Cover and table of contents

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Cover and table of contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended November 30, 2022


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

For the transition period from to

Commission File Number: 001-08495

CONSTELLATION BRANDS, INC.

(Exact name of registrant as specified in its charter)


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

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

(Address of principal executive offices) (Zip code)

(585) 678-7100

(Registrant’s telephone number, including area code)

Not Applicable

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

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


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

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

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

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


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

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

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

Yes ☐ No ☒

There were 184,498,219 shares of Class A Common Stock and 52,685 shares of Class 1 Common Stock outstanding as of December 31, 2022.

TABLE OF CONTENTS


		Page

DEFINED TERMS		i

PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets		1
Consolidated Statements of Comprehensive Income (Loss)		2
Consolidated Statements of Changes in Stockholders’ Equity		3
Consolidated Statements of Cash Flows		5
Notes to Consolidated Financial Statements
	1. Basis of Presentation	7
	2. Inventories	7


	3. Derivative Instruments	7
	4. Fair Value of Financial Instruments	10
	5. Goodwill	15
	6. Intangible Assets	16
	7. Equity Method Investments	16


	8. Borrowings	19
	9. Income Taxes	22


	10. Stockholders' Equity	23
	11. Net Income (Loss) Per Common Share Attributable to CBI	25
	12. Comprehensive Income (Loss) Attributable to CBI	26
	13. Business Segment Information	28


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		32
Item 3. Quantitative and Qualitative Disclosures About Market Risk		58
Item 4. Controls and Procedures		59

PART II – OTHER INFORMATION
Item 1. Legal Proceedings		60
Item 1A. Risk Factors		60

Item 5. Other Information		63
Item 6. Exhibits		64

SIGNATURES		68

This Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the Company’s control, that could cause actual results to differ materially from those set forth in, or implied by, such forward-looking statements. For further information regarding such forward-looking statements, risks, and uncertainties, please see “Information Regarding Forward-Looking Statements” under MD&A.

Defined Terms

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


Term						Meaning

$						U.S. dollars
2.65% November 2017 Senior Notes						$700.0 million principal amount of 2.65% senior notes issued in November 2017 and redeemed in August 2021, prior to maturity
2.70% May 2017 Senior Notes						$500.0 million principal amount of 2.70% senior notes issued in May 2017 and redeemed in August 2021, prior to maturity
3.20% February 2018 Senior Notes						$600.0 million principal amount of 3.20% senior notes issued in February 2018, partially tendered in May 2022, and fully redeemed in June 2022, prior to maturity
4.25% May 2013 Senior Notes						$1,050.0 million principal amount of 4.25% senior notes issued in May 2013, partially tendered in May 2022, and fully redeemed in June 2022, prior to maturity
2018 Authorization						authority to repurchase up to $3.0 billion of our publicly traded common stock, authorized in January 2018 by our Board of Directors
2020 U.S. wildfires						significant wildfires that broke out in California, Oregon, and Washington states which affected the 2020 U.S. grape harvest

2021 Authorization						authority to repurchase up to $2.0 billion of our publicly traded common stock, authorized in January 2021 by our Board of Directors
2022 Annual Report						our Annual Report on Form 10-K for the fiscal year ended February 28, 2022

2022 Credit Agreement						tenth amended and restated credit agreement, dated as of April 14, 2022, that provides for an aggregate revolving credit facility of $2.25 billion
2022 Restatement Agreement						restatement agreement, dated as of April 14, 2022, that amended and restated the ninth amended and restated agreement, dated as of March 26, 2020, which was our then-existing senior credit facility as of February 28, 2022
2022 Wine Divestiture						sale of certain mainstream and premium wine brands and related inventory
3-tier						distribution channel where products are sold to a distributor (wholesaler) who then sells to a retailer; the retailer sells the products to a consumer
3-tier eCommerce						digital commerce experience for our consumers to purchase beverage alcohol from retailers
ABA						alternative beverage alcohol
Acreage						Acreage Holdings, Inc.
Acreage Financial Instrument						a call option for Canopy to acquire up to 100% of the shares of Acreage
Acreage Transaction						Canopy’s intention to acquire Acreage, subject to certain conditions
Administrative Agent						Bank of America, N.A., as administrative agent for the senior credit facility and term loan credit agreements

Amended and Restated By-Laws						our amended and restated by-laws which became effective at the Effective Time
Amended and Restated Charter						our amended and restated certificate of incorporation which effectuated the Reclassification at the Effective Time
AOCI						accumulated other comprehensive income (loss)
April 2022 Term Credit Agreement						June 2021 Term Credit Agreement, inclusive of amendment dated as of April 14, 2022
ASR						accelerated share repurchase agreement with a third-party financial institution
August 2022 Term Credit Agreement						term loan credit agreement, dated as of August 9, 2022, that provided for a $1.0 billion unsecured delayed draw three-year term loan facility
Austin Cocktails						we made an initial investment in the Austin Cocktails business and subsequently acquired the remaining ownership interest
C$						Canadian dollars


