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

Introduction

This MD&A provides additional information on our businesses, current developments, financial condition, cash flows, and results of operations. It should be read in conjunction with our Financial Statements and with our consolidated financial statements and notes included in our 2022 Annual Report. This MD&A is organized as follows:

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

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

Results of operations. This section provides an analysis of our results of operations presented on a business segment basis for the three months ended May 31, 2022, and May 31, 2021. In addition, a brief description of significant transactions and other items that affect the comparability of the results is provided.

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

Overview

We are an international producer and marketer of beer, wine, and spirits with operations in the U.S., Mexico, New Zealand, and Italy with powerful, consumer-connected, high-quality brands like Corona Extra, Modelo Especial, the Robert Mondavi Brand Family, Kim Crawford, Meiomi, The Prisoner Wine Company, and High West. In the U.S., we are one of the top growth contributors at retail among beverage alcohol suppliers. We are the third-largest beer company in the U.S. and continue to strengthen our leadership position as the #1 high-end beer supplier and the #1 share gainer across the U.S. beer market. Within wine and spirits, we are making solid progress in transforming our brand portfolio to shift to a higher-end focused business to deliver net sales growth and margin expansion. The strength of our brands makes us a supplier of choice to many of our consumers and our customers, which include wholesale distributors, retailers, and on-premise locations. We conduct our business through entities we wholly own as well as through a variety of joint ventures and other entities.

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

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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.

Strategy

Business strategy

Our overall strategic vision is to consistently deliver industry-leading total stockholder returns over the long-term through a focus on these key pillars:

• continue building strong brands people love with advantaged routes to market;

• build a culture that is consumer-obsessed and leverages robust innovation capabilities to stay on the forefront of consumer trends; and

• deliver on impactful ESG initiatives that we believe are not only good business, but also good for the world.

We will continue to strive for success by ensuring consumer-led decision making drives all aspects of our business; building a diverse talent pipeline with best-in-class people development; investing in data systems, architecture, and infrastructure that enables our business; and exemplifying intentional and proactive balance sheet management. We place focus on positioning our portfolio on higher-margin, higher-growth categories of the beverage alcohol industry to align with consumer-led premiumization trends, which we believe will continue to drive faster growth rates across beer, wine, and spirits. To continue capitalizing on consumer-led premiumization trends, become more competitive, and grow our business, we have employed a strategy dedicated to organic growth and supplemented by targeted investments and acquisitions. We also believe a key component to driving faster growth rates is to invest and strengthen our leadership position within the DTC and 3-tier eCommerce channels. As a part of our strategy, we have launched Digital Business Acceleration which we believe will enable us to drive results by enhancing our business in key areas including procurement, end-to-end supply chain planning, and marketing optimization. For further information on First Quarter 2023 Digital Business Acceleration investments, see “Selling, general, and administrative expenses” within Results of Operations below.

Our business strategy for the Beer segment focuses on upholding our leadership position in the high-end segment of the U.S. beer market through maintenance of leading margins, enhancements to our results of operations and operating cash flow, and exploring new avenues for growth. This includes continued focus on growing our beer portfolio in the U.S. through expanding distribution for key brands, including within the DTC and 3-tier eCommerce channels, as well as continued expansion, optimization, and/or construction activities for our Mexico beer operations. Additionally, in an effort to compete more fully in growing sectors of the high-end segment of the U.S. beer market, we have leveraged our innovation capabilities to create new line extensions behind celebrated, trusted brands and package formats that meet emerging needs.

Expansion, optimization, and/or construction activities continue under our Mexico Beer Projects to align with our anticipated future growth expectations. At this time, we have suspended all Mexicali Brewery construction activities, following a negative result from a public consultation held in Mexico. We continue to work with government officials in Mexico to explore options to add further capacity at other locations in Mexico,

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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.

Our business strategy for the Wine and Spirits segment focuses on higher-end brands, improving margins, and creating operating efficiencies. We continue to refine our portfolio primarily through the acquisition of higher-margin, higher-growth wine and spirits brands. We recently reorganized this business into two distinct commercial teams, one focused on our fine wine and craft spirits brands and the other focused on our mainstream and premium brands. While each team has its own distinct strategy, both remain aligned to the goal of accelerating performance by growing net sales and expanding margins. In addition, we aim to have the DTC and 3-tier eCommerce channels collectively account for 20% of our wine and spirits business over time. In markets where it is feasible, we entered into a contractual arrangement to consolidate our U.S. distribution in order to obtain dedicated distributor selling resources which focus on our U.S. wine and spirits portfolio to drive organic growth. This U.S. distributor currently represents about 70% of our branded wine and spirits volume in the U.S. We expect U.S. wine and spirits shipment volume to be generally aligned with depletion volume for Fiscal 2023.

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

We complement our strategy with our investment in Canopy by expanding our portfolio into adjacent categories. Canopy is a leading cannabis company with operations in countries across the world. This investment is consistent with our long-term strategy to identify, address, and stay ahead of evolving consumer trends and market dynamics. Our strategic relationship with Canopy is designed to help position it to be successful in cannabis production, branding, and intellectual property.

