Item 1. Financial Statements.

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Item 1. Financial Statements.

CONSTELLATION BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share data)

(unaudited)


	May 31, 2022		February 28, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	101.8	$	199.4
Accounts receivable	879.9		899.0
Inventories	1,656.4		1,573.2
Prepaid expenses and other	664.1		658.1

Total current assets	3,302.2		3,329.7
Property, plant, and equipment	6,163.3		6,059.6
Goodwill	7,915.1		7,862.4
Intangible assets	2,765.7		2,755.2
Equity method investments	2,534.0		2,688.7
Securities measured at fair value	172.3		191.4
Deferred income taxes	2,334.8		2,351.5

Other assets	653.7		617.3
Total assets	$	25,841.1	$	25,855.8
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings	$	124.0	$	323.0
Current maturities of long-term debt	575.1		605.3
Accounts payable	874.6		899.2
Other accrued expenses and liabilities	792.1		871.3
Total current liabilities	2,365.8		2,698.8
Long-term debt, less current maturities	10,278.2		9,488.2

Deferred income taxes and other liabilities	1,638.6		1,621.0
Total liabilities	14,282.6		13,808.0
Commitments and contingencies
CBI stockholders’ equity:
Class A Stock, $0.01 par value – Authorized, 322,000,000 shares; Issued, 187,264,514 shares and 187,263,859 shares, respectively	1.9		1.9
Class B Stock, $0.01 par value – Authorized, 30,000,000 shares; Issued, 28,211,685 shares and 28,212,340 shares, respectively	0.3		0.3
Additional paid-in capital	1,825.0		1,808.9
Retained earnings	14,746.2		14,505.4
Accumulated other comprehensive income (loss)	(166.3)		(412.7)
	16,407.1		15,903.8
Less: Treasury stock –
Class A Stock, at cost, 26,694,497 shares and 22,824,607 shares, respectively	(5,173.5)		(4,169.7)
Class B Stock, at cost, 5,005,800 shares	(2.2)		(2.2)
	(5,175.7)		(4,171.9)
Total CBI stockholders’ equity	11,231.4		11,731.9
Noncontrolling interests	327.1		315.9
Total stockholders’ equity	11,558.5		12,047.8
Total liabilities and stockholders’ equity	$	25,841.1	$	25,855.8

The accompanying notes are an integral part of these statements.


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FINANCIAL STATEMENTS			Table of Contents

CONSTELLATION BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in millions, except per share data)

(unaudited)


	For the Three Months Ended May 31,
	2022		2021
Sales	$	2,540.7	$	2,188.3
Excise taxes	(177.5)		(161.8)
Net sales	2,363.2		2,026.5
Cost of product sold	(1,108.2)		(907.2)
Gross profit	1,255.0		1,119.3
Selling, general, and administrative expenses	(438.6)		(378.3)
Impairment of brewery construction in progress	—		(665.9)


Operating income (loss)	816.4		75.1
Income (loss) from unconsolidated investments	(187.9)		(899.2)
Interest expense	(88.5)		(86.7)
Loss on extinguishment of debt	(15.3)		—
Income (loss) before income taxes	524.7		(910.8)
(Provision for) benefit from income taxes	(125.4)		13.5
Net income (loss)	399.3		(897.3)
Net (income) loss attributable to noncontrolling interests	(9.8)		(10.8)
Net income (loss) attributable to CBI	$	389.5	$	(908.1)

Comprehensive income (loss)	$	658.3	$	(792.8)
Comprehensive (income) loss attributable to noncontrolling interests	(22.4)		(16.4)
Comprehensive income (loss) attributable to CBI	$	635.9	$	(809.2)

Net income (loss) per common share attributable to CBI:
Basic – Class A Stock	$	2.09	$	(4.74)
Basic – Class B Stock	$	1.89	$	(4.31)

Diluted – Class A Stock	$	2.06	$	(4.74)
Diluted – Class B Stock	$	1.89	$	(4.31)

Weighted average common shares outstanding:
Basic – Class A Stock	165.335		170.602
Basic – Class B Stock	23.206		23.247

Diluted – Class A Stock	189.333		170.602
Diluted – Class B Stock	23.206		23.247

Cash dividends declared per common share:
Class A Stock	$	0.80	$	0.76
Class B Stock	$	0.72	$	0.69

The accompanying notes are an integral part of these statements.


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FINANCIAL STATEMENTS			Table of Contents


CONSTELLATION BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (in millions) (unaudited)
	Stock				Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Non-controlling Interests		Total
	Class A		Class B
Balance at February 28, 2022	$	1.9	$	0.3	$	1,808.9	$	14,505.4	$	(412.7)	$	(4,171.9)	$	315.9	$	12,047.8

Comprehensive income (loss):
Net income (loss)	—		—		—		389.5		—		—		9.8		399.3
Other comprehensive income (loss), net of income tax effect	—		—		—		—		246.4		—		12.6		259.0
Comprehensive income (loss)															658.3
Repurchase of shares	—		—		—		—		—		(1,007.6)		—		(1,007.6)
Dividends declared	—		—		—		(148.7)		—		—		—		(148.7)
Noncontrolling interest distributions	—		—		—		—		—		—		(11.2)		(11.2)
Shares issued under equity compensation plans	—		—		(0.6)		—		—		3.8		—		3.2
Stock-based compensation	—		—		16.7		—		—		—		—		16.7
Balance at May 31, 2022	$	1.9	$	0.3	$	1,825.0	$	14,746.2	$	(166.3)	$	(5,175.7)	$	327.1	$	11,558.5























Balance at February 28, 2021	$	1.9	$	0.3	$	1,604.2	$	15,117.8	$	(335.5)	$	(2,789.8)	$	330.2	$	13,929.1

Comprehensive income (loss):
Net income (loss)	—		—		—		(908.1)		—		—		10.8		(897.3)
Other comprehensive income (loss), net of income tax effect	—		—		—		—		98.9		—		5.6		104.5
Comprehensive income (loss)															(792.8)
Repurchase of shares	—		—		—		—		—		(400.8)		—		(400.8)
Dividends declared	—		—		—		(146.1)		—		—		—		(146.1)
Noncontrolling interest distributions	—		—		—		—		—		—		(10.6)		(10.6)
Shares issued under equity compensation plans	—		—		(0.9)		—		—		3.8		—		2.9
Stock-based compensation	—		—		15.9		—		—		—		—		15.9
Balance at May 31, 2021	$	1.9	$	0.3	$	1,619.2	$	14,063.6	$	(236.6)	$	(3,186.8)	$	336.0	$	12,597.6

The accompanying notes are an integral part of these statements.