Constellation Brands, Inc. Q3 FY 2023 Form 10-Q			#WORTHREACHINGFOR I i


Term						Meaning

Canopy						we made an investment in Canopy Growth Corporation, an Ontario, Canada-based public company
Canopy Amendment						a proposed resolution authorizing amending Canopy’s share capital to create Exchangeable Shares and providing for the conversion of Canopy common shares into Exchangeable Shares on a one-for-one basis at any time and at the option of the holder of such shares
Canopy Debt Securities						debt securities issued by Canopy, as amended to remove Canopy's right to settle such debt securities on conversion into Canopy common shares
Canopy Equity Method Investment						November 2017 Canopy Investment, November 2018 Canopy Investment, May 2020 Canopy Investment, and July 2022 Canopy Investment, collectively
Canopy Strategic Transaction(s)						any potential acquisition, divestiture, investment, or other similar transaction made by Canopy, including but not limited to the Acreage Transaction and the Canopy Transaction
Canopy Transaction						proposed corporate transaction by Canopy, including the creation of Exchangeable Shares, designed to consolidate its U.S. cannabis assets into Canopy USA
Canopy USA						a new U.S. holding company formed by Canopy
CARES Act						Coronavirus Aid, Relief, and Economic Security Act
CB International						CB International Finance S.à r.l., a wholly-owned subsidiary of ours
Class 1 Stock						our Class 1 Convertible Common Stock, par value $0.01 per share
Class A Stock						our Class A Common Stock, par value $0.01 per share
Class B Stock						our Class B Convertible Common Stock, par value $0.01 per share, eliminated on November 10, 2022, pursuant to the Reclassification
CODM						chief operating decision maker
Comparable Adjustments						certain items affecting comparability that have been excluded by management
Consent Agreement						an agreement between Canopy and (i) Greenstar Canada Investment Limited Partnership and (ii) CBG Holdings LLC, our indirect, wholly-owned subsidiaries
Depletions						represent U.S. domestic distributor shipments of our respective branded products to retail customers, based on third-party data
Digital Business Acceleration						a phased initiative by the Company to create a cohesive digital strategy and build an advanced digital business in the coming years
DTC						direct-to-consumer inclusive of (i) a digital commerce experience for consumers to purchase directly from brand websites with inventory coming straight from the supplier and (ii) consumer purchases at hospitality locations (tasting rooms and tap rooms) from the supplier
Effective Time						the time that the Amended and Restated Charter was duly filed with the Secretary of State of the State of Delaware on November 10, 2022
ERP						enterprise resource planning system
ESG						environmental, social, and governance
Exchangeable Shares						proposed new class of non-voting and non-participating exchangeable shares in Canopy which will be convertible into common shares of Canopy
Exchange Act						Securities Exchange Act of 1934, as amended

Financial Statements						our consolidated financial statements and notes thereto included herein
Fiscal 2022						the Company’s fiscal year ended February 28, 2022
Fiscal 2023						the Company’s fiscal year ending February 28, 2023
Fiscal 2024						the Company’s fiscal year ending February 29, 2024
Fiscal 2025						the Company’s fiscal year ending February 28, 2025
Fiscal 2026						the Company’s fiscal year ending February 28, 2026
Fiscal 2027						the Company’s fiscal year ending February 28, 2027
Fiscal 2028						the Company’s fiscal year ending February 29, 2028


Constellation Brands, Inc. Q3 FY 2023 Form 10-Q			#WORTHREACHINGFOR I ii


Term						Meaning

Five-Year Term Facility						a five-year term loan facility under the April 2022 Term Credit Agreement
Form 10-Q						this Quarterly Report on Form 10-Q for the quarterly period ended November 30, 2022, unless otherwise specified
GHG						greenhouse gas
GivingTuesday						a global generosity movement to encourage others to give back to their community, occurring each year on the Tuesday following Thanksgiving in the U.S.
July 2022 Canopy Investment						in July 2022, we received 29.2 million common shares of Canopy through the exchange of C$100.0 million principal amount of our Canopy Debt Securities
June 2021 Term Credit Agreement						amended and restated term loan credit agreement, dated as of March 26, 2020, that provided for aggregate facilities of $491.3 million, consisting of the Five-Year Term Facility, inclusive of amendment dated as of June 10, 2021
Lender						Bank of America, N.A., as lender for the April 2022 Term Credit Agreement
LIBOR						London Interbank Offered Rate
Lingua Franca						Lingua Franca, LLC business, acquired by us
May 2020 Canopy Investment						in May 2020, we made an incremental investment for 18.9 million common shares of Canopy through the exercise of warrants obtained in November 2017
May 2022 Senior Notes						$1,850.0 million aggregate principal amount of senior notes issued in May 2022
MD&A						Management’s Discussion and Analysis of Financial Condition and Results of Operations under Part I – Item 2. of this Form 10-Q
Mexicali Brewery						canceled brewery construction project located in Mexicali, Baja California, Mexico
Mexico Beer Projects						expansion, optimization, and/or construction activities at the Obregon Brewery, Nava Brewery, and Veracruz Brewery
M&T						Manufacturers and Traders Trust Company
My Favorite Neighbor						we made an initial investment in My Favorite Neighbor, LLC and subsequently acquired the remaining ownership interest
NA						not applicable