We remain committed to our long-term financial model of: growing sales, expanding margins, and increasing cash flow in order to achieve earnings per share growth, maintain our targeted net leverage ratio, and deliver returns to stockholders through the payment of dividends and periodic share repurchases. Our results of operations and financial condition have been affected by inflation, changing prices, and reductions in discretionary income of consumers available to purchase our products, and we expect these impacts to continue throughout the remainder of Fiscal 2023. Our Fiscal 2023 results of operations have also been, and may continue to be, impacted by other unfavorable global and regional economic conditions, geopolitical events, and military conflicts, such as repercussions from the recent conflict in Ukraine. We intend to continue to monitor the inflationary environment and the impact on the consumer when we consider passing along rising costs through increased selling prices, subject to normal competitive conditions. In addition, we continue to identify on-going cost savings initiatives, including our commodity hedging program. However, there can be no assurance that we will be able to fully mitigate rising costs through increased selling prices and/or cost savings initiatives. Furthermore, to the extent climate-related severe weather events, such as droughts, floods, wildfires, and/or late frosts, continue to occur or accelerate in future periods, it could have a material impact on our results of operations and financial condition.

ESG strategy

Our ESG strategy is aligned with our business goals and stakeholder interests, reflects our Company values, and more directly addresses pressing societal needs. Specifically, we dedicate our resources towards:

Serving as good stewards of our environment and natural resources – Modeling water stewardship for our industry; and reducing GHG emissions through energy conservation and renewable energy initiatives

Enhancing social equity within our industry and communities – Championing the professional development and advancement of women in beverage alcohol and our communities; and enhancing economic development and prosperity in disadvantaged communities

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Promoting responsible beverage alcohol consumption – Empowering adults to make responsible choices in their alcohol (substance) consumption by supporting fact-based education, engagement programs, and policies

During First Quarter 2023 we took the following steps to advance our ESG strategy by key area:

Serving as good stewards of our environment and natural resources

• held an interactive virtual presentation by The Nature Conservancy to recognize Earth Day, which is celebrated annually around the world on April 22. Topics discussed included global water challenges, The Nature Conservancy’s water security strategies, how companies like ours can lead in the water space, and how each of us as individuals, families, and communities can preserve our planet. Approximately 500 employees from around the globe attended the virtual presentation

Enhancing social equity within our industry and communities

• supported Dress for Success Worldwide, an organization whose mission is to empower women to achieve economic independence, in their Your Hour, Her Power® annual campaign for Women's History Month and International Women's Day, and we matched employee contributions 2:1. The Your Hour, Her Power® pledge asks individuals to donate one hour of pay to help women gain financial independence and professional mobility. Together with our employees, we raised $16,200 in total contributions

• in response to the Russian invasion of Ukraine, created the Ukraine Humanitarian Support Fund and matched employee donations 2:1. The fund supported United Help Ukraine, a nonprofit organization committed to providing humanitarian aid, including food and medical supplies, to Ukrainians during this conflict. Together with our employees, we raised more than $100,000 in total donations

• collaborated with UnidosUS to host informational sessions in English and Spanish to help winery employees understand the various housing and financial education benefits available to them through our company benefits and UnidosUS

• began supporting an initiative, as a member of Distilled Spirits Council of the United States, to develop a pipeline of talent from the Black community that seeks to fill 1,800 roles from internships to executive levels within the spirits industry over the next ten years

Promoting responsible beverage alcohol consumption

• joined RESPONSIBILITY.ORG, a national not-for-profit that aims to empower adults to make a lifetime of responsible alcohol choices as part of a balanced lifestyle, eliminate drunk driving and work with others to end all impaired driving, and eliminate underage drinking, as a member company

Recent Developments

Reclassification Agreement

On June 30, 2022, we announced the Reclassification. To effect the Reclassification, the Company will seek to effectuate the Charter Amendment. If the Reclassification occurs, at 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

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• 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.

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.

Global Supply Chain and COVID-19 Related Impacts

Fiscal 2023 has been, and is expected to continue to be, impacted by challenges with both global supply chain and transportation which contributed to lower product inventory levels and higher cost of product sold. For example, wine produced in New Zealand and Italy and subsequently shipped to the U.S. for distribution continues to be affected by the lack of availability and increased costs of ocean freight shipping containers and port delays causing increased storage charges. In addition, during Fiscal 2022, we experienced a brown glass purchasing shortage, which impacted certain of our imported beer brands. This supply returned to normal levels in early Fiscal 2023. To the extent these circumstances continue to occur or accelerate in future periods it could have a material impact on our results of operations.

We have seen consumers shift more of their total shopping spend to online channels since the COVID-19 outbreak, which has led to increased eCommerce sales, including DTC, for our business. In response to COVID-19, we have ensured our on-going liquidity and financial flexibility through cash preservation initiatives, capital management adjustments, and cost control measures. We have used opportunities under the CARES Act, afforded to us earlier in the pandemic, to defer some payments including certain payroll taxes. We are not able to estimate the long-term impact of COVID-19 on our business, financial condition, results of operations, and/or cash flow. We believe we have sufficient liquidity available from operating cash flow, cash on hand, and availability under our revolving credit facility. We expect to have continued access to capital markets and to be able to continue to return value to stockholders through dividends and periodic share repurchases.