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FINANCIAL STATEMENTS			Table of Contents

CONSTELLATION BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)


	For the Three Months Ended May 31,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	399.3	$	(897.3)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Unrealized net (gain) loss on securities measured at fair value	22.4		745.1
Deferred tax provision (benefit)	21.5		(98.7)
Depreciation	92.7		76.0
Stock-based compensation	16.8		16.0
Equity in (earnings) losses of equity method investees and related activities, net of distributed earnings	165.5		154.1
Noncash lease expense	21.6		19.7

Amortization of debt issuance costs and loss on extinguishment of debt	17.7		2.7


Impairment of brewery construction in progress	—		665.9



Gain (loss) on settlement of Pre-issuance hedge contracts	20.7		—

Change in operating assets and liabilities, net of effects from purchase and sale of business:
Accounts receivable	17.2		(136.7)
Inventories	(83.0)		(82.3)
Prepaid expenses and other current assets	93.7		(11.7)
Accounts payable	94.5		224.1
Deferred revenue	26.2		130.5
Other accrued expenses and liabilities	(166.2)		(61.7)
Other	(2.4)		(29.7)
Total adjustments	358.9		1,613.3
Net cash provided by (used in) operating activities	758.2		716.0

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant, and equipment	(196.6)		(113.9)

Purchase of business, net of cash acquired	(37.2)		—
Investments in equity method investees and securities	—		(8.5)
Proceeds from sale of assets	6.5		0.8

Proceeds from sale of business	—		5.0
Other investing activities	0.5		—
Net cash provided by (used in) investing activities	(226.8)		(116.6)


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FINANCIAL STATEMENTS			Table of Contents

CONSTELLATION BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)


	For the Three Months Ended May 31,
	2022		2021
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt	1,846.8		6.3
Principal payments of long-term debt	(1,084.7)		(7.4)
Net proceeds from (repayments of) short-term borrowings	(199.0)		—
Dividends paid	(149.3)		(146.7)
Purchases of treasury stock	(1,007.6)		(400.8)
Proceeds from shares issued under equity compensation plans	14.0		12.5
Payments of minimum tax withholdings on stock-based payment awards	(10.4)		(9.8)
Payments of debt issuance, debt extinguishment, and other financing costs	(25.8)		—
Distributions to noncontrolling interests	(11.2)		(10.6)




Net cash provided by (used in) financing activities	(627.2)		(556.5)

Effect of exchange rate changes on cash and cash equivalents	(1.8)		0.3

Net increase (decrease) in cash and cash equivalents	(97.6)		43.2
Cash and cash equivalents, beginning of period	199.4		460.6
Cash and cash equivalents, end of period	$	101.8	$	503.8

Supplemental disclosures of noncash investing and financing activities











Additions to property, plant, and equipment	$	83.1	$	179.6

The accompanying notes are an integral part of these statements.


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FINANCIAL STATEMENTS			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			Table of Contents

CONSTELLATION BRANDS, INC. AND SUBSIDIARIES

MAY 31, 2022

(unaudited)

1. BASIS OF PRESENTATION

We have prepared the Financial Statements, without audit, pursuant to the rules and regulations of the SEC applicable to quarterly reporting on Form 10-Q and reflect, in our opinion, all adjustments necessary to present fairly our financial information. All such adjustments are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements, prepared in accordance with generally accepted accounting principles, have been condensed or omitted as permitted by such rules and regulations. These Financial Statements should be read in conjunction with the consolidated financial statements and related notes included in the 2022 Annual Report. Results of operations for interim periods are not necessarily indicative of annual results.

2. INVENTORIES

Inventories are stated at the lower of cost (primarily computed in accordance with the first-in, first-out method) or net realizable value. Elements of cost include materials, labor, and overhead and consist of the following:


	May 31, 2022		February 28, 2022
(in millions)
Raw materials and supplies	$	215.0	$	185.3
In-process inventories	820.9		804.8
Finished case goods	620.5		583.1
	$	1,656.4	$	1,573.2

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. We evaluated the carrying value of certain inventories and recognized the following in cost of product sold within our consolidated results of operations:


	For the Three Months Ended May 31,
	2022		2021
(in millions)
Loss on inventory write-down	$	6.1	$	16.0

3. DERIVATIVE INSTRUMENTS

Overview

Our risk management and derivative accounting policies are presented in Notes 1 and 6 of our consolidated financial statements included in our 2022 Annual Report and have not changed significantly for the three months ended May 31, 2022.

We have an investment in certain equity securities and other rights which provide us with the option to purchase an additional ownership interest in the equity securities of Canopy (see Note 7). This investment is included in securities measured at fair value and is accounted for at fair value, with the net gain (loss) from the changes in fair value of this investment recognized in income (loss) from unconsolidated investments (see Note 4).


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FINANCIAL STATEMENTS			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			Table of Contents

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


	May 31, 2022		February 28, 2022
(in millions)
Derivative instruments designated as hedging instruments
Foreign currency contracts	$	2,030.2	$	1,863.2


Pre-issuance hedge contracts	$	—	$	100.0

Derivative instruments not designated as hedging instruments
Foreign currency contracts	$	696.0	$	497.6
Commodity derivative contracts	$	342.0	$	291.1

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 May 31, 2022, the estimated fair value of derivative instruments in a net liability position due to counterparties was $3.9 million. If we were required to settle the net liability position under these derivative instruments on May 31, 2022, we would have had sufficient available liquidity on hand to satisfy this obligation.

