Senior Notes due November 2022			Oct 2022						15
3.20% Senior Notes due February 2023			Jan 2023						13
3.60% Senior Notes due February 2028			Nov 2027						15
4.10% Senior Notes due February 2048			Aug 2047						20
4.40% Senior Notes due November 2025			Sept 2025						20
4.65% Senior Notes due November 2028			Aug 2028						25
5.25% Senior Notes due November 2048			May 2048						30
3.15% Senior Notes due August 2029			May 2029						20
2.875% Senior Notes due May 2030			Feb 2030						35
3.75% Senior Notes due May 2050			Nov 2049						40

(6)Redeemed prior to maturity in May 2020 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.

(7)Redeemed prior to maturity in November 2020 at a redemption price equal to 100% of the outstanding principal amount, plus accrued and unpaid interest.

Indentures

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.

Subsidiary credit facilities

General

We have additional credit arrangements totaling $61.2 million and $71.8 million as of February 28, 2021, and February 29, 2020, respectively. As of February 28, 2021, and February 29, 2020, amounts outstanding under these arrangements were $15.5 million and $25.3 million, respectively, the majority of which is classified as long-term as of the respective date. These arrangements primarily support the financing needs of our domestic and foreign subsidiary operations (see “Other long-term debt” for additional information). Interest rates and other terms of these borrowings vary from country to country, depending on local market conditions.

Other long-term debt

During the year ended February 28, 2019, we recorded a conversion of $248.2 million from long-term debt to noncontrolling equity interests associated with the noncash settlement of a prior contractual agreement with our glass production plant joint venture partner, Owens-Illinois.

Debt payments

As of February 28, 2021, the required principal repayments under long-term debt obligations (excluding unamortized debt issuance costs and unamortized discounts of $60.6 million and $17.0 million, respectively) for each of the five succeeding fiscal years and thereafter are as follows:

(in millions)
2022			$	29.2
2023			1,829.2
2024			1,078.7
2025			782.8
2026			900.0
Thereafter			5,900.0
			$	10,519.9

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13. INCOME TAXES

Income (loss) before income taxes was generated as follows:

			For the Years Ended
			February 28, 2021						February 29, 2020						February 28, 2019
(in millions)
Domestic			$	495.2					$	(2,230.1)					$	1,615.9
Foreign			2,047.7						1,284.9						2,529.1
			$	2,542.9					$	(945.2)					$	4,145.0

The income tax provision (benefit) consisted of the following:

			For the Years Ended
			February 28, 2021						February 29, 2020						February 28, 2019
(in millions)
Current
Federal			$	74.0					$	66.5					$	4.1
State			19.1						12.1						15.7
Foreign			81.6						108.5						239.2
Total current			174.7						187.1						259.0
Deferred
Federal			152.8						(459.9)						223.9
State			28.3						(118.3)						75.0
Foreign			155.3						(575.5)						128.0
Total deferred			336.4						(1,153.7)						426.9
Income tax provision (benefit)			$	511.1					$	(966.6)					$	685.9

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A reconciliation of the total tax provision (benefit) to the amount computed by applying the statutory U.S. federal income tax rate to income before provision for (benefit from) income taxes is as follows:

			For the Years Ended
			February 28, 2021												February 29, 2020												February 28, 2019
			Amount						% of Pretax Income (Loss)						Amount						% of Pretax Income (Loss)						Amount						% of Pretax Income (Loss)
(in millions, except % of pretax income (loss) data)
Income tax provision (benefit) at statutory rate			$	534.0					21.0		%				$	(198.5)					21.0		%				$	870.5					21.0		%
State and local income taxes, net of federal income tax benefit (1)			39.0						1.5		%				(82.3)						8.7		%				81.3						2.0		%
Net income tax provision (benefit) from legislative changes (2)			10.9						0.4		%				(547.4)						57.9		%				(37.6)						(0.9		%)
Earnings taxed at other than U.S. statutory rate (3)			(84.4)						(3.2		%)				(46.5)						5.0		%				(81.0)						(1.9		%)
Excess tax benefits from stock-based compensation awards (4)			(29.4)						(1.2		%)				(56.2)						5.9		%				(82.9)						(2.0		%)
Net income tax provision (benefit) recognized for adjustment to valuation allowance			27.1						1.1		%				(32.8)						3.5		%				(74.1)						(1.8		%)
Miscellaneous items, net			13.9						0.5		%				(2.9)						0.3		%				9.7						0.1		%
Income tax provision (benefit) at effective rate			$	511.1					20.1		%				$	(966.6)					102.3		%				$	685.9					16.5		%

(1)Includes differences resulting from adjustments to the current and deferred state effective tax rates.

(2)The year ended February 28, 2021, represents a net income tax (provision) benefit resulting from initiatives under the CARES Act. The year ended February 29, 2020, represents the recognition of a 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. The year ended February 28, 2019, represents the recognition of a net income tax benefit related to the TCJ Act.

(3)Consists of the following (i) difference between the U.S. statutory rate and local jurisdiction tax rates, (ii) the provision for incremental U.S. taxes on earnings of certain foreign subsidiaries offset by foreign tax credits, (iii) the non-U.S. portion of tax provision (benefit) recorded on the net unrealized gain (loss) from the changes in fair value of our investment in Canopy, and (iv) the non-U.S. portion of tax benefits recorded on the Canopy equity in earnings (losses) and related activities.

(4)Represents the recognition of the income tax effect of stock-based compensation awards in the income statement when the awards vest or are settled.

Deferred tax assets and liabilities reflect the future income tax effects of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates that apply to taxable income.

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Significant components of deferred tax assets (liabilities) consist of the following:

			February 28, 2021						February 29, 2020
(in millions)
Deferred tax assets
Intangible assets			$	1,852.0					$	2,045.8
Loss carryforwards			233.1						225.9
Stock-based compensation			30.1						75.6
Lease liabilities			83.1						89.2
Inventory			26.6						32.4
Investments in unconsolidated investees			36.7						106.1
Other accruals			33.7						35.0
Gross deferred tax assets			2,295.3						2,610.0
Valuation allowances			(78.6)						(54.1)
Deferred tax assets, net			2,216.7						2,555.9
Deferred tax liabilities
Property, plant, and equipment			(200.3)						(175.5)
Provision for unremitted earnings			(23.0)						(27.5)
Right-of-use assets			(70.6)						(80.5)
Total deferred tax liabilities			(293.9)						(283.5)
Deferred tax assets (liabilities), net			$	1,922.8					$	2,272.4

In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some or all of the deferred tax assets will not be realized. In making this assessment, we consider the projected reversal of deferred tax liabilities and projected future taxable income as well as tax planning strategies. Based upon this assessment, we believe it is more likely than not that we will realize the benefits of these deductible differences, net of any valuation allowances.