Acquisitions

Wine and Spirits segment

Austin Cocktails acquisition

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. The results of operations of Austin Cocktails are reported in the Wine and Spirits segment and have been included in our consolidated results of operations from the date of acquisition.

Lingua Franca acquisition

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. 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.

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My Favorite Neighbor acquisition

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. 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.

Our recent acquisitions supported our strategic focus on consumer-led premiumization trends and meeting the evolving needs of our consumers.

For additional information on these recent developments and acquisitions, refer to Notes 5, 7, and 10.

Results of Operations

Financial Highlights

First Quarter 2023 compared to First Quarter 2022

*•*Our results of operations were largely impacted by (i) a decrease in unrealized net loss from the changes in fair value of our investment in Canopy, (ii) an impairment of long-lived assets for First Quarter 2022 in connection with certain assets at the Mexicali Brewery, and (iii) improvements within the Beer segment driven by shipment volume growth.

• Net sales increased 17%** due to an increase in Beer net sales driven primarily by shipment volume growth and favorable impact from pricing.

*•*Operating income increased largely due to (i) the impact of the First Quarter 2022 impairment of long-lived assets in connection with certain assets at the Mexicali Brewery and (ii) the improvements within the Beer segment.

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

Comparable Adjustments

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

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

			First Quarter 2023						First Quarter 2022
(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

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			First Quarter 2023						First Quarter 2022
(in millions)
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)			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)
Income (loss) from unconsolidated investments			$	(135.4)					$	(855.6)

Cost of product sold

Undesignated commodity derivative contracts

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

Strategic business development costs

We recognized costs primarily in connection with losses on write-downs of excess inventory and contract terminations resulting from our initiatives to optimize our portfolio, gain efficiencies, and reduce our cost structure within the Wine and Spirits segment (First Quarter 2022).

Selling, general, and administrative expenses

Transition services agreements activity

We recognized costs in connection with transition services agreements related to the sale of a portion of our wine and spirits business.

Other gains (losses)

We recognized other gains (losses) primarily in connection with (i) a gain recognized on the remeasurement of our previously held equity interest in Austin Cocktails to the acquisition-date fair value (First Quarter 2023) and (ii) a net gain recognized from the sale of a portion of the wine and spirits business (First Quarter 2022). For additional information on the First Quarter 2023 transaction, refer to Notes 5 and 13.

Impairment of brewery construction in progress

We recognized an impairment of long-lived assets in connection with certain assets at the Mexicali Brewery. For additional information, refer to Note 4.

Income (loss) from unconsolidated investments

We recognized an unrealized gain (loss) primarily from (i) equity in earnings (losses) from Canopy’s results, including equity in losses from Canopy largely related to costs designed to improve their organizational focus, streamline operations, and align production capability with projected demand and (ii) the changes in fair value of our securities measured at fair value. For additional information, refer to Notes 4 and 7.

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Business Segments

First Quarter 2023 compared to First Quarter 2022

Net sales

			First Quarter 2023						First Quarter 2022						Dollar Change						Percent Change
(in millions)
Beer			$	1,898.2					$	1,572.0					$	326.2					21		%
Wine and Spirits:
Wine			404.1						397.7						6.4						2		%
Spirits			60.9						56.8						4.1						7		%
Total Wine and Spirits			465.0						454.5						10.5						2		%
Canopy			88.2						117.3						(29.1)						(25		%)
Consolidation and eliminations			(88.2)						(117.3)						29.1						25		%
Consolidated net sales			$	2,363.2					$	2,026.5					$	336.7					17		%

			Beer segment			First Quarter 2023						First Quarter 2022						Dollar Change						Percent Change
(in millions, branded product, 24-pack, 12-ounce case equivalents)
Net sales						$	1,898.2					$	1,572.0					$	326.2					21		%
Shipments						99.5						84.8												17.3		%
Depletions																								8.7		%

The increase in Beer net sales is largely due to (i) $274.5 million of shipment volume growth within our Mexican beer portfolio, which benefited from continued consumer demand and (ii) $63.9 million of favorable impact from pricing in select markets within our Mexican beer portfolio, partially offset by $10.9 million of unfavorable product mix primarily from a shift in package types. The First Quarter 2023 net sales increase also benefited from a favorable overlap due to supply shortages from severe winter storms in First Quarter 2022. First Quarter 2023 cases shipped were generally aligned with cases depleted as product inventories in our 3-tier distribution channel remained at normal levels.

			Wine and Spirits segment			First Quarter 2023						First Quarter 2022						Dollar Change						Percent Change
(in millions, branded product, 9-liter case equivalents)
Net sales						$	465.0					$	454.5					$	10.5					2		%
Shipments
Total						6.8						6.7												1.5		%
U.S. Domestic						5.8						6.0												(3.3		%)
Depletions																								1.2		%

The increase in Wine and Spirits net sales is due to (i) $23.5 million from favorable product mix shift driven by our strategic focus on higher-end brands and (ii) $17.5 million of favorable impact from pricing, partially offset by (i) a $21.6 million decrease largely attributable to a reduction in net sales of our U.S. domestic lower-end wine

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and spirits brands and (ii) an $8.9 million decrease in bulk wine and non-branded net sales as compared to First Quarter 2022. The increase in net sales was hindered by global supply chain constraints.