Results of period derivative activity

The estimated fair value and location of our derivative instruments on our balance sheets are as follows (see Note 4):


Assets					Liabilities
	May 31, 2022		February 28, 2022			May 31, 2022		February 28, 2022
(in millions)
Derivative instruments designated as hedging instruments
Foreign currency contracts:
Prepaid expenses and other	$	61.9	$	28.6	Other accrued expenses and liabilities	$	10.1	$	5.9
Other assets	$	72.2	$	25.1	Deferred income taxes and other liabilities	$	7.6	$	8.6



Pre-issuance hedge contracts:

Other assets	$	—	$	—	Deferred income taxes and other liabilities	$	—	$	0.4



Derivative instruments not designated as hedging instruments
Foreign currency contracts:
Prepaid expenses and other	$	13.7	$	2.7	Other accrued expenses and liabilities	$	4.8	$	3.3
Commodity derivative contracts:
Prepaid expenses and other	$	92.3	$	61.3	Other accrued expenses and liabilities	$	5.4	$	0.7
Other assets	$	28.5	$	29.7	Deferred income taxes and other liabilities	$	2.6	$	0.2


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FINANCIAL STATEMENTS			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			Table of Contents

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 Three Months Ended May 31, 2022
Foreign currency contracts	$	79.5	Sales	$	(0.6)
			Cost of product sold	11.1


Pre-issuance hedge contracts	15.7		Interest expense	(0.5)
	$	95.2		$	10.0

For the Three Months Ended May 31, 2021
Foreign currency contracts	$	19.3	Sales	$	(0.2)
			Cost of product sold	9.0

Pre-issuance hedge contracts	—		Interest expense	(0.6)
	$	19.3		$	8.2

We expect $45.6 million of net gains, net of income tax effect, to be reclassified from AOCI to our results of operations within the next 12 months.

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


Derivative Instruments Not Designated as Hedging Instruments	Location of Net Gain (Loss) Recognized in Income (Loss)	Net Gain (Loss) Recognized in Income (Loss)
(in millions)
For the Three Months Ended May 31, 2022
Commodity derivative contracts	Cost of product sold	$	48.5
Foreign currency contracts	Selling, general, and administrative expenses	6.2

		$	54.7

For the Three Months Ended May 31, 2021
Commodity derivative contracts	Cost of product sold	$	24.1
Foreign currency contracts	Selling, general, and administrative expenses	(2.2)

		$	21.9

4. FAIR VALUE OF FINANCIAL INSTRUMENTS

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

Level 1 inputs are quoted prices in active markets for identical assets or liabilities;
Level 2 inputs include data points that are observable such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or similar assets or liabilities in markets


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that are not active, and inputs (other than quoted prices) such as volatility, interest rates, and yield curves that are observable for the asset and liability, either directly or indirectly; and

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

Fair value methodology

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

Foreign currency and commodity derivative contracts

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

Interest rate swap and Pre-issuance hedge contracts

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

Canopy investment

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


	May 31, 2022						February 28, 2022
	Tranche A Warrants (3)			Tranche B Warrants (4)			Tranche A Warrants (3)			Tranche B Warrants (4)
Exercise price (5)	C$	50.40		C$	76.68		C$	50.40		C$	76.68
Valuation date stock price (6)	C$	6.33		C$	6.33		C$	9.04		C$	9.04
Remaining contractual term (7)	1.4 years			4.4 years			1.7 years			4.7 years
Expected volatility (8)	85.0		%	85.0		%	75.0		%	75.0		%
Risk-free interest rate (9)	2.6		%	2.7		%	1.4		%	1.7		%
Expected dividend yield (10)	0.0		%	0.0		%	0.0		%	0.0		%

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

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

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

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

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

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

(7)Based on the expiration date of the warrants.


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

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

(10)Based on historical dividend levels.

Debt securities, Convertible – We have elected the fair value option to account for the Canopy Debt Securities acquired in June 2018 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. 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. For additional information on the Canopy Debt Securities refer to Note 7.

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


	May 31, 2022			February 28, 2022
Conversion price (1)	C$	48.17		C$	48.17
Valuation date stock price (2)	C$	6.33		C$	9.04
Remaining term (3)	1.1 years			1.4 years
Expected volatility (4)	85.0		%	75.0		%
Risk-free interest rate (5)	2.5		%	1.4		%
Expected dividend yield (6)	0.0		%	0.0		%

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

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

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

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

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

(6)Based on historical dividend levels.

Short-term borrowings

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

Long-term debt

The term loan under our 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, and accounts payable, approximate fair value as of May 31, 2022, and February 28, 2022, due


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to the relatively short maturity of these instruments. As of May 31, 2022, the carrying amount of long-term debt, including the current portion, was $10,853.3 million, compared with an estimated fair value of $10,442.9 million. As of February 28, 2022, the carrying amount of long-term debt, including the current portion, was $10,093.5 million, compared with an estimated fair value of $10,345.3 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)
May 31, 2022
Assets:
Foreign currency contracts	$	—	$	147.8	$	—	$	147.8
Commodity derivative contracts	$	—	$	120.8	$	—	$	120.8

November 2018 Canopy Warrants (1)	$	—	$	17.6	$	—	$	17.6
Canopy Debt Securities (1)	$	—	$	146.1	$	—	$	146.1

Liabilities:
Foreign currency contracts	$	—	$	22.5	$	—	$	22.5
Commodity derivative contracts	$	—	$	8.0	$	—	$	8.0




February 28, 2022
Assets:
Foreign currency contracts	$	—	$	56.4	$	—	$	56.4
Commodity derivative contracts	$	—	$	91.0	$	—	$	91.0
November 2018 Canopy Warrants (1)	$	—	$	36.3	$	—	$	36.3
Canopy Debt Securities (1)	$	—	$	146.6	$	—	$	146.6
Liabilities:
Foreign currency contracts	$	—	$	17.8	$	—	$	17.8
Commodity derivative contracts	$	—	$	0.9	$	—	$	0.9

Pre-issuance hedge contracts	$	—	$	0.4	$	—	$	0.4


(1)	Unrealized net gain (loss) from the changes in fair value of our securities measured at fair value recognized in income (loss) from unconsolidated investments, are as follows:
		For the Three Months Ended May 31,
		2022		2021
	(in millions)
	November 2018 Canopy Warrants	$	(18.7)	$	(736.2)
	Canopy Debt Securities	(3.7)		(8.9)
		$	(22.4)	$	(745.1)


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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 period 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 Three Months Ended May 31, 2021
Long-lived assets	$	—	$	—	$	20.0	$	665.9