As of February 28, 2021, operating loss carryforwards, which are primarily state and foreign, totaling $1.6 billion are being carried forward in a number of jurisdictions where we are permitted to use tax operating losses from prior periods to reduce future taxable income. Of these operating loss carryforwards, $1.2 billion will expire by fiscal 2027, $344.1 million will expire between fiscal 2028 and fiscal 2041, and $92.5 million of operating losses in certain jurisdictions may be carried forward indefinitely. Additionally, as of February 28, 2021, federal capital losses totaling $168.1 million are being carried forward and will expire in fiscal 2022.

We have recognized valuation allowances for operating loss carryforwards, capital loss carryforwards, and other deferred tax assets when we believe it is more likely than not that these items will not be realized. The increase in our valuation allowances as of February 28, 2021, primarily relate to adjustments in expected utilization of capital loss carryforwards in connection with the Wine and Spirits Divestiture and the Paul Masson Divestiture.

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The liability for income taxes associated with uncertain tax positions, excluding interest and penalties, and a reconciliation of the beginning and ending unrecognized tax benefit liabilities is as follows:

			For the Years Ended
			February 28, 2021						February 29, 2020						February 28, 2019
(in millions)
Balance as of March 1			$	249.4					$	224.3					$	89.3
Increases as a result of tax positions taken during a prior period			3.1						11.4						56.4
Decreases as a result of tax positions taken during a prior period			(15.4)						(14.8)						(1.4)
Increases as a result of tax positions taken during the current period			15.2						29.0						88.8
Decreases related to settlements with tax authorities			(10.2)						(0.1)						(0.8)
Decreases related to lapse of applicable statute of limitations			(6.0)						(0.4)						(8.0)
Balance as of last day of February			$	236.1					$	249.4					$	224.3

As of February 28, 2021, and February 29, 2020, we had $268.9 million and $276.2 million, respectively, of non-current unrecognized tax benefit liabilities, including interest and penalties, recognized on our balance sheets. These liabilities are recorded as non-current as payment of cash is not anticipated within one year of the balance sheet date.

As of February 28, 2021, and February 29, 2020, we had $236.1 million and $249.4 million, respectively, of unrecognized tax benefit liabilities that, if recognized, would decrease the effective tax rate in the year of resolution.

We file U.S. federal income tax returns and various state, local, and foreign income tax returns. Major tax jurisdictions where we are subject to examination by tax authorities include Canada, Mexico, Switzerland, and the U.S. Various U.S. federal, state and foreign income tax examinations are currently in progress. It is reasonably possible that the liability associated with our unrecognized tax benefit liabilities will increase or decrease within the next twelve months as a result of these examinations or the expiration of statutes of limitation. As of February 28, 2021, we estimate that unrecognized tax benefit liabilities could change by a range of $1 million to $8 million. With few exceptions, we are no longer subject to U.S. federal, state, local, or foreign income tax examinations for fiscal years prior to February 28, 2014.

We provide for additional tax expense based on probable outcomes of ongoing tax examinations and assessments in various jurisdictions. While it is often difficult to predict the outcome or the timing of resolution of any tax matter, we believe the reserves reflect the probable outcome of known tax contingencies. Unfavorable settlement of any particular issue would require the use of cash.

14. DEFERRED INCOME TAXES AND OTHER LIABILITIES

The major components of deferred income taxes and other liabilities are as follows:

			February 28, 2021						February 29, 2020
(in millions)
Deferred income taxes			$	569.7					$	384.0
Operating lease liability			471.1						483.6
Unrecognized tax benefit liabilities			268.9						276.2
Long-term income tax payable			86.1						96.2
Other			97.7						86.3
			$	1,493.5					$	1,326.3

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15. LEASES

General

We primarily lease certain vineyards, office and production facilities, warehouses, production equipment, and vehicles. We have concluded that certain grape purchasing arrangements associated with the purchase of grape production yielded from a specified block of a vineyard and certain third-party logistics arrangements contain a lease.

Balance sheet location

A summary of lease right-of-use assets and liabilities are as follows:

			Balance Sheet Classification			February 28, 2021						February 29, 2020
(in millions)
Assets
Operating lease			Other assets			$	477.9					$	481.4
Finance lease			Property, plant, and equipment			17.0						26.6
Total right-of-use assets						$	494.9					$	508.0
Liabilities
Current:
Operating lease			Other accrued expenses and liabilities			$	68.8					$	76.6
Finance lease			Current maturities of long-term debt			4.6						11.7
Non-current:
Operating lease			Deferred income taxes and other liabilities			471.1						483.6
Finance lease			Long-term debt, less current maturities			10.9						13.6
Total lease liabilities						$	555.4					$	585.5

Lease cost

The components of total lease cost are as follows:

			For the Years Ended
			February 28, 2021						February 29, 2020
(in millions)
Operating lease cost			$	93.4					$	98.9
Finance lease cost:
Amortization of right-of-use assets			11.0						12.2
Interest on lease liabilities			0.5						0.7
Short-term lease cost			9.2						8.6
Variable lease cost (1)			216.5						403.3
Total lease cost			$	330.6					$	523.7

(1)The decrease for the year ended February 28, 2021, was primarily due to (i) transfers of grape purchasing agreements largely in connection with our Wine and Spirits Divestitures and (ii) reduced grape supply availability due to the 2020 U.S. wildfires (see Note 16).

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Lease maturities (1)

As of February 28, 2021, minimum payments due for lease liabilities for each of the five succeeding fiscal years and thereafter are as follows:

			Operating Leases						Finance Leases
(in millions)
2022			$	84.6					$	4.8
2023			73.3						4.7
2024			66.7						4.2
2025			54.6						2.1
2026			44.1						—
Thereafter			336.0						—
Total lease payments			659.3						15.8
Less: Interest			(119.4)						(0.3)
Total lease liabilities			$	539.9					$	15.5

(1)For leases with terms in excess of 12 months at inception.