			Canopy segment Our ownership interest in Canopy allows us to exercise significant influence, but not control, and, therefore, we account for our investment in Canopy under the equity method. Amounts included for the Canopy segment represent 100% of Canopy’s reported results on a two-month lag. Accordingly, we recognized our share of Canopy’s earnings (losses) for the periods January through March 2022, in our First Quarter 2023 results and January through March 2021, in our First Quarter 2022 results. Although we own less than 100% of the outstanding shares of Canopy, 100% of its results are included and subsequently eliminated to reconcile to our consolidated financial statements. See “Income (loss) from unconsolidated investments” below for a discussion of Canopy’s net sales, gross profit (loss), selling, general, and administrative expenses, and operating income (loss). This discussion is based on information Canopy has publicly disclosed.

Gross profit

			First Quarter 2023						First Quarter 2022						Dollar Change						Percent Change
(in millions)
Beer			$	1,019.5					$	893.7					$	125.8					14		%
Wine and Spirits			211.1						207.5						3.6						2		%
Canopy			(125.7)						7.7						(133.4)						NM
Consolidation and eliminations			125.7						(7.7)						133.4						NM
Comparable Adjustments			24.4						18.1						6.3						35		%
Consolidated gross profit			$	1,255.0					$	1,119.3					$	135.7					12		%

			The increase in Beer is primarily due to $157.0 million of shipment volume growth and the $63.9 million favorable impact from pricing, partially offset by $77.5 million of higher cost of product sold driven by inflation and global supply chain constraints and $16.5 million of unfavorable product mix. The higher cost of product sold is largely due to (i) $43.9 million of higher material costs, including pallets, cartons, aluminum, steel, and corn, (ii) $19.3 million of higher depreciation, (iii) $13.1 million of increased transportation costs, and (iv) a $13.0 million increase in brewery costs primarily driven by incremental headcount to support the growth of our Mexican beer portfolio and increased maintenance and utilities costs, partially offset by $14.2 million of favorable fixed cost absorption related to increased production levels as compared to First Quarter 2022 and $8.0 million of decreased inventory obsolescence primarily related to hard seltzers.

			The increase in Wine and Spirits gross profit is primarily due to $23.5 million from favorable product mix shift and the $17.5 million favorable impact from pricing, partially offset by $21.6 million of shipment volume decline and $13.8 million of higher cost of product sold driven by global supply chain constraints and inflation. The increase in cost of product sold was largely attributable to (i) $21.4 million of higher material costs, including grapes and glass, and (ii) $8.8 million of increased transportation and warehousing costs, partially offset by (i) $16.5 million related to an out of period inventory adjustment and (ii) $2.9 million of favorable fixed cost absorption as a result of the impact of the 2020 U.S. wildfires in First Quarter 2022.

Gross profit as a percent of net sales decreased to 53.1% for First Quarter 2023 compared with 55.2% for First Quarter 2022. This decrease was largely due to approximately (i) 320 basis points and 60 basis points of rate decline from cost of product sold within the Beer and Wine and Spirits segments, respectively, driven by the increase in operational and logistics costs, and (ii) 40 basis points related to unfavorable product mix shift within

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the Beer segment, partially offset by approximately (i) 115 basis points of favorable impact from Beer pricing in select markets and (ii) 45 basis points related to favorable product mix shift within the Wine and Spirits segment.

Selling, general, and administrative expenses

			First Quarter 2023						First Quarter 2022						Dollar Change						Percent Change
(in millions)
Beer			$	256.7					$	220.6					$	36.1					16		%
Wine and Spirits			120.1						103.3						16.8						16		%
Corporate Operations and Other			61.3						54.5						6.8						12		%
Canopy			292.5						191.9						100.6						52		%
Consolidation and eliminations			(292.5)						(191.9)						(100.6)						(52		%)
Comparable Adjustments			0.5						(0.1)						0.6						NM
Consolidated selling, general, and administrative expenses			$	438.6					$	378.3					$	60.3					16		%

			The increase in Beer is driven by $21.6 million of increased marketing spend and a $14.5 million increase in general and administrative expenses. The increase in marketing spend is due largely to planned investment to support the growth of our Mexican beer portfolio. The increase in general and administrative expenses was driven primarily by costs associated with strategic asset relocation, incremental headcount to support the growth of our Mexican beer portfolio, and higher travel as compared to First Quarter 2022, partially offset by a favorable foreign currency impact.

			The increase in Wine and Spirits is primarily due to $12.8 million of increased general and administrative expenses and a $4.7 million increase in marketing spend. The increase in general and administrative expenses was largely driven by compensation and benefits, primarily related to higher headcount as compared to First Quarter 2022, and expenses associated with an initiative to improve our marketing effectiveness. The increase in marketing spend was driven by planned investments to support the growth of our brands.