Long-lived assets

In April 2021, our Board of Directors authorized management to sell or abandon the Mexicali Brewery. Subsequently, management determined that we will be unable to use or repurpose certain assets at the Mexicali Brewery. Accordingly, for the first quarter of Fiscal 2022, long-lived assets with a carrying value of $685.9 million were written down to their estimated fair value of $20.0 million, resulting in an impairment of $665.9 million. This impairment was included in impairment of brewery construction in progress within our consolidated results of operations for the three months ended May 31, 2021. Our estimate of fair value was determined based on the expected salvage value of the assets. The Mexicali Brewery is a component of the Beer segment. We continue to work with government officials in Mexico to (i) determine next steps for our suspended Mexicali Brewery construction project, (ii) pursue various forms of recovery for capitalized costs and additional expenses incurred in establishing the brewery, however, there can be no assurance of any recoveries, and (iii) explore options to add further capacity at other locations in Mexico, including the construction of the Veracruz Brewery where there is ample water and we will have a skilled workforce to meet our long-term needs. In the medium-term, under normal operating conditions, we have ample capacity at the Nava and Obregon breweries to meet consumer needs based on current growth forecasts and current and planned production capabilities. Expansion, optimization, and/or construction activities continue at our current brewery locations under our Mexico Beer Projects to align with our anticipated future growth expectations.

5. GOODWILL

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


	Beer		Wine and Spirits		Consolidated
(in millions)
Balance, February 28, 2021	$	5,125.6	$	2,667.9	$	7,793.5
Purchase accounting allocations (1)	—		79.6		79.6

Foreign currency translation adjustments	(4.9)		(5.8)		(10.7)

Balance, February 28, 2022	5,120.7		2,741.7		7,862.4
Purchase accounting allocations (2)	—		25.9		25.9

Foreign currency translation adjustments	30.1		(3.3)		26.8


Balance, May 31, 2022	$	5,150.8	$	2,764.3	$	7,915.1

(1)Preliminary purchase accounting allocations associated with the acquisition of My Favorite Neighbor and purchase accounting allocations associated with the acquisition of Empathy Wines.

(2)Preliminary purchase accounting allocations associated with the acquisitions of My Favorite Neighbor, Lingua Franca, and Austin Cocktails.


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Acquisitions

Austin Cocktails

In April 2022, we acquired the remaining 73% ownership interest in Austin Cocktails, which included a portfolio of small batch, RTD cocktails. This transaction primarily included the acquisition of goodwill and a trademark. In addition, the purchase price for Austin Cocktails includes an earn-out over five years based on performance. The results of operations of Austin Cocktails are reported in the Wine and Spirits segment and have been included in our consolidated results of operations from the date of acquisition. For additional information on this transaction refer to Note 13.

Lingua Franca

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

My Favorite Neighbor

In November 2021, we acquired the remaining 65% ownership interest in My Favorite Neighbor, a super-luxury, DTC focused wine business as well as certain wholesale distributed brands. This transaction primarily included the acquisition of goodwill, trademarks, inventory, and property, plant, and equipment. In addition, the My Favorite Neighbor transaction includes an earn-out over 10 years based on performance, with a 50% minimum guarantee due at the end of the earn-out period. The results of operations of My Favorite Neighbor are reported in the Wine and Spirits segment and have been included in our consolidated results of operations from the date of acquisition.

6. INTANGIBLE ASSETS

The major components of intangible assets are as follows:


	May 31, 2022				February 28, 2022
	Gross Carrying Amount		Net Carrying Amount		Gross Carrying Amount		Net Carrying Amount
(in millions)
Amortizable intangible assets
Customer relationships	$	87.1	$	20.7	$	87.1	$	21.7
Other	20.8		—		20.9		—
Total	$	107.9	20.7		$	108.0	21.7

Nonamortizable intangible assets
Trademarks			2,745.0				2,733.5
Total intangible assets			$	2,765.7			$	2,755.2

We did not incur costs to renew or extend the term of acquired intangible assets for the three months ended May 31, 2022, and May 31, 2021. Net carrying amount represents the gross carrying value net of accumulated amortization.


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7. EQUITY METHOD INVESTMENTS

Our equity method investments are as follows:


	May 31, 2022				February 28, 2022
	Carrying Value		Ownership Percentage		Carrying Value		Ownership Percentage
(in millions)
Canopy Equity Method Investment (1) (2)	$	2,353.5	36.1	%	$	2,503.5	36.1	%
Other equity method investments	180.5		20%-50%		185.2		20%-50%
	$	2,534.0			$	2,688.7

(1)The fair value based on the closing price of the underlying equity security as of May 31, 2022, and February 28, 2022, was $711.9 million and $1,014.8 million, respectively. Refer to discussion below on other-than-temporary impairment considerations.

(2)Includes the following:


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

Canopy Equity Method Investment

We complement our beverage alcohol strategy with our investment in Canopy, a leading provider of medicinal and recreational cannabis products. Equity in earnings (losses) from the Canopy Equity Method Investment and related activities is determined by recording the effect of basis differences. Amounts included in our consolidated results of operations for each period are as follows:


	For the Three Months Ended May 31,
	2022		2021
(in millions)
Equity in earnings (losses) from Canopy and related activities	$	(165.0)	$	(155.8)

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 Acreage Financial Instrument (a call option for Canopy to acquire 70% of the shares of Acreage at a fixed exchange ratio and 30% at a floating exchange ratio). As of May 31, 2022, the exercise and/or conversion of certain of these outstanding securities could have a significant effect on our share of Canopy’s reported earnings or losses and our ownership interest in Canopy.

We have evaluated the Canopy Equity Method Investment as of May 31, 2022, and determined that there was not an other-than-temporary impairment. Our conclusion was based on several contributing factors, including: (i) the period of time for which the fair value has been less than the carrying value, (ii) an expectation that Canopy’s results will improve, (iii) an expectation that the Canopy stock price will recover in the near-term, and (iv) our ability and intent to hold the investment until that recovery. We will continue to review the Canopy Equity Method Investment for an other-than-temporary impairment. If Canopy’s stock price does not recover above our C$20.54 carrying value in the near-term, it may result in an impairment of our Canopy Equity Method Investment. There may also be a future impairment of our Canopy Equity Method Investment if our expectations about Canopy’s prospective results and cash flows decline, which could be influenced by a variety of factors


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FINANCIAL STATEMENTS			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			Table of Contents

including adverse market conditions or if Canopy records a significant impairment of goodwill or intangible or other long-lived assets, makes significant asset sales, or has changes in senior management.