Supplemental information

			For the Years Ended
			February 28, 2021						February 29, 2020
(in millions)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases			$	93.9					$	100.7
Operating cash flows from finance leases			$	0.5					$	0.7
Financing cash flows from finance leases			$	10.5					$	13.8
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases			$	66.3					$	34.3
Finance leases			$	11.6					$	10.7
			February 28, 2021						February 29, 2020
Weighted-average remaining lease term: (1)
Operating leases			12.8 years						11.7 years
Finance leases			2.9 years						3.2 years
Weighted-average discount rate:
Operating leases			3.2		%				3.5		%
Finance leases			1.2		%				2.6		%

(1)Our leases have varying terms with remaining lease terms of up to approximately 30 years. Certain of our lease arrangements provide us with the option to extend or to terminate the lease early.

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16. COMMITMENTS AND CONTINGENCIES

Purchase commitments and contingencies

We have entered into various long-term contracts in the normal course of business for the purchase of (i) certain inventory components, (ii) transportation, marketing, and warehousing services, (iii) IT contracts, (iv) certain energy requirements, and (v) property, plant, and equipment and related contractor and manufacturing services. As of February 28, 2021, the estimated aggregate minimum purchase commitments under these contracts are as follows:

			Type			Length of Commitment			Amount
(in millions)
Raw materials and supplies (1)			Packaging, grapes, malts, corn, and hops			through December 2037			$	4,063.8
Contract services			Transportation, marketing, and warehousing services, and IT and energy contracts			through December 2030			816.5
Capital expenditures (2)			Property, plant, and equipment and contractor and manufacturing services			through January 2024			243.7
In-process inventories			Bulk wine and spirits			through April 2025			75.3
Other			Finished wine case goods			through May 2029			26.4
									$	5,225.7

(1)Certain grape purchasing arrangements include the purchase of grape production yielded from specified blocks of a vineyard. The actual tonnage and price of grapes that we purchase will vary each year depending on certain factors, including weather, time of harvest, overall market conditions, and the agricultural practices and location of the vineyard. Amounts included herein for the estimated aggregate minimum grape purchase commitments consist of estimates for the purchase of the grapes and the implicit leases of the land. Certain grape purchasing arrangements classified as leases have not resulted in the recognition of right-of-use assets and lease liabilities on our balance sheet due to their variable nature.

(2)Consists of purchase commitments entered into primarily in connection with the expansion project for the Obregon Brewery.

Additionally, we have entered into various contractual arrangements with affiliates of Owens-Illinois primarily for the purchase of glass bottles used largely in our imported and craft beer portfolios. Amounts purchased under these arrangements for the years ended February 28, 2021, February 29, 2020, and February 28, 2019, were $154.7 million, $166.6 million, and $238.8 million, respectively.

Indemnification liabilities

In connection with prior divestitures, we have indemnified respective parties against certain liabilities that may arise subsequent to the divestiture. As of February 28, 2021, and February 29, 2020, these liabilities consist primarily of indemnifications related to certain lease contracts and income tax matters. During the year ended February 28, 2019, in connection with the sale of the Accolade Wine Investment, we were released from certain guarantees and we recognized a gain of $3.7 million as part of the net gain on the sale of this business. This net gain is included in income (loss) from unconsolidated investments within our consolidated results of operations. As of February 28, 2021, and February 29, 2020, the carrying amount of our indemnification liabilities was $17.0 million and $9.1 million, respectively, and is included in deferred income taxes and other liabilities. We do not expect to be required to make material payments under the indemnifications and we believe that the likelihood is remote that the indemnifications could have a material adverse effect on our business, liquidity, financial condition, and/or results of operations.

Legal matters

In the ordinary course of our business, we are subject to lawsuits, arbitration, claims, and other legal proceedings in connection with our business. Some of the legal actions include claims for substantial or unspecified compensatory and/or punitive damages and/or injunctive relief. A substantial adverse judgment or other unfavorable resolution of these matters could have a material adverse effect on our financial condition, results of operations, or cash flows. Management believes that we have adequate legal defenses with respect to

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the legal proceedings to which it is a defendant or respondent and that the outcome of these pending proceedings is not likely to have a material adverse effect on our financial condition, results of operations, or cash flows. However, we are unable to predict the outcome of these matters.

Regulatory matters

We are in discussions with various governmental agencies concerning matters raised during regulatory examinations or otherwise subject to such agencies’ inquiry. These matters could result in censures, fines, or other sanctions. Management believes the outcome of any pending regulatory matters will not have a material adverse effect on our financial condition, results of operations, or cash flows. However, we are unable to predict the outcome of these matters.

2020 U.S. wildfires

In August 2020, significant wildfires broke out in California, Oregon, and Washington states which affected the U.S. grape harvest. None 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 year ended February 28, 2021, we recognized a $78.6 million loss in connection with the write-down of bulk wine inventory and certain grapes as a result of smoke damage sustained during the 2020 U.S. wildfires. This loss was included in cost of product sold within our consolidated results of operations. We have insurance coverage that partially covers losses for grapes in our own vineyards. In the fourth quarter of fiscal 2021 we determined a loss recovery from our insurance carriers was realizable and recognized $8.2 million in cost of product sold within our consolidated results of operations. While we are continuing to pursue reimbursement, there can be no assurance there will be any additional recoveries. We test the grapes acquired under our supply contracts for smoke damage and other issues prior to accepting them. Additionally, for the year ended February 28, 2021, we recognized $28.6 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 operations in the Wine and Spirits segment rather than capitalized in inventories.

17. STOCKHOLDERS’ EQUITY

Common stock

We have two classes of common stock with a material number of shares outstanding: Class A Common Stock and Class B Convertible Common Stock. Class B Convertible Common Stock shares are convertible into shares of Class A Common Stock on a one-to-one basis at any time at the option of the holder. Holders of Class B Convertible Common Stock are entitled to ten votes per share. Holders of Class A Common Stock are entitled to one vote per share and a cash dividend premium. If we pay a cash dividend on Class B Convertible Common Stock, each share of Class A Common Stock will receive an amount at least ten percent greater than the amount of the cash dividend per share paid on Class B Convertible Common Stock. In addition, the Board of Directors may declare and pay a dividend on Class A Common Stock without paying any dividend on Class B Convertible Common Stock. However, our senior credit facility limits the cash dividends that we can pay on our common stock to a fixed amount per quarter but the fixed amount may be exceeded subject to various conditions set forth in the senior credit facility.