			The increase in Corporate Operations and Other is primarily due to approximately (i) $9 million related to Digital Business Acceleration investments and (ii) a $2 million increase in compensation and benefits as compared to First Quarter 2022, partially offset by an approximately $6 million decrease in consulting services, driven by the completion of an ERP implementation.

Selling, general, and administrative expenses as a percent of net sales remained relatively flat at 18.6% for First Quarter 2023 as compared to 18.7% for First Quarter 2022. This was driven by rate decline from the Beer segment as the increase in Beer net sales exceeded the increase in selling, general, and administrative expenses, offset by rate growth from an increase in both the Wine and Spirits and Corporate Operations and Other segments selling, general, and administrative expenses.

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Operating income (loss)

			First Quarter 2023						First Quarter 2022						Dollar Change						Percent Change
(in millions)
Beer			$	762.8					$	673.1					$	89.7					13		%
Wine and Spirits			91.0						104.2						(13.2)						(13		%)
Corporate Operations and Other			(61.3)						(54.5)						(6.8)						(12		%)
Canopy			(418.2)						(184.2)						(234.0)						(127		%)
Consolidation and eliminations			418.2						184.2						234.0						127		%
Comparable Adjustments			23.9						(647.7)						671.6						104		%
Consolidated operating income (loss)			$	816.4					$	75.1					$	741.3					NM

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

			The decrease in Wine and Spirits is largely attributable to branded wine and spirits volume decline, supply chain constraints, inflation, and increased general and administrative expenses, as described above, partially offset by favorable impacts from product mix shift and pricing.

			As previously discussed, the Corporate Operations and Other increase in operating loss is largely due to the First Quarter 2023 Digital Business Acceleration investments and increased compensation and benefits, partially offset by the decrease in ERP-related consulting services.

Income (loss) from unconsolidated investments

General

			First Quarter 2023						First Quarter 2022						Dollar Change						Percent Change
(in millions)
Unrealized net gain (loss) on securities measured at fair value			$	(22.4)					$	(745.1)					$	722.7					97		%
Equity in earnings (losses) from Canopy and related activities (1)			(165.0)						(155.8)						(9.2)						(6		%)
Equity in earnings (losses) from other equity method investees			(0.5)						1.7						(2.2)						(129		%)
			$	(187.9)					$	(899.2)					$	711.3					79		%

(1)Includes $100.9 million and $24.6 million of costs designed to improve their organizational focus, streamline operations, and align production capability with projected demand for First Quarter 2023 and First Quarter 2022, respectively.

For additional information regarding our equity method investments, refer to Note 7.

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			Canopy segment Canopy net sales decreased to $88.2 million for First Quarter 2023 from $117.3 million for First Quarter 2022. This decrease of $29.1 million, or 25%, is largely attributable to lower global cannabis sales. The decline in global cannabis sales primarily resulted from (i) a decrease in Canadian recreational cannabis, largely driven by lower supply of high demand products, unfavorable impacts from product mix shift and pricing, and a rapid increase in third party retail locations across Canada and (ii) a decrease in medical sales driven by the January 2022 divestiture of C3, an international pharmaceutical business. These declines were partially offset by growth in Canadian THC recreational sales driven by Canopy’s Fiscal 2022 acquisitions including the Supreme Cannabis Company, Inc. and AV Cannabis Inc. (“Ace Valley”). Canopy gross profit (loss) decreased to $(125.7) million for First Quarter 2023 from $7.7 million for First Quarter 2022. This decrease of $133.4 million is primarily driven by the write-down of excess inventory balances related to its organizational and strategic review of its business, decreased net sales and price compression in the Canadian recreational channel, and higher shipping, distribution, and warehousing costs in North America. Canopy selling, general, and administrative expenses increased $100.6 million largely driven by higher asset impairment and restructuring costs for First Quarter 2023, partially offset by a continued focus on reducing costs and the closure of certain research and development facilities in Fiscal 2022. The combination of these factors were the main contributors to the increase in operating loss of $234.0 million.

Interest expense

Interest expense increased to $88.5 million for First Quarter 2023 from $86.7 million for First Quarter 2022. This increase of $1.8 million, or 2%, is due to approximately $90 million of higher average borrowings, largely offset by lower weighted average interest rates.

Loss on extinguishment of debt

Loss on extinguishment of debt consists of a premium payment and the write-off of debt issuance costs in connection with the May 2022 tender offers of our 3.20% February 2018 Senior Notes and 4.25% May 2013 Senior Notes.

(Provision for) benefit from income taxes

The (provision for) benefit from income taxes increased to $(125.4) million for First Quarter 2023 from $13.5 million for First Quarter 2022. Our effective tax rate for First Quarter 2023 was 23.9% as compared with 1.5% for First Quarter 2022. In comparison to prior year, our taxes were impacted primarily by:

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

• the effective tax rates applicable to our foreign businesses, including the impact of the First Quarter 2022 impairment of long-lived assets in connection with certain assets at the Mexicali Brewery.