The following table presents 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 January through March 2022 and January through March 2021 in our three months ended May 31, 2022, and May 31, 2021, results, respectively. The three months ended May 31, 2022, includes substantial costs designed to drive efficiency and accelerate Canopy’s path to profitability. The amounts shown represent 100% of Canopy’s reported results of operations for the respective periods.


	For the Three Months Ended May 31,
	2022		2021
(in millions)
Net sales	$	88.2	$	117.3
Gross profit (loss)	$	(125.7)	$	7.7
Net income (loss)	$	(456.8)	$	(487.1)
Net income (loss) attributable to Canopy	$	(453.7)	$	(552.9)

Subsequent event

Canopy Debt Securities

On June 29, 2022, certain holders of Canopy Debt Securities agreed to sell C$255 million of their Canopy Debt Securities to Canopy at 99% of principal value in exchange for newly issued shares of Canopy common stock. As part of this transaction, we agreed to sell C$100 million of our Canopy Debt Securities in exchange for Canopy common shares. The number of common shares issuable will be based on the volume-weighted average trading price of Canopy's common shares on the Nasdaq for a 10-day trading period beginning on and including June 30, 2022, provided that the exchange price will not be less than $2.50 or more than $3.50. As a result of the exchange, we will receive between 30.7 million and 21.9 million Canopy common shares in July 2022. This sale is not expected to significantly change our Canopy ownership percentage and we will continue to hold C$100 million of our Canopy Debt Securities following this transaction. As part of this transaction, the Canopy Debt Securities were amended to remove Canopy’s right to settle the Canopy Debt Securities on conversion into Canopy equity shares. As a result, the Canopy Debt Securities may only be settled in cash.

8. BORROWINGS

Borrowings consist of the following:


	May 31, 2022						February 28, 2022
	Current		Long-term		Total		Total
(in millions)
Short-term borrowings

Commercial paper	$	124.0					$	323.0

	$	124.0					$	323.0

Long-term debt

Term loan credit facilities	$	—	$	300.0	$	300.0	$	300.0
Senior notes	567.4		9,965.7		10,533.1		9,773.6
Other	7.7		12.5		20.2		19.9
	$	575.1	$	10,278.2	$	10,853.3	$	10,093.5


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Bank facilities

Senior credit facility

In April 2022, the Company, CB International, the Administrative Agent, and certain other lenders entered into the 2022 Restatement Agreement that amended and restated our then-existing senior credit facility (as amended and restated by the 2022 Restatement Agreement, the 2022 Credit Agreement). The principal changes effected by the 2022 Restatement Agreement were:

The refinance and increase of the existing revolving credit facility from $2.0 billion to $2.25 billion and extension of its maturity to April 14, 2027;
The refinement of certain negative covenants; and
The replacement of LIBOR rates with rates based on term SOFR.

Term credit agreement

In April 2022, the Company, the Administrative Agent, and the Lender amended the June 2021 Term Credit Agreement (as amended, the 2022 Term Credit Agreement). The principal changes effected by the amendment were the refinement of certain negative covenants and replacement of LIBOR rates with rates based on term SOFR.

As of May 31, 2022, aggregate credit facilities under the 2022 Credit Agreement and the 2022 Term Credit Agreement consist of the following:


	Amount		Maturity
(in millions)
2022 Credit Agreement
Revolving credit facility (1) (2)	$	2,250.0	Apr 14, 2027





2022 Term Credit Agreement
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 SOFR plus a margin and a credit spread adjustment, or the base rate plus a margin, or, in certain circumstances where SOFR cannot be adequately ascertained or available, an alternative benchmark rate plus a margin.

(2)We and/or CB International are the borrower under the $2,250.0 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 Five-Year Term Facility.

As of May 31, 2022, information with respect to borrowings under the 2022 Credit Agreement and the 2022 Term Credit Agreement is as follows:


	Outstanding borrowings		Interest rate		SOFR margin		Outstanding letters of credit		Remaining borrowing capacity (1)
(in millions)
2022 Credit Agreement
Revolving credit facility	$	—	—	%	—	%	$	12.0	$	2,114.0





2022 Term Credit Agreement
Five-Year Term Facility	$	300.0	1.7	%	0.88	%

(1)Net of outstanding revolving credit facility borrowings and outstanding letters of credit under the 2022 Credit Agreement and outstanding borrowings under our commercial paper program of $124.0 million (excluding unamortized discount) (see “Commercial paper program” below).


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We and our subsidiaries are subject to covenants that are contained in the 2022 Credit Agreement and the 2022 Term Credit Agreement, including those restricting the incurrence of additional subsidiary indebtedness, additional liens, mergers and consolidations, transactions with affiliates, and sale and leaseback transactions, in each case subject to numerous conditions, exceptions, and thresholds. The financial covenants are limited to a minimum interest coverage ratio and a maximum net leverage ratio.

Commercial paper program

We have a commercial paper program which provides for the issuance of up to an aggregate principal amount of $2.0 billion of commercial paper. Our commercial paper program is backed by unused commitments under our revolving credit facility under our 2022 Credit Agreement. Accordingly, outstanding borrowings under our commercial paper program reduce the amount available under our revolving credit facility. As of May 31, 2022, we had $124.0 million of outstanding borrowings, net of unamortized discount, under our commercial paper program with a weighted average annual interest rate of 1.3% and a weighted average remaining term of five days.

Pre-issuance hedge contracts

In connection with the May 2022 Senior Notes, we entered into Pre-issuance hedge contracts, which were designated as cash flow hedges. As a result of these agreements, we hedged the treasury rate volatility on $300.0 million of future debt issuances. In May 2022, we terminated and settled all outstanding Pre-issuance hedge contracts, and recognized an unrealized gain, net of income tax effect, of $15.3 million in AOCI within our consolidated balance sheets. The gain on Pre-issuance hedge contracts is being amortized over 10 years to interest expense within our consolidated results of operations. See “Senior notes” below.