In addition, we have a class of common stock with an immaterial number of shares outstanding: Class 1 Common Stock. Shares of Class 1 Common Stock generally have no voting rights. Class 1 Common Stock shares are convertible into shares of Class A Common Stock on a one-to-one basis at any time at the option of the holder, provided that the holder immediately sells the Class A Common Stock acquired upon conversion. Because shares of Class 1 Common Stock are convertible into shares of Class A Common Stock, for each share of Class 1 Common Stock issued, we must reserve one share of Class A Common Stock for issuance upon the conversion of the share of Class 1 Common Stock. Holders of Class 1 Common Stock do not have any preference as to dividends, but may participate in any dividend if and when declared by the Board of Directors. If we pay a cash dividend on Class 1 Common Stock, each share of Class A Common Stock will receive an amount at least ten percent greater than the amount of cash dividend per share paid on Class 1 Common Stock. In addition, the Board of Directors may declare

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and pay a dividend on Class A Common Stock without paying a dividend on Class 1 Common Stock. The cash dividends declared and paid on Class B Convertible Common Stock and Class 1 Common Stock must always be the same.

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

			Common Stock																		Treasury Stock
			Class A						Class B						Class 1						Class A						Class B
Balance at February 28, 2018			258,718,356						28,335,387						1,970						90,743,239						5,005,800
Retirement of treasury shares (1)			(74,000,000)						—						—						(74,000,000)						—
Share repurchases			—						—						—						2,352,145						—
Conversion of shares			12,968						(12,968)						—						—						—
Exercise of stock options			1,008,854						—						1,147,654						—						—
Employee stock purchases			—						—						—						(76,844)						—
Grant of restricted stock awards			—						—						—						(3,914)						—
Vesting of restricted stock units (2)			—						—						—						(24,308)						—
Vesting of performance share units (2)			—						—						—						(62,352)						—
Balance at February 28, 2019			185,740,178						28,322,419						1,149,624						18,927,966						5,005,800
Share repurchases			—						—						—						265,593						—
Conversion of shares			350,567						(22,213)						(328,354)						—						—
Exercise of stock options (3)			—						—						870,957						(747,527)						—
Employee stock purchases			—						—						—						(69,324)						—
Vesting of restricted stock units (2)			—						—						—						(91,311)						—
Vesting of performance share units (2)			—						—						—						(29,015)						—
Cancellation of restricted shares			—						—						—						444						—
Balance at February 29, 2020			186,090,745						28,300,206						1,692,227						18,256,826						5,005,800
Conversion of shares			1,113,535						(29,918)						(1,083,617)						—						—
Exercise of stock options (3)			—						—						4,326						(1,020,853)						—
Employee stock purchases			—						—						—						(67,801)						—
Vesting of restricted stock units (2)			—						—						—						(80,287)						—
Vesting of performance share units (2)			—						—						—						(17,335)						—
Balance at February 28, 2021			187,204,280						28,270,288						612,936						17,070,550						5,005,800

(1)Shares of our Class A Treasury Stock were retired to authorized and unissued shares of our Class A Common Stock.

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

			For the Years Ended
			February 28, 2021						February 29, 2020						February 28, 2019
Restricted Stock Units			37,933						49,900						15,409
Performance Share Units			9,433						17,439						44,016

(3)Includes use of Class A Treasury Stock associated with stock option exercises beginning March 1, 2019.

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. In January 2021, our Board of Directors authorized the repurchase of up to $2.0 billion of our Class A Common Stock and Class B Convertible Common Stock. Shares may

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be repurchased through open market or privately negotiated transactions. Shares repurchased under these authorizations will become treasury shares.

A summary of share repurchase activity is as follows:

															Class A Common Shares Repurchased
			Repurchase Authorization												For the Year Ended February 28, 2021												For the Year Ended February 29, 2020												For the Year Ended February 28, 2019
			Date						Amount Authorized						Dollar Value						Number of Shares						Dollar Value						Number of Shares						Dollar Value						Number of Shares
(in millions, except share data)
2018 Authorization (1)			Jan 2018						$3,000.0						$	—					—						$	50.0					265,593						$	504.3					2,352,145
2021 Authorization (2)			Jan 2021						$2,000.0						—						—						—						—						—						—
															$	—					—						$	50.0					265,593						$	504.3					2,352,145

(1)As of February 28, 2021, $1,954.1 million remains available for future share repurchase under the 2018 Authorization. The Board of Directors did not specify a date upon which the 2018 Authorization would expire.

(2)As of February 28, 2021, no shares have been repurchased under the 2021 Authorization. The Board of Directors did not specify a date upon which the 2021 Authorization would expire.

Common stock dividends

In April 2021, our Board of Directors declared a quarterly cash dividend of $0.76 per share of Class A Common Stock, $0.69 per share of Class B Convertible Common Stock, and $0.69 per share of Class 1 Common Stock payable in the first quarter of fiscal 2022.

18. STOCK-BASED EMPLOYEE COMPENSATION

We have two stock-based employee compensation plans (as further discussed below). Total compensation cost recognized for our stock-based awards and income tax benefits related thereto are as follows:

			For the Years Ended
			February 28, 2021						February 29, 2020						February 28, 2019
(in millions)
Total compensation cost recognized in our results of operations			$	63.0					$	60.4					$	64.1
Income tax benefit related thereto recognized in our results of operations			$	9.2					$	9.5					$	11.6

Long-Term Stock Incentive Plan

Under our Long-Term Stock Incentive Plan, nonqualified stock options, restricted stock, restricted stock units, performance share units, and other stock-based awards may be granted to our employees, officers, and directors. The aggregate number of shares of our Class A Common Stock and Class 1 Common Stock available for awards under our Long-Term Stock Incentive Plan is 108,000,000 shares.

The exercise price, vesting period, and term of nonqualified stock options granted are established by the committee administering the plan (the “Committee”). The exercise price of any nonqualified stock option may not be less than the fair market value of our Class A Common Stock on the date of grant. Nonqualified stock options generally vest and become exercisable over a four-year period from the date of grant and expire as established by the Committee, but not later than ten years after the grant date.