For additional information, refer to Note 9.

We expect our reported effective tax rate for Fiscal 2023 to be in the range of 20% to 23%. For additional information, refer to Note 4. Since estimates are not currently available, this range does not reflect any future changes in the fair value of our Canopy investment measured at fair value and any future equity in earnings (losses) from the Canopy Equity Method Investment and related activities.

Net income (loss) attributable to CBI

Net income (loss) attributable to CBI increased to $389.5 million for First Quarter 2023 from $(908.1) million for First Quarter 2022. This increase of $1,297.6 million is largely attributable to (i) the decrease in unrealized net loss from the changes in fair value of our investment in Canopy in First Quarter 2023 as compared to First Quarter 2022, (ii) the First Quarter 2022 impairment of long-lived assets in connection with certain assets at the Mexicali Brewery, and (iii) improvements within the Beer segment, partially offset by the higher provision for income taxes.

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Liquidity and Capital Resources

General

Our primary source of liquidity has been cash flow from operating activities. Our ability to consistently generate robust cash flow from our operations is one of our most significant financial strengths; it enables us to invest in our people and our brands, make capital investments and strategic acquisitions, provide a cash dividend program, and from time-to-time, repurchase shares of our common stock. Our largest use of cash in our operations is for purchasing and carrying inventories and carrying seasonal accounts receivable. Historically, we have used this cash flow to repay our short-term borrowings and fund capital expenditures. Additionally, our commercial paper program is used to fund our short-term borrowing requirements and to maintain our access to the capital markets. We use our short-term borrowings, including our commercial paper program, to support our working capital requirements and capital expenditures.

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

We expect the Reclassification may require significant cash outlays in the near-term. If the Reclassification is completed, each share of Class B Stock issued and outstanding or held by us as treasury stock 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. We expect the aggregate cash payment to holders of Class B Stock at the Effective Time will be $1.5 billion. In addition, we will have to pay certain additional costs related to the Reclassification.

We have an agreement with a financial institution for payable services and plan to facilitate a voluntary supply chain finance program through this participating financial institution in Fiscal 2023. The program will be available to certain of our suppliers allowing them the option to manage their cash flow. We will not be a party to the agreements between the participating financial institution and the suppliers in connection with the program. Our rights and obligations to our suppliers, including amounts due and scheduled payment terms, will not be impacted. We are still evaluating the impact of this program on future liquidity.

As of May 31, 2022, the exercise of the November 2018 Canopy Warrants would have required a cash outflow of approximately $5.9 billion based on the terms of the warrants. The exercise price for the November 2018 Canopy Warrants exceeded Canopy’s stock price as of May 31, 2022.

Cash Flows

			First Quarter 2023						First Quarter 2022						Dollar Change						Percent Change
(in millions)
Net cash provided by (used in):
Operating activities			$	758.2					$	716.0					$	42.2					6		%
Investing activities			(226.8)						(116.6)						(110.2)						(95)		%
Financing activities			(627.2)						(556.5)						(70.7)						(13)		%
Effect of exchange rate changes on cash and cash equivalents			(1.8)						0.3						(2.1)						NM
Net increase (decrease) in cash and cash equivalents			$	(97.6)					$	43.2					$	(140.8)					NM

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Operating activities

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

			First Quarter 2023						First Quarter 2022						Dollar Change						Percent Change
(in millions)
Net income (loss)			$	399.3					$	(897.3)					$	1,296.6					145		%
Unrealized net (gain) loss on securities measured at fair value			22.4						745.1						(722.7)						(97)		%
Deferred tax provision (benefit)			21.5						(98.7)						120.2						122		%
Equity in (earnings) losses of equity method investees and related activities, net of distributed earnings			165.5						154.1						11.4						7		%
Impairment of brewery construction in progress			—						665.9						(665.9)						NM
Other non-cash adjustments			167.1						84.7						82.4						97		%
Change in operating assets and liabilities, net of effects from purchase and sale of business			(17.6)						62.2						(79.8)						(128)		%
Net cash provided by (used in) operating activities			$	758.2					$	716.0					$	42.2					6		%

The net change in operating assets and liabilities was largely driven by accounts payable primarily attributable to the timing of payments for both the Beer and Wine and Spirits segments and an exclusivity payment received in connection with distribution arrangements for our U.S. wine and spirits brand portfolio in First Quarter 2022. This was partially offset by benefits from accounts receivable primarily due to improved timing of collections for both the Beer and Wine and Spirits segments. Additionally, the overall increase in net cash provided by operating activities was partially offset by higher income tax payments in First Quarter 2023 as compared to First Quarter 2022.

Investing activities

Net cash used in investing activities increased to $226.8 million for First Quarter 2023 from $116.6 million for First Quarter 2022. This increase of $110.2 million was primarily due to $82.7 million of higher capital expenditures and $37.2 million of business acquisitions for First Quarter 2023, consisting of Lingua Franca and Austin Cocktails.