Senior notes

In May 2022, we issued $1,850.0 million aggregate principal amount of senior notes. Proceeds from this offering, net of discount and debt issuance costs, were $1,837.5 million. The May 2022 Senior Notes consist of:


			Date of		Redemption
	Principal		Maturity	Interest Payments	Stated Redemption Date	Stated Basis Points
(in millions, except basis points)
3.60% Senior Notes (1)	$	550.0	May 2024	May/Nov	(2)	15
4.35% Senior Notes (1) (3)	$	600.0	May 2027	May/Nov	Apr 2027	25
4.75% Senior Notes (1) (3)	$	700.0	May 2032	May/Nov	Feb 2032	30

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

(2)Redeemable, in whole or in part, at our option at any time 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 applicable treasury rate plus the stated basis points.

(3)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 applicable treasury rate plus the stated basis points as defined in the indenture. On or after the stated redemption date, redeemable, in whole or in part, at our option at any time at a redemption price equal to 100% of the outstanding principal amount, plus accrued and unpaid interest.

In February 2018, we issued $600.0 million aggregate principal amount of 3.20% senior notes due February 2023. In May 2013, we issued $1,050.0 million aggregate principal amount of 4.25% senior notes due May 2023. In May 2022, we used a portion of the proceeds from the May 2022 Senior Notes to complete a series of cash tender offers to purchase the 3.20% February 2018 Senior Notes and the 4.25% May 2013 Senior Notes validly tendered pursuant to the tender offers. We settled the tender offers with holders of approximately 67%


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and 65% of the total outstanding principal amount of the 3.20% February 2018 Senior Notes and the 4.25% May 2013 Senior Notes, respectively. Total cash consideration paid for these purchases was $1,096.0 million and the total carrying amount of the notes was $1,080.7 million, resulting in a loss on extinguishment of debt of $15.3 million (including an immaterial amount of fees and other costs associated with the tender offers), which is included within our consolidated results. In addition, we paid any accrued interest on the tendered notes up to, but not including the date of settlement. In June 2022, we redeemed the remaining $198.2 million and $369.8 million outstanding principal balance of the 3.20% February 2018 Senior Notes and the 4.25% May 2013 Senior Notes, respectively. Total cash consideration paid was $575.5 million, which included the remaining principal amount of the notes of $568.0 million and a make-whole premium of $7.5 million which will be included in loss on extinguishment of debt within our consolidated results. See “Debt payments” below.

Debt payments

As of May 31, 2022, the required principal repayments under long-term debt obligations (excluding unamortized debt issuance costs and unamortized discounts of $63.6 million and $21.3 million, respectively) for the remaining nine months of Fiscal 2023 and for each of the five succeeding fiscal years and thereafter are as follows:


(in millions)
Fiscal 2023 (1)	$	574.1
Fiscal 2024	7.0
Fiscal 2025	1,254.0
Fiscal 2026	902.1
Fiscal 2027	600.9
Fiscal 2028	1,800.0
Thereafter	5,800.1
	$	10,938.2

(1)Includes $568.0 million remaining principal amount of the 3.20% February 2018 Senior Notes and 4.25% May 2013 Senior Notes, fully redeemed in June 2022.

9. INCOME TAXES

Our effective tax rate for the three months ended May 31, 2022, and May 31, 2021, was 23.9% and 1.5%, respectively.

For the three months ended May 31, 2022, our effective tax rate was higher than the federal statutory rate of 21% primarily due to valuation allowances on the unrealized net loss from changes in fair value of our investment in Canopy and Canopy equity in earnings (losses), partially offset by the benefit of lower effective tax rates applicable to our foreign businesses.

For the three months ended May 31, 2021, our effective tax rate was lower than the federal statutory rate of 21% primarily due to (i) valuation allowances on the unrealized net loss from changes in fair value of our investment in Canopy and Canopy equity in earnings (losses) and (ii) the impact of the long-lived asset impairment of brewery construction in progress, partially offset by the benefit of lower effective tax rates applicable to our foreign businesses.


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10. STOCKHOLDERS’ EQUITY

Common stock

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


	Common Stock			Treasury Stock
	Class A	Class B	Class 1	Class A	Class B
Balance at February 28, 2022	187,263,859	28,212,340	2,248,679	22,824,607	5,005,800
Share repurchases	—	—	—	4,065,508	—
Conversion of shares	655	(655)	—	—	—
Exercise of stock options	—	—	35	(108,228)	—


Vesting of restricted stock units (1)	—	—	—	(71,064)	—
Vesting of performance share units (1)	—	—	—	(16,326)	—

Balance at May 31, 2022	187,264,514	28,211,685	2,248,714	26,694,497	5,005,800




















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


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

Balance at May 31, 2021	187,247,721	28,227,478	613,086	18,577,123	5,005,800

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


			For the Three Months Ended May 31,
2022
Restricted Stock Units			37,308
Performance Share Units			4,919

2021
Restricted Stock Units			36,048
Performance Share Units			4,565

Stock repurchases

In January 2018, our Board of Directors authorized the repurchase of up to $3.0 billion of our Class A Stock and Class B Stock, which was fully utilized during the three months ended May 31, 2022. Shares repurchased under the 2018 Authorization have become treasury shares.

Additionally, in January 2021, our Board of Directors authorized the repurchase of up to $2.0 billion of our Class A Stock and Class B Stock. The Board of Directors did not specify a date upon which this authorization would expire. Shares repurchased under this authorization become treasury shares.

For the three months ended May 31, 2022, we repurchased 2,254,536 shares of Class A Stock pursuant to the 2018 Authorization at an aggregate cost of $563.6 million through a combination of open market transactions and an ASR that was announced in April 2022 and 1,810,972 shares of Class A Stock pursuant to the 2021 Authorization at an aggregate cost of $444.1 million through open market transactions. Subsequent to May 31, 2022, we repurchased 1,240,495 shares of Class A Stock pursuant to the 2021 Authorization at an aggregate cost of $293.0 million through open market transactions. Beginning May 25, 2022, all repurchases were made pursuant to a Rule 10b5-1 trading plan.


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FINANCIAL STATEMENTS			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			Table of Contents

As of June 30, 2022, total shares repurchased under the 2018 Authorization and the 2021 Authorization are as follows:


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

2018 Authorization	$	3,000.0	$	3,000.0	13,331,156
2021 Authorization	$	2,000.0	$	737.1	3,051,467

Subsequent event

Reclassification Agreement

On June 30, 2022, we announced the Reclassification. To effect the Reclassification, we will seek to effectuate the Charter Amendment. If the Reclassification is completed, upon the Effective Time, each share of Class B Stock issued and outstanding immediately prior to the Effective Time will be reclassified, exchanged, and converted into one share of Class A Stock and the right to receive $64.64 in cash, without interest.