Nava						Nava, Coahuila, Mexico
Nava Brewery						brewery located in Nava
Net sales						gross sales less promotions, returns and allowances, and excise taxes
Nine Months 2022						the Company’s nine months ended November 30, 2021
Nine Months 2023						the Company’s nine months ended November 30, 2022
NM						not meaningful
Note(s)						notes to the consolidated financial statements
November 2017 Canopy Investment						in November 2017, we made an initial investment for 18.9 million common shares of Canopy
November 2018 Canopy Investment						in November 2018, we made an incremental investment for 104.5 million common shares of Canopy

November 2018 Canopy Warrants						Tranche A Warrants, Tranche B Warrants, and Tranche C Warrants, collectively
Obregon						Obregon, Sonora, Mexico
Obregon Brewery						brewery located in Obregon
OCI						other comprehensive income (loss)
October 2022 Credit Agreement Amendments						amendments dated as of October 18, 2022, to the 2022 Credit Agreement, the April 2022 Term Credit Agreement, and the August 2022 Term Credit Agreement
Pre-issuance hedge contracts						treasury lock and/or swap lock contracts designated as cash flow hedges entered into to hedge treasury rate volatility on future debt issuances
Reclassification						the reclassification, exchange, and conversion of the Company’s common stock to eliminate the Class B Stock pursuant to the terms and conditions of the Reclassification Agreement


Constellation Brands, Inc. Q3 FY 2023 Form 10-Q			#WORTHREACHINGFOR I iii


Term						Meaning

Reclassification Agreement						reclassification agreement in support of the Reclassification, dated June 30, 2022, among the Company and the Sands Family Stockholders
Registration Rights Agreement						Registration Rights Agreement, dated as of November 10, 2022, by and among the Company and the Sands Family Stockholders
Registration Statement on Form S-4						our Registration Statement on Form S-4, including our proxy statement/prospectus, in connection with the Reclassification declared effective by the SEC on September 21, 2022
RTD						ready-to-drink
SEC						Securities and Exchange Commission
Sands Family Stockholders						RES Master LLC, RES Business Holdings LP, SER Business Holdings LP, RHT 2015 Business Holdings LP, RSS Master LLC, RSS Business Holdings LP, SSR Business Holdings LP, RSS 2015 Business Holdings LP, RCT 2015 Business Holdings LP, RCT 2020 Investments LLC, NSDT 2009 STZ LLC, NSDT 2011 STZ LLC, RSS Business Management LLC, SSR Business Management LLC, LES Lauren Holdings LLC, MES Mackenzie Holdings LLC, Abigail Bennett, Zachary Stern, A&Z 2015 Business Holdings LP (subsequently liquidated), Marilyn Sands Master Trust, MAS Business Holdings LP, Sands Family Foundation, Richard Sands, Robert Sands, WildStar, Astra Legacy LLC, AJB Business Holdings LP, and ZMSS Business Holdings LP
Specified Time						such time as the domestic sale of marijuana could not reasonably be expected to violate the Controlled Substances Act, the Civil Asset Forfeiture Reform Act (as it relates to violation of the Controlled Substances Act), and all related applicable anti-money laundering laws
Securities Act						Securities Act of 1933, as amended
SOFR						secured overnight financing rate administered by the Federal Reserve Bank of New York



THC						tetrahydrocannabinol
Third Quarter 2022						the Company’s three months ended November 30, 2021
Third Quarter 2023						the Company’s three months ended November 30, 2022
Tranche A Warrants						warrants which give us the option to purchase 88.5 million common shares of Canopy expiring November 1, 2023
Tranche B Warrants						warrants which give us the option to purchase 38.4 million common shares of Canopy expiring November 1, 2026
Tranche C Warrants						warrants which give us the option to purchase 12.8 million common shares of Canopy expiring November 1, 2026
TSX						Toronto Stock Exchange
U.S.						United States of America
U.S. GAAP						generally accepted accounting principles in the U.S.
Veracruz						Heroica Veracruz, Veracruz, Mexico
Veracruz Brewery						a new brewery being constructed in Veracruz
VWAP Exercise Price						volume-weighted average of the closing market price of Canopy’s common shares on the TSX for the five trading days immediately preceding the exercise date
WildStar						WildStar Partners LLC


Constellation Brands, Inc. Q3 FY 2023 Form 10-Q			#WORTHREACHINGFOR I iv


FINANCIAL STATEMENTS			Table of Contents

PART I – FINANCIAL INFORMATION

Next: Item 1. Financial Statements.