Financing activities

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

			First Quarter 2023						First Quarter 2022						Dollar Change						Percent Change
(in millions)
Net proceeds from (payments of) debt, current and long-term, and related activities			$	537.3					$	(1.1)					$	538.4					NM
Dividends paid			(149.3)						(146.7)						(2.6)						(2)		%
Purchases of treasury stock			(1,007.6)						(400.8)						(606.8)						(151)		%
Net cash provided by stock-based compensation activities			3.6						2.7						0.9						33		%
Distributions to noncontrolling interests			(11.2)						(10.6)						(0.6)						(6)		%
Net cash provided by (used in) financing activities			$	(627.2)					$	(556.5)					$	(70.7)					(13)		%

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Debt

Total debt outstanding as of May 31, 2022, amounted to $10,977.3 million, an increase of $560.8 million from February 28, 2022. This increase consisted of (1):

						Debt repayment						Debt issuance

(1)Total debt outstanding as of May 31, 2022, 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.

Bank facilities

In April 2022, we entered into the 2022 Restatement Agreement that amended and restated our then-existing senior credit facility. The 2022 Restatement Agreement resulted in (i) 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, (ii) the refinement of certain negative covenants, and (iii) the replacement of LIBOR rates with rates based on term SOFR. There are no borrowings outstanding under the 2022 Credit Agreement.

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

Senior notes

In May 2022, we issued the May 2022 Senior Notes. Proceeds from this offering, net of discount and debt issuance costs, of $1,837.5 million were used towards a series of cash tender offers, the June 2022 repayment of the 3.20% February 2018 Senior Notes and the 4.25% May 2013 Senior Notes, and for general corporate purposes, including working capital, funding capital expenditures, retirement of debt, and other business opportunities.

General

The majority of our outstanding borrowings as of May 31, 2022, consisted of fixed-rate senior unsecured notes, with maturities ranging from calendar 2023 to calendar 2050, and a variable-rate senior unsecured term loan facility under our 2022 Term Credit Agreement with a calendar 2024 maturity date.

Additionally, we have a commercial paper program which provides for the issuance of up to an aggregate principal amount of $2.0 billion of commercial paper. Our commercial paper program is backed by unused commitments under our revolving credit facility under our 2022 Credit Agreement. Accordingly, outstanding borrowings under our commercial paper program reduce the amount available under our revolving credit facility.

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We do not have purchase commitments from buyers for our commercial paper and, therefore, our ability to issue commercial paper is subject to market demand. If the commercial paper market is not available to us for any reason when commercial paper borrowings mature, we intend to utilize unused commitments under our revolving credit facility under our 2022 Credit Agreement to repay commercial paper borrowings. We do not expect that fluctuations in demand for commercial paper will affect our liquidity given our borrowing capacity available under our revolving credit facility.

We had the following remaining borrowing capacity available under our 2022 Credit Agreement:

			May 31, 2022						June 24, 2022
(in millions)
Revolving credit facility (1)			$	2,114.0					$	1,389.1

(1)Net of outstanding revolving credit facility borrowings and outstanding letters of credit under our 2022 Credit Agreement and outstanding borrowings under our commercial paper program.

The financial institutions participating in our 2022 Credit Agreement have complied with prior funding requests and we believe they will comply with any future funding requests. However, there can be no assurances that any particular financial institution will continue to do so.

We and our subsidiaries are subject to covenants that are contained in our 2022 Credit Agreement, including those restricting the incurrence of additional subsidiary indebtedness, additional liens, mergers and consolidations, transactions with affiliates, and sale and leaseback transactions, in each case subject to numerous conditions, exceptions, and thresholds. The financial covenants are limited to a minimum interest coverage ratio and a maximum net leverage ratio, both as defined in our 2022 Credit Agreement. As of May 31, 2022, under our 2022 Credit Agreement, the minimum interest coverage ratio was 2.5x and the maximum net leverage ratio was 4.0x.

The representations, warranties, covenants, and events of default set forth in our 2022 Term Credit Agreement are substantially similar to those set forth in our 2022 Credit Agreement.

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

As of May 31, 2022, we were in compliance with our covenants under our 2022 Credit Agreement, our 2022 Term Credit Agreement, and our indentures, and have met all debt payment obligations.

For further discussion and presentation of our borrowings and available sources of borrowing, refer to Note 12 of our consolidated financial statements included in our 2022 Annual Report and Note 8.

Common Stock Dividends

On June 29, 2022, our Board of Directors declared a quarterly cash dividend of $0.80 per share of Class A Stock, $0.72 per share of Class B Stock, and $0.72 per share of Class 1 Stock payable on August 24, 2022, to stockholders of record of each class as of the close of business on August 10, 2022.

We currently expect to continue to pay a regular quarterly cash dividend to stockholders of our common stock in the future, but such payments are subject to approval of our Board of Directors and are dependent upon our financial condition, results of operations, capital requirements, and other factors, including those set forth under Item 1A. “Risk Factors” of our 2022 Annual Report.

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Share Repurchase Program

Our Board of Directors authorized the repurchase of up to $3.0 billion of our Class A Stock and Class B Stock under the 2018 Authorization and an additional repurchase of up to $2.0 billion of our Class A Stock and Class B Stock under the 2021 Authorization. The 2018 Authorization was fully utilized during First Quarter 2023 through a combination of open market transactions and an ASR that was announced in April 2022.