Grants of restricted stock, restricted stock units, performance share units, and other stock-based awards may contain such vesting periods, terms, conditions, and other requirements as the Committee may establish. Restricted stock and restricted stock unit awards are based on service and generally vest over one to four years from the date of grant. Performance share unit awards are based on service and the satisfaction of certain performance conditions, and vest over a required employee service period, generally from one to three years from

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the date of grant, which closely matches the performance period. The performance conditions include the achievement of specified financial or operational performance metrics, or market conditions which require the achievement of specified levels of shareholder return relative to other companies as defined in the applicable performance share unit agreement. The actual number of shares to be awarded upon vesting of a performance share unit award will range between 0% and 200% of the target award, based upon the measure of performance as certified by the Committee.

A summary of stock option activity under our Long-Term Stock Incentive Plan is as follows:

			For the Years Ended
			February 28, 2021												February 29, 2020												February 28, 2019
			Number of Options						Weighted Average Exercise Price						Number of Options						Weighted Average Exercise Price						Number of Options						Weighted Average Exercise Price
Outstanding as of March 1			4,525,418						$	108.87					5,691,219						$	81.87					7,444,701						$	56.33
Granted			973,286						$	154.62					639,957						$	206.76					540,640						$	227.91
Exercised			(1,025,179)						$	47.42					(1,618,484)						$	41.77					(2,156,508)						$	23.55
Forfeited			(56,897)						$	185.59					(175,917)						$	201.44					(133,250)						$	187.84
Expired			(16,821)						$	221.16					(11,357)						$	224.07					(4,364)						$	175.86
Outstanding as of last day of February			4,399,807						$	131.89					4,525,418						$	108.87					5,691,219						$	81.87
Exercisable			2,754,888						$	104.94					3,330,164						$	75.61					4,456,486						$	53.18

As of February 28, 2021, the aggregate intrinsic value of our options outstanding and exercisable was $367.5 million and $303.6 million, respectively. In addition, the weighted average remaining contractual life for our options outstanding and exercisable was 5.6 years and 3.8 years, respectively.

The fair value of stock options vested, and the intrinsic value of and tax benefit realized from the exercise of stock options, are as follows:

			For the Years Ended
			February 28, 2021						February 29, 2020						February 28, 2019
(in millions)
Fair value of stock options vested			$	21.1					$	21.1					$	22.8
Intrinsic value of stock options exercised			$	142.1					$	255.0					$	348.5
Tax benefit realized from stock options exercised			$	33.9					$	60.4					$	82.6

The weighted average grant-date fair value of stock options granted and the weighted average inputs used to estimate the fair value on the date of grant using the Black-Scholes option-pricing model are as follows:

			For the Years Ended
			February 28, 2021						February 29, 2020						February 28, 2019
Grant-date fair value			$	31.26					$	44.90					$	53.06
Expected life (1)			6.3 years						6.0 years						5.9 years
Expected volatility (2)			26.6		%				22.1		%				22.3		%
Risk-free interest rate (3)			0.5		%				2.5		%				2.9		%
Expected dividend yield (4)			1.9		%				1.5		%				1.3		%

(1)Based on historical experience of employees’ exercise behavior for similar type awards.

(2)Based primarily on historical volatility levels of our Class A Common Stock.

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(3)Based on the implied yield currently available on U.S. Treasury zero coupon issues with a remaining term equal to the expected life.

(4)Based on the calculated yield on our Class A Common Stock at date of grant using the current fiscal year projected annualized dividend distribution rate.

A summary of restricted Class A Common Stock activity under our Long-Term Stock Incentive Plan is as follows:

			For the Years Ended
			February 28, 2021												February 29, 2020												February 28, 2019
			Number						Weighted Average Grant-Date Fair Value						Number						Weighted Average Grant-Date Fair Value						Number						Weighted Average Grant-Date Fair Value
Restricted Stock Awards
Outstanding balance as of March 1, Nonvested			—						$	—					3,914						$	214.29					3,848						$	197.18
Granted			—						$	—					—						$	—					3,914						$	214.29
Vested			—						$	—					(3,470)						$	214.34					(3,848)						$	197.18
Forfeited			—						$	—					(444)						$	213.85					—						$	—
Outstanding balance as of last day of February, Nonvested			—						$	—					—						$	—					3,914						$	214.29
Restricted Stock Units
Outstanding balance as of March 1, Nonvested			271,143						$	196.58					314,252						$	181.62					286,658						$	157.29
Granted			178,550						$	165.57					138,472						$	203.32					108,545						$	226.97
Vested			(118,220)						$	185.75					(141,211)						$	168.68					(39,717)						$	129.57
Forfeited			(20,115)						$	183.77					(40,370)						$	200.87					(41,234)						$	182.00
Outstanding balance as of last day of February, Nonvested			311,358						$	183.74					271,143						$	196.58					314,252						$	181.62
Performance Share Units
Outstanding balance as of March 1, Nonvested			221,749						$	231.49					259,464						$	213.27					227,720						$	177.90
Granted			39,781						$	202.53					60,031						$	253.72					172,468						$	222.92
Performance achievement (1)			(1,517)						$	250.30					(17,035)						$	168.00					(281)						$	155.72
Vested			(26,768)						$	250.30					(46,454)						$	156.80					(106,368)						$	147.34
Forfeited			(6,782)						$	238.06					(34,257)						$	239.48					(34,075)						$	215.63
Outstanding balance as of last day of February, Nonvested			226,463						$	223.85					221,749						$	231.49					259,464						$	213.27

(1)Reflects the net number of awards achieved above (below) target levels based on actual performance measured at the end of the performance period.

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The fair value of shares vested for our restricted Class A Common Stock awards is as follows:

			For the Years Ended
			February 28, 2021						February 29, 2020						February 28, 2019
(in millions)
Restricted stock awards			$	—					$	0.7					$	0.8
Restricted stock units			$	19.2					$	29.9					$	9.0
Performance share units			$	4.3					$	9.9					$	24.4

The weighted average grant-date fair value of performance share units granted with a market condition and the weighted average inputs used to estimate the fair value on the date of grant using the Monte Carlo Simulation model are as follows:

			For the Years Ended
			February 28, 2021						February 29, 2020						February 28, 2019
Grant-date fair value			$	202.53					$	319.56					$	322.42
Grant-date price			$	153.02					$	205.46					$	228.26
Performance period			2.9 years						2.8 years						2.9 years
Expected volatility (1)			31.7		%				23.1		%				20.7		%
Risk-free interest rate (2)			0.2		%				2.3		%				2.6		%
Expected dividend yield (3)			0.0		%				0.0		%				0.0		%

(1)Based primarily on historical volatility levels of our Class A Common Stock.