The closing of the Reclassification is subject to customary conditions, including:

approval of the Charter Amendment by the affirmative vote of the holders of (i) a majority of the voting power of the issued and outstanding shares of Class A Stock and Class B Stock entitled to vote thereon, voting together as a single class, (ii) a majority of the issued and outstanding shares of Class B Stock, and (iii) the affirmative vote of at least 50.3% of the issued and outstanding shares of Class A Stock not held by the Sands Stockholder Group, executive officers of the Company, or directors that hold Class B Stock;
the effectiveness of our registration statement on Form S-4 to be filed with the SEC in connection with the Reclassification;
approval by the NYSE of the listing of the shares of Class A Stock into which the Class B Stock will be reclassified, exchanged, and converted into, subject to official notice of issuance; and
the accuracy of the representations and warranties of each party (subject to specified materiality qualifiers) and compliance in all material respects by each party with its obligations under the Reclassification Agreement. The Reclassification Agreement contains customary representations, warranties, and covenants of each of the parties thereto for a transaction of this type.

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

For the three months ended May 31, 2022, net income (loss) per common share – diluted for Class A Stock has been computed using the if-converted method and assumes the exercise of stock options using the treasury stock method and the conversion of Class B Stock as this method is more dilutive than the two-class method. For the three months ended May 31, 2022, net income (loss) per common share – diluted for Class B Stock has been computed using the two-class method and does not assume conversion of Class B Stock into shares of Class A Stock. For the three months ended May 31, 2021, net income (loss) per common share – diluted for Class A Stock and Class B Stock have been computed using the two-class method. The computation of basic and diluted net income (loss) per common share is as follows:


	For the Three Months Ended
	May 31, 2022				May 31, 2021
	Class A Stock		Class B Stock		Class A Stock		Class B Stock
(in millions, except per share data)
Net income (loss) attributable to CBI allocated – basic	$	345.6	$	43.9	$	(807.8)	$	(100.3)
Conversion of Class B common shares into Class A common shares	43.9		—		—		—
Effect of stock-based awards on allocated net income (loss)	—		(0.1)		—		—
Net income (loss) attributable to CBI allocated – diluted	$	389.5	$	43.8	$	(807.8)	$	(100.3)

Weighted average common shares outstanding – basic	165.335		23.206		170.602		23.247
Conversion of Class B common shares into Class A common shares (1)	23.206		—		—		—
Stock-based awards, primarily stock options (1)	0.792		—		—		—
Weighted average common shares outstanding – diluted	189.333		23.206		170.602		23.247

Net income (loss) per common share attributable to CBI – basic	$	2.09	$	1.89	$	(4.74)	$	(4.31)
Net income (loss) per common share attributable to CBI – diluted	$	2.06	$	1.89	$	(4.74)	$	(4.31)


(1)	For the three months ended May 31, 2021, we have excluded the following weighted average common shares outstanding from the calculation of diluted net income (loss) per common share, as the effect of including these would have been anti-dilutive, in millions:

		Class B Stock	23.247
		Stock-based awards, primarily stock options	2.034

12. COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CBI

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


	Before Tax Amount		Tax (Expense) Benefit		Net of Tax Amount
(in millions)
For the Three Months Ended May 31, 2022
Net income (loss) attributable to CBI					$	389.5
Other comprehensive income (loss) attributable to CBI:
Foreign currency translation adjustments:
Net gain (loss)	$	170.3	$	—	170.3
Reclassification adjustments	—		—		—
Net gain (loss) recognized in other comprehensive income (loss)	170.3		—		170.3
Unrealized gain (loss) on cash flow hedges:
Net derivative gain (loss)	105.5		(14.8)		90.7
Reclassification adjustments	(10.0)		0.9		(9.1)
Net gain (loss) recognized in other comprehensive income (loss)	95.5		(13.9)		81.6




Pension/postretirement adjustments:
Net actuarial gain (loss)	(0.3)		—		(0.3)
Reclassification adjustments	—		—		—
Net gain (loss) recognized in other comprehensive income (loss)	(0.3)		—		(0.3)


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FINANCIAL STATEMENTS			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			Table of Contents


	Before Tax Amount		Tax (Expense) Benefit		Net of Tax Amount
(in millions)
Share of OCI of equity method investments
Net gain (loss)	(9.0)		3.8		(5.2)
Reclassification adjustments	—		—		—
Net gain (loss) recognized in other comprehensive income (loss)	(9.0)		3.8		(5.2)
Other comprehensive income (loss) attributable to CBI	$	256.5	$	(10.1)	246.4
Comprehensive income (loss) attributable to CBI					$	635.9

For the Three Months Ended May 31, 2021
Net income (loss) attributable to CBI					$	(908.1)
Other comprehensive income (loss) attributable to CBI:
Foreign currency translation adjustments:
Net gain (loss)	$	103.0	$	—	103.0
Reclassification adjustments	—		—		—
Net gain (loss) recognized in other comprehensive income (loss)	103.0		—		103.0
Unrealized gain (loss) on cash flow hedges:
Net derivative gain (loss)	27.5		(9.8)		17.7
Reclassification adjustments	(7.8)		0.2		(7.6)
Net gain (loss) recognized in other comprehensive income (loss)	19.7		(9.6)		10.1




Pension/postretirement adjustments:
Net actuarial gain (loss)	(0.2)		—		(0.2)
Reclassification adjustments	—		—		—
Net gain (loss) recognized in other comprehensive income (loss)	(0.2)		—		(0.2)
Share of OCI of equity method investments
Net gain (loss)	(18.1)		4.1		(14.0)
Reclassification adjustments	—		—		—
Net gain (loss) recognized in other comprehensive income (loss)	(18.1)		4.1		(14.0)
Other comprehensive income (loss) attributable to CBI	$	104.4	$	(5.5)	98.9
Comprehensive income (loss) attributable to CBI					$	(809.2)

AOCI, net of income tax effect, includes the following components:


	Foreign Currency Translation Adjustments		Unrealized Net Gain (Loss) on Derivative Instruments		Pension/ Postretirement Adjustments		Share of OCI of Equity Method Investments		AOCI
(in millions)
Balance, February 28, 2022	$	(431.4)	$	17.5	$	(4.0)	$	5.2	$	(412.7)
OCI:
OCI before reclassification adjustments	170.3		90.7		(0.3)		(5.2)		255.5
Amounts reclassified from AOCI	—		(9.1)		—		—		(9.1)
OCI	170.3		81.6		(0.3)		(5.2)		246.4
Balance, May 31, 2022	$	(261.1)	$	99.1	$	(4.3)	$	—	$	(166.3)


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FINANCIAL STATEMENTS			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			Table of Contents

13. BUSINESS SEGMENT INFORMATION

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

In the Beer segment, our portfolio consists of high-end imported beer brands, craft beer, and ABAs. We have an exclusive perpetual brand license to import, market, and sell our Mexican beer portfolio in the U.S. In the Wine and Spirits segment, we sell a portfolio that includes higher-margin, higher-growth wine brands complemented by certain higher-end spirits brands. Amounts included in the Corporate Operations and Other segment consist of costs of executive management, corporate development, corporate finance, corporate growth and strategy, human resources, internal audit, investor relations, legal, public relations, and information technology, as well as our investments made through our corporate venture capital function. All costs included in the Corporate Operations and Other segment are general costs that are applicable to the consolidated group and are, therefore, not allocated to the other reportable segments. All costs reported within the Corporate Operations and Other segment are not included in our 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 the incentive compensation of segment management are evaluated based on core segment operating income (loss) which does not include the impact of these Comparable Adjustments.

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


	For the Three Months Ended May 31,
	2022		2021
(in millions)
Cost of product sold
Net gain (loss) on undesignated commodity derivative contracts	$	48.5	$	24.1

Recovery of inventory write-down	0.2		—
Settlements of undesignated commodity derivative contracts	(23.3)		(3.4)
Flow through of inventory step-up	(1.0)		—
Strategic business development costs	—		(2.6)



Total cost of product sold	24.4		18.1

Selling, general, and administrative expenses
Transition services agreements activity	(3.4)		(2.3)
Restructuring and other strategic business development costs	(1.4)		(0.9)
Transaction, integration, and other acquisition-related costs	(0.2)		—




Other gains (losses) (1)	4.5		3.3
Total selling, general, and administrative expenses	(0.5)		0.1

Impairment of brewery construction in progress	—		(665.9)



Comparable Adjustments, Operating income (loss)	$	23.9	$	(647.7)

(1)The three months ended May 31, 2022, primarily includes a gain of $5.2 million related to the remeasurement of our previously held 27% equity interest in Austin Cocktails to the acquisition date fair value.


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FINANCIAL STATEMENTS			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			Table of Contents

The accounting policies of the segments are the same as those described for the Company in Note 1 of our consolidated financial statements included in our 2022 Annual Report. Amounts included below for the Canopy segment represent 100% of Canopy’s reported results on a two-month lag, prepared in accordance with U.S. GAAP, and converted from Canadian dollars to U.S. dollars. Although we own less than 100% of the outstanding shares of Canopy, 100% of its results are included in the information below and subsequently eliminated in order to reconcile to our consolidated financial statements. Segment information is as follows:


	For the Three Months Ended May 31,
	2022		2021
(in millions)
Beer
Net sales	$	1,898.2	$	1,572.0
Segment operating income (loss)	$	762.8	$	673.1


Capital expenditures	$	161.8	$	85.8
Depreciation and amortization	$	68.2	$	54.0

Wine and Spirits
Net sales:
Wine	$	404.1	$	397.7
Spirits	60.9		56.8
Net sales	$	465.0	$	454.5
Segment operating income (loss)	$	91.0	$	104.2
Income (loss) from unconsolidated investments	$	1.5	$	1.3

Equity method investments	$	98.0	$	128.0

Capital expenditures	$	29.8	$	25.7
Depreciation and amortization	$	22.3	$	19.9

Corporate Operations and Other
Segment operating income (loss)	$	(61.3)	$	(54.5)
Income (loss) from unconsolidated investments	$	(2.0)	$	(0.6)

Equity method investments	$	82.5	$	91.9

Capital expenditures	$	5.0	$	2.4
Depreciation and amortization	$	3.2	$	3.3

Canopy
Net sales	$	88.2	$	117.3
Segment operating income (loss)	$	(418.2)	$	(184.2)


Capital expenditures	$	0.1	$	21.0
Depreciation and amortization	$	24.1	$	22.9

Consolidation and Eliminations
Net sales	$	(88.2)	$	(117.3)
Operating income (loss)	$	418.2	$	184.2
Income (loss) from unconsolidated investments	$	(52.0)	$	(44.3)

Equity method investments	$	2,353.5	$	2,436.8

Capital expenditures	$	(0.1)	$	(21.0)
Depreciation and amortization	$	(24.1)	$	(22.9)


Constellation Brands, Inc. Q1 FY 2023 Form 10-Q			#WORTHREACHINGFOR I 23


FINANCIAL STATEMENTS			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			Table of Contents


	For the Three Months Ended May 31,
	2022		2021
(in millions)
Comparable Adjustments

Operating income (loss)	$	23.9	$	(647.7)
Income (loss) from unconsolidated investments	$	(135.4)	$	(855.6)


Consolidated
Net sales	$	2,363.2	$	2,026.5
Operating income (loss)	$	816.4	$	75.1
Income (loss) from unconsolidated investments (1)	$	(187.9)	$	(899.2)

Equity method investments	$	2,534.0	$	2,656.7

Capital expenditures	$	196.6	$	113.9
Depreciation and amortization	$	93.7	$	77.2


(1)	Income (loss) from unconsolidated investments consists of:
			For the Three Months Ended May 31,
			2022		2021
		(in millions)
		Unrealized net gain (loss) on securities measured at fair value	$	(22.4)	$	(745.1)
		Equity in earnings (losses) from Canopy and related activities	(165.0)		(155.8)
		Equity in earnings (losses) from other equity method investees	(0.5)		1.7


			$	(187.9)	$	(899.2)


Constellation Brands, Inc. Q1 FY 2023 Form 10-Q			#WORTHREACHINGFOR I 24


MD&A			Table of Contents

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