As of June 30, 2022, total shares repurchased under the 2018 Authorization and 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

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

We currently expect to continue to repurchase shares in the future, but such repurchases are dependent upon our financial condition, results of operations, capital requirements, and other factors, including those set forth under Item 1A. “Risk Factors” of our 2022 Annual Report as supplemented by the additional factors set forth under Item 1A. “Risk Factors” included in this Form 10-Q.

For additional information, refer to Note 17 of our consolidated financial statements included in our 2022 Annual Report and Note 10.

Accounting Guidance

Accounting guidance adopted for First Quarter 2023 did not have a material impact on our Financial Statements.

Information Regarding Forward-Looking Statements

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

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

◦our business strategy, future operations, innovation strategy and new products, future financial position and liquidity, future net sales, expected volume, inventory, and depletion trends, future marketing spend, long-term financial model, including our targeted net leverage ratio, future effective tax rates and anticipated tax liabilities, access to capital markets, and prospects, plans, and objectives of management;

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◦anticipated inflationary pressures and our responses thereto as well as other unfavorable global and regional economic conditions, geopolitical events, and military conflicts, such as repercussions from the recent conflict in Ukraine;

◦our ESG strategy;

◦the potential impact to supply, production levels, and costs due to global supply chain constraints and transportation;

◦any delays with respect to, or the failure to complete, the Reclassification, including failure to receive the requisite stockholder approvals, and the impact of the Reclassification on the market price of our common stock;

◦the COVID-19 pandemic;

◦expected or potential actions of third parties, including possible changes to laws, rules, and regulations;

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

◦the refinement of our wine and spirits portfolio;

◦the availability of a supply chain finance program;

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

◦the amount and timing of future dividends.

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

• The statements regarding:

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

◦our activities surrounding our investment in Canopy;

◦Canopy’s expectations and the transaction with Acreage;

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

◦a potential future impairment of our Canopy Equity Method Investment; and

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

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

When used in this Form 10-Q, the words “anticipate,” “intend,” “expect,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. All forward-looking statements speak only as of the date of this Form 10-Q. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. In addition to the risks and uncertainties of ordinary business operations and conditions in the general economy and markets in which we compete, our forward-looking statements contained in this Form 10-Q are also subject to the risk, uncertainty, and possible variance from our current expectations regarding:

• water, agricultural and other raw material, and packaging material supply, production, and/or shipment difficulties which could adversely affect our ability to supply our customers;

• the ability to respond to anticipated inflationary pressures, including reductions in consumer discretionary income and our ability to pass along rising costs through increased selling prices, and unfavorable global or regional economic conditions, including economic slowdown or recession;

• the actual impact to supply, production levels, and costs from global supply chain constraints, transportation challenges, wildfires, and severe weather events, due to, among other reasons, actual supply chain and transportation performance and the actual severity and geographical reach of wildfires and severe weather events;

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

• the actual demand, net sales, channel proportions, and volume trends for our products due to, among other reasons, actual shipments to distributors and actual consumer demand;

• beer operations expansion, optimization, and/or construction activities, scope, capacity, costs (including impairments), capital expenditures, and timing due to, among other reasons, market conditions, our cash and debt position, receipt of required regulatory approvals by the expected dates and on the expected terms, results of discussions with government officials in Mexico, the actual amount of non-recoverable brewery construction assets and other costs and expenses, and other factors as determined by management;

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

• the impact of the military conflict in Ukraine and associated geopolitical tensions and responses, including on inflation, supply chains, commodities, energy, and cyber-security;

• the amount, timing, and source of funds for any share repurchases or future exercises of the November 2018 Canopy Warrants, if any, which may vary due to market conditions; our cash and debt position; the impact of the beer operations expansion, optimization, and/or construction activities; the impact of our investment in Canopy; and other factors as determined by management from time to time;

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

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

• the accuracy of management’s projections relating to the Canopy investment due to Canopy’s actual results and market and economic conditions;

• the timeframe and amount of any potential 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 various factors including adverse market conditions or if Canopy records a significant impairment of goodwill or intangible assets or other long-lived assets, makes significant asset sales, or has changes in senior management;

• the amount of contingent consideration, if any, received in the divestitures of a portion of our wine and spirits business which will depend on actual future brand performance;

• the expected impacts of wine and spirits portfolio refinement activities;

• purchase accounting with respect to any transaction, or the assumptions used regarding the assets purchased and liabilities assumed to determine their fair value;

• any impact of U.S. federal laws on Canopy Strategic Transactions or upon the implementation of such Canopy Strategic Transactions, or the impact of any Canopy Strategic Transaction upon our future ownership level in Canopy or our future share of Canopy’s reported earnings and losses; and

• our targeted net leverage ratio due to market conditions, our ability to generate cash flow at expected levels, and our ability to generate expected earnings.

For additional information about risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by our forward-looking statements, please refer to Item 1A. “Risk Factors” of our 2022 Annual Report.

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