(2)Based on the implied yield currently available on U.S. Treasury zero coupon issues with a remaining term equal to the performance period.

(3)No expected dividend yield as units granted earn dividend equivalents.

Employee Stock Purchase Plan

We have an Employee Stock Purchase Plan under which 9,000,000 shares of Class A Common Stock may be issued. Under the terms of the plan, eligible employees may purchase shares of our Class A Common Stock through payroll deductions. The purchase price is the lower of 85% of the fair market value of the stock on the first or last day of the purchase period. For the years ended February 28, 2021, February 29, 2020, and February 28, 2019, employees purchased 67,801 shares, 69,324 shares, and 76,844 shares, respectively, under this plan.

Other

As of February 28, 2021, there was $66.8 million of total unrecognized compensation cost related to nonvested stock-based compensation arrangements granted under our stock-based employee compensation plans. This cost is expected to be recognized in our results of operations over a weighted-average period of 2.1 years. With respect to the issuance of shares under any of our stock-based compensation plans, we have the option to issue authorized but unissued shares or treasury shares.

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

The computation of basic and diluted net income (loss) per common share is as follows:

			For the Years Ended
			February 28, 2021												February 29, 2020												February 28, 2019
			Common Stock												Common Stock												Common Stock
			Class A						Class B						Class A						Class B						Class A						Class B
(in millions, except per share data)
Net income (loss) attributable to CBI allocated – basic			$	1,777.2					$	220.8					$	(10.2)					$	(1.6)					$	3,049.5					$	386.4
Conversion of Class B common shares into Class A common shares			220.8						—						—						—						386.4						—
Effect of stock-based awards on allocated net income (loss)			—						(1.5)						—						—						—						(8.3)
Net income (loss) attributable to CBI allocated – diluted			$	1,998.0					$	219.3					$	(10.2)					$	(1.6)					$	3,435.9					$	378.1
Weighted average common shares outstanding – basic			170.239						23.280						168.329						23.313						167.249						23.321
Conversion of Class B common shares into Class A common shares (1)			23.280						—						—						—						23.321						—
Stock-based awards, primarily stock options (1)			1.789						—						—						—						4.962						—
Weighted average common shares outstanding – diluted			195.308						23.280						168.329						23.313						195.532						23.321
Net income (loss) per common share attributable to CBI – basic			$	10.44					$	9.48					$	(0.07)					$	(0.07)					$	18.24					$	16.57
Net income (loss) per common share attributable to CBI – diluted			$	10.23					$	9.42					$	(0.07)					$	(0.07)					$	17.57					$	16.21

(1)			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 Year Ended
															February 29, 2020
						(in millions)
						Class B Convertible Common Stock									23.313
						Stock-based awards, primarily stock options									3.239

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20. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Other comprehensive income (loss) attributable to CBI includes the following components:

			Before Tax Amount						Tax (Expense) Benefit						Net of Tax Amount
(in millions)
For the Year Ended February 28, 2019
Other comprehensive income (loss) attributable to CBI:
Foreign currency translation adjustments:
Net gain (loss)			$	(194.2)					$	—					$	(194.2)
Reclassification adjustments			—						—						—
Net gain (loss) recognized in other comprehensive income (loss)			(194.2)						—						(194.2)
Unrealized gain (loss) on cash flow hedges:
Net derivative gain (loss)			8.3						5.0						13.3
Reclassification adjustments			(3.6)						0.9						(2.7)
Net gain (loss) recognized in other comprehensive income (loss)			4.7						5.9						10.6
Unrealized gain (loss) on AFS debt securities:
Net AFS debt securities gain (loss)			(0.4)						0.1						(0.3)
Reclassification adjustments			1.9						0.9						2.8
Net gain (loss) recognized in other comprehensive income (loss)			1.5						1.0						2.5
Pension/postretirement adjustments:
Net actuarial gain (loss)			0.4						(0.1)						0.3
Reclassification adjustments			0.3						(0.1)						0.2
Net gain (loss) recognized in other comprehensive income (loss)			0.7						(0.2)						0.5
Share of OCI of equity method investments:
Net gain (loss)			38.7						(9.1)						29.6
Reclassification adjustments			—						—						—
Net gain (loss) recognized in other comprehensive income (loss)			38.7						(9.1)						29.6
Other comprehensive income (loss) attributable to CBI			$	(148.6)					$	(2.4)					$	(151.0)
For the Year Ended February 29, 2020
Other comprehensive income (loss) attributable to CBI:
Foreign currency translation adjustments:
Net gain (loss)			$	83.4					$	—					$	83.4
Reclassification adjustments			(22.6)						—						(22.6)
Net gain (loss) recognized in other comprehensive income (loss)			60.8						—						60.8
Unrealized gain (loss) on cash flow hedges:
Net derivative gain (loss)			48.0						6.4						54.4
Reclassification adjustments			(15.3)						(1.7)						(17.0)
Net gain (loss) recognized in other comprehensive income (loss)			32.7						4.7						37.4
Pension/postretirement adjustments:
Net actuarial gain (loss)			(3.1)						0.9						(2.2)
Reclassification adjustments			1.8						(0.1)						1.7
Net gain (loss) recognized in other comprehensive income (loss)			(1.3)						0.8						(0.5)
Share of OCI of equity method investments:
Net gain (loss)			(13.3)						3.2						(10.1)
Reclassification adjustments			—						—						—
Net gain (loss) recognized in other comprehensive income (loss)			(13.3)						3.2						(10.1)
Other comprehensive income (loss) attributable to CBI			$	78.9					$	8.7					$	87.6

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			Before Tax Amount						Tax (Expense) Benefit						Net of Tax Amount
(in millions)
For the Year Ended February 28, 2021
Other comprehensive income (loss) attributable to CBI:
Foreign currency translation adjustments:
Net gain (loss)			$	(51.9)					$	—					$	(51.9)
Reclassification adjustments			5.1						—						5.1
Net gain (loss) recognized in other comprehensive income (loss)			(46.8)						—						(46.8)
Unrealized gain (loss) on cash flow hedges:
Net derivative gain (loss)			(48.1)						3.2						(44.9)
Reclassification adjustments			28.8						(2.9)						25.9
Net gain (loss) recognized in other comprehensive income (loss)			(19.3)						0.3						(19.0)
Pension/postretirement adjustments:
Net actuarial gain (loss)			(2.3)						0.7						(1.6)
Reclassification adjustments			—						—						—
Net gain (loss) recognized in other comprehensive income (loss)			(2.3)						0.7						(1.6)
Share of OCI of equity method investments:
Net gain (loss)			(1.6)						(0.2)						(1.8)
Reclassification adjustments			—						—						—
Net gain (loss) recognized in other comprehensive income (loss)			(1.6)						(0.2)						(1.8)
Other comprehensive income (loss) attributable to CBI			$	(70.0)					$	0.8					$	(69.2)

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			(51.9)						(44.9)												(1.6)						(1.8)						(100.2)
Amounts reclassified from accumulated other comprehensive income (loss)			5.1						25.9												—						—						31.0
Other comprehensive income (loss)			(46.8)						(19.0)												(1.6)						(1.8)						(69.2)
Balance, February 28, 2021			$	(392.5)					$	43.5											$	(4.2)					$	17.7					$	(335.5)

21. SIGNIFICANT CUSTOMERS AND CONCENTRATION OF CREDIT RISK

Net sales to our five largest customers represented 31.8%, 32.5%, and 32.7% of our net sales for the years ended February 28, 2021, February 29, 2020, and February 28, 2019, respectively. Net sales to our five largest customers are expected to continue to represent a significant portion of our revenues. Net sales to an individual customer which amount to 10% or more of our net sales, and the associated amounts receivable from this customer as a percentage of our accounts receivable, are as follows:

			For the Years Ended
			February 28, 2021						February 29, 2020						February 28, 2019
Southern Glazer’s Wine and Spirits
Net sales			10.5		%				10.5		%				12.9		%
Accounts receivable			28.7		%				27.2		%				30.8		%

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Net sales for the above customer are primarily reported within the Wine and Spirits segment. Our arrangements with certain of our customers may, generally, be terminated by either party with prior notice. The majority of our accounts receivable balance is generated from sales to independent distributors with whom we have a predetermined collection date arranged through electronic funds transfer. We perform ongoing credit evaluations of our customers’ financial position, and management is of the opinion that any risk of significant loss is reduced due to the diversity of our customers and geographic sales area.

Subsequent event

Effective April 1, 2021, approximately 70% of our branded wine and spirits portfolio volume in the U.S. is expected to be distributed through an expanded relationship with a single distributor, Southern Glazer’s Wine & Spirits.

22. BUSINESS SEGMENT INFORMATION

Our internal management financial reporting to 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, (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, craft beer, and ABA brands. 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 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 Comparable 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 segment management compensation are evaluated based upon core segment operating income (loss). As such, the performance measures for incentive compensation purposes for segment management do not include the impact of these Comparable Adjustments.

Constellation Brands, Inc. FY 2021 Form 10-K			#WORTHREACHINGFOR I 110

PART II			ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA			Table of Contents

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 Years Ended
			February 28, 2021						February 29, 2020						February 28, 2019
(in millions)
Cost of product sold
Recovery of (loss on) inventory write-down			$	(70.4)					$	8.6					$	(3.3)
Strategic business development costs			(29.8)						(124.5)						(6.0)
COVID-19 incremental costs			(7.6)						—						—
Flow through of inventory step-up			(0.4)						(1.5)						(4.9)
Accelerated depreciation			(0.1)						(7.6)						(8.9)
Settlements of undesignated commodity derivative contracts			31.6						11.7						(8.6)
Net gain (loss) on undesignated commodity derivative contracts			25.1						(49.0)						1.8
Total cost of product sold			(51.6)						(162.3)						(29.9)
Selling, general, and administrative expenses
Restructuring and other strategic business development costs			(23.9)						(25.3)						(17.1)
Net gain (loss) on foreign currency derivative contracts			(8.0)						(1.8)						(32.6)
Transaction, integration, and other acquisition-related costs			(7.6)						(9.2)						(10.2)
Impairment of intangible assets			(6.0)						(11.0)						(108.0)
COVID-19 incremental costs			(4.8)						—						—
Deferred compensation			—						—						(16.3)
Other gains (losses) (1)			14.7						7.3						10.1
Total selling, general, and administrative expenses			(35.6)						(40.0)						(174.1)
Impairment of assets held for sale			(24.0)						(449.7)						—
Gain (loss) on sale of business			14.2						74.1						—
Comparable Adjustments, Operating income (loss)			$	(97.0)					$	(577.9)					$	(204.0)

(1)			Primarily includes the following:
						For the Years Ended
						February 28, 2021						February 29, 2020						February 28, 2019
			Decrease (increase) in estimated fair value of a contingent liability associated with prior period acquisitions			$	9.7					$	(11.4)					$	—
			Sale of certain non-core assets			$	8.8					$	(0.3)					$	8.5
			Increase in our ownership interest in Nelson’s Green Brier			$	—					$	11.8					$	—
			Recognition of previously deferred gain upon release of a related guarantee			$	—					$	6.2					$	—

The accounting policies of the segments are the same as those described for the Company in the Summary of Significant Accounting Policies in Note 1. 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 results are included in the information below and subsequently eliminated in order to reconcile to our consolidated financial statements. Segment information is as follows:

Constellation Brands, Inc. FY 2021 Form 10-K			#WORTHREACHINGFOR I 111

PART II			ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA			Table of Contents

			For the Years Ended
			February 28, 2021						February 29, 2020						February 28, 2019
(in millions)
Beer
Net sales			$	6,074.6					$	5,615.9					$	5,202.1
Segment operating income (loss)			$	2,494.3					$	2,247.9					$	2,042.9
Capital expenditures			$	693.9					$	571.7					$	720.0
Depreciation and amortization			$	194.7					$	204.3					$	203.5
Wine and Spirits
Net sales:
Wine			$	2,208.4					$	2,367.5					$	2,532.5
Spirits			331.9						360.1						381.4
Net sales			$	2,540.3					$	2,727.6					$	2,913.9
Segment operating income (loss)			$	622.4					$	708.4					$	771.2
Income (loss) from unconsolidated investments			$	31.7					$	36.4					$	33.4
Equity method investments (1)			$	125.7					$	87.7					$	79.7
Capital expenditures			$	107.5					$	92.7					$	129.5
Depreciation and amortization			$	89.9					$	98.7					$	98.4
Corporate Operations and Other
Segment operating income (loss)			$	(228.6)					$	(223.9)					$	(197.9)
Income (loss) from unconsolidated investments			$	(0.4)					$	(3.2)					$	(0.2)
Equity method investments			$	83.9					$	94.5					$	53.8
Capital expenditures			$	63.2					$	62.1					$	36.8
Depreciation and amortization			$	14.4					$	21.6					$	28.3
Canopy
Net sales			$	378.6					$	290.2					$	48.6
Segment operating income (loss)			$	(1,496.0)					$	(685.8)					$	(82.7)
Capital expenditures			$	172.6					$	572.8					$	449.8
Depreciation and amortization			$	103.3					$	81.4					$	21.9
Consolidation and Eliminations
Net sales			$	(378.6)					$	(290.2)					$	(48.6)
Operating income (loss)			$	1,496.0					$	685.8					$	82.7
Income (loss) from unconsolidated investments			$	(146.2)					$	(221.7)					$	(16.5)
Equity method investments			$	2,578.8					$	2,911.7					$	3,332.1
Capital expenditures			$	(172.6)					$	(572.8)					$	(449.8)
Depreciation and amortization			$	(103.3)					$	(81.4)					$	(21.9)
Comparable Adjustments
Operating income (loss)			$	(97.0)					$	(577.9)					$	(204.0)
Income (loss) from unconsolidated investments			$	265.2					$	(2,480.1)					$	2,084.9
Depreciation and amortization			$	0.1					$	7.6					$	8.9

Constellation Brands, Inc. FY 2021 Form 10-K			#WORTHREACHINGFOR I 112

PART II			ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA			Table of Contents

			For the Years Ended
			February 28, 2021						February 29, 2020						February 28, 2019
(in millions)
Consolidated
Net sales			$	8,614.9					$	8,343.5					$	8,116.0
Operating income (loss)			$	2,791.1					$	2,154.5					$	2,412.2
Income (loss) from unconsolidated investments (2)			$	150.3					$	(2,668.6)					$	2,101.6
Equity method investments (1)			$	2,788.4					$	3,093.9					$	3,465.6
Capital expenditures			$	864.6					$	726.5					$	886.3
Depreciation and amortization			$	299.1					$	332.2					$	339.1

(1)			Equity method investments balance at February 29, 2020, excludes amounts reclassified to assets held for sale.
(2)			Income (loss) from unconsolidated investments consists of:
									For the Years Ended
									February 28, 2021						February 29, 2020						February 28, 2019
			(in millions)
			Unrealized net gain (loss) on securities measured at fair value						$	802.0					$	(2,126.4)					$	1,971.2
			Equity in earnings (losses) from Canopy and related activities (i)						(679.0)						(575.9)						(2.6)
			Equity in earnings (losses) from other equity method investees						27.3						33.3						33.2
			Net gain (loss) on sale of unconsolidated investment						—						0.4						99.8
									$	150.3					$	(2,668.6)					$	2,101.6
			(i)			The year ended February 29, 2020, includes the June 2019 Modification Loss.

Our principal area of operation is in the U.S. Current operations outside the U.S. are in Mexico for the Beer segment and primarily in New Zealand and Italy for the Wine and Spirits segment. Revenues are attributed to countries based on the location of the customer.

Geographic data is as follows:

			For the Years Ended
			February 28, 2021						February 29, 2020						February 28, 2019
(in millions)
Net sales
U.S.			$	8,396.5					$	8,116.2					$	7,894.8
Non-U.S. (primarily Canada)			218.4						227.3						221.2
			$	8,614.9					$	8,343.5					$	8,116.0

			February 28, 2021						February 29, 2020
(in millions)
Long-lived tangible assets (1)
U.S.			$	1,005.3					$	897.7
Non-U.S. (primarily Mexico)			4,816.3						4,435.3
			$	5,821.6					$	5,333.0

(1)Long-lived tangible assets balance at February 29, 2020, excludes amounts reclassified to assets held for sale.

Constellation Brands, Inc. FY 2021 Form 10-K			#WORTHREACHINGFOR I 113

PART II			ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA			Table of Contents

23. SUBSEQUENT EVENT

Mexicali Brewery

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, in the first quarter of fiscal 2022, we expect to recognize a long-lived asset impairment of approximately $650 million to $680 million which will be included within our consolidated results of operations. The fair value will be determined based on the expected salvage value of the abandoned assets as of April 2021. We are continuing to work with government officials in Mexico to (i) determine next steps for our suspended Mexicali Brewery construction project and (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. 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. To align with our anticipated future growth expectations we are also working with the Mexican government to explore options to add further capacity at another location in Southeastern Mexico where there is ample water and a skilled workforce to meet our long-term needs.

24. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

A summary of selected quarterly financial information is as follows:

			For the Three Months Ended
			February 28, 2021						February 29, 2020
(in millions, except per share data)
Net sales			$	1,953.0					$	1,902.9
Gross profit			$	993.7					$	949.8
Net income (loss) attributable to CBI (1)			$	382.9					$	398.4
Net income (loss) per common share attributable to CBI (1):
Basic – Class A Common Stock			$	2.00					$	2.10
Basic – Class B Convertible Common Stock			$	1.81					$	1.91
Diluted – Class A Common Stock			$	1.95					$	2.04
Diluted – Class B Convertible Common Stock			$	1.80					$	1.89

(1)			Includes the following:
						For the Three Months Ended
						February 28, 2021						February 29, 2020
			(in millions, net of income tax effect)
			Unrealized net gain (loss) on securities measured at fair value			$	206.3					$	56.9
			Net gain (loss) on undesignated commodity derivative contracts			$	19.2					$	(19.2)
			Gain (loss) on sale of business			$	15.6					$	5.2
			Equity in earnings (losses) from Canopy			$	(189.5)					$	(15.6)
			(Loss on) recovery of write-down of certain inventory as a result of smoke damage sustained during wildfires			$	(34.4)					$	—
			Net income tax (provision) benefit recognized for adjustments to valuation allowances			$	(4.8)					$	(25.0)
			Impairment of asset held for sale			$	—					$	(33.2)

Constellation Brands, Inc. FY 2021 Form 10-K			#WORTHREACHINGFOR I 114

PART II			OTHER KEY INFORMATION			Table of Contents