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

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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 2023 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 significant divestitures, acquisitions, and investments.

Results of operations. This section provides an analysis of our results of operations presented on a business segment basis for the three months ended August 31, 2023, and August 31, 2022, and six months ended August 31, 2023, and August 31, 2022. 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 liquidity position. Included in the analysis of outstanding debt is a discussion of the 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, High West, Casa Noble, and Mi CAMPO. 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 refining 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.

Effective May 31, 2023, we changed our internal management financial reporting to consist of two business divisions: (i) Beer and (ii) Wine and Spirits and we now report our operating results in three


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segments: (i) Beer, (ii) Wine and Spirits, and (iii) Corporate Operations and Other following the removal of the Canopy operating segment. For additional information, refer to Note 13.

In the Beer segment, our portfolio consists of high-end imported beer brands 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, IT, legal, and public relations, as well as our Canopy investment and 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;
deploy capital in line with disciplined and balanced priorities; 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 infrastructure that supports and enables our business, including data systems and architecture; and exemplifying intentional and proactive fiscal 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. We have launched a multi-year Digital Business Acceleration initiative, which we believe will enable us to drive results by enhancing our technology capabilities in key areas. In Fiscal 2024, we continue to focus our Digital Business Acceleration initiative efforts on procurement, end-to-end supply chain planning, and marketing optimization, as well as introducing a new focus area, logistics. Additionally, we believe our continued focus on maintaining a strong balance sheet provides a solid financial foundation to support our broader strategic initiatives.

Our business strategy for the Beer segment focuses on strengthening our leadership position in the high-end segment of the U.S. beer market and continuing to grow our high-end imported beer brands 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 3-tier eCommerce channel, as well as continued expansion, optimization, and/or construction activities at our breweries in Mexico. 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


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innovation capabilities to create new line extensions behind celebrated, trusted brands and package formats that are intended to meet emerging needs.

Expansion, optimization, and/or construction activities continue under our Mexico Beer Projects to align with our anticipated future growth expectations. Additionally, we are pursuing the sale of the remaining assets at the canceled Mexicali Brewery after exploring various options; however, we may not be successful in completing any such sale or obtaining other forms of recovery.

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 an enhanced focus on higher-margin, higher-growth wine and spirits brands. Our business is organized 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 organic net sales and expanding margins. In addition, we are advancing our aim to become a global, omni-channel competitor in line with consumer preferences. Our business continues to progressively expand into DTC channels (including hospitality), 3-tier eCommerce, and international markets, while continuing to grow in U.S. 3-tier brick-and-mortar distribution. In markets where it is feasible, we entered into a contractual arrangement with Southern Glazer’s Wine and Spirits 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.

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, 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 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 as well as our target net leverage ratio and dividend payout ratio; investing to support the growth of our business; and delivering additional returns to stockholders through periodic share repurchases. Our results of operations and financial condition have been affected by inflation, changing prices, reductions in discretionary income of consumers available to purchase our products, and shifting consumer behaviors, as well as other unfavorable global and regional economic conditions, global supply chain disruptions and constraints, geopolitical events, and military conflicts, such as repercussions from the conflict in Ukraine. We expect some or all of these impacts to continue during the remainder of Fiscal 2024 which could have a material impact on our results of operations. We intend to continue to monitor the inflationary environment and the impact on the consumer when we consider passing along rising costs through further selling price increases, subject to normal competitive conditions. In addition, we continue to identify on-going cost savings initiatives, including our commodity and foreign exchange hedging programs. 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, extreme heat, 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

During the course of our history, we have been committed to safeguarding our environment, making a positive difference in our communities, and advocating for responsible consumption of beverage alcohol products. We believe our ESG strategy enables us to better meet stakeholder expectations, reflects our Company values, and directly address pressing environmental and societal needs that are important to our stockholders, communities, consumers, and employees.


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Specifically, we have focused on areas where we believe we have the greatest opportunities to make meaningful, positive impacts for people and the planet, and we dedicate our resources towards:

Serving as good stewards of our environment and natural resources

Improve water availability and resilience for our communities where we operate; and reducing GHG emissions through energy conservation and renewable energy initiatives; and reducing operational waste and enhancing our use of returnable, recyclable, or renewable packaging

Enhancing social equity within our industry and communities

Championing the professional development and advancement of women in the beverage alcohol industry and our communities; enhancing economic development and prosperity in disadvantaged communities; and championing an inclusive culture within our organization, characterized by diversity in background and thought, which reflects our consumers and the communities where we live and work

Promoting responsible beverage alcohol consumption

Ensuring the responsible promotion and marketing of our products; and empowering adults to make responsible choices in their alcohol (substance) consumption by supporting fact-based education, engagement programs, and policies

During Second Quarter 2024 we took the following steps to advance our ESG strategy by key area:

Serving as good stewards of our environment and natural resources

Corona again partnered with Oceanic Global, a non-profit leader in ocean conservation, to evaluate plastic waste usage within marketing materials and organize and support beach cleanup events around the U.S. focused on removing plastic, and is on track to exceed the brand’s goal of removing one million pounds of plastic from the beach, Corona’s packaging, and its branded merchandise by its 100th birthday in calendar year 2025
completed the transition from hi-cone plastic rings to recyclable paperboard for all applicable 4-pack and 6-pack stock keeping units across our Beer portfolio

Enhancing social equity within our industry and communities

partnered with National Hispanic Corporate Council and UnidosUS to host events to learn and share diversity, equity, and inclusion best practices, to collectively address top-of-mind issues and concerns affecting the Hispanic/Latinx community, and to seek to inspire attendees to continue creating change across the U.S.
acquired the Domaine Curry wine brand. Through Second Quarter 2024, we have delivered 85% and 22% of our commitments to our Focus on Female Founders and Focus on Minority Founder Venture programs, respectively

Promoting responsible beverage alcohol consumption

in collaboration with Responsibility.org, a not-for-profit that aims to empower adults to make a lifetime of responsible alcohol choices, we shared responsible consumption messaging throughout the summer months, including the July 4th holiday, with employees and external audiences

Divestitures, acquisitions, and investments

Beer segment

Craft Beer Divestitures

In June 2023, we completed the Craft Beer Divestitures. Accordingly, our consolidated results of operations include the results of operations of such craft beer brands through the dates of these divestitures. The Craft Beer Divestitures are consistent with our strategic focus on continuing to grow our high-end imported beer brands through maintenance of leading margins and enhancements to our results of operations.


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Daleville Facility

In May 2023, we sold the Daleville Facility in connection with management’s decision to exit the craft beer business. The net cash proceeds from the transaction were used primarily for general corporate purposes.

Wine and Spirits segment

Wine Divestiture

In October 2022, we sold certain of our mainstream and premium wine brands and related inventory. Accordingly, our consolidated results of operations include the results of operations of such mainstream and premium wine brands through the date of divestiture.

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 included 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.

Our Wine and Spirits segment divestiture and acquisitions support our strategic focus on consumer-led premiumization trends and meeting the evolving needs of our consumers.

Corporate Operations and Other segment

Corporate ventures

As of August 31, 2023, we evaluated certain equity method investments, made through our corporate venture capital function, and determined there were other-than-temporary impairments due to business underperformance. Investments with a carrying value of $14.9 million were written down to an estimated fair value of $2.6 million, resulting in an impairment of $12.3 million. This loss from impairment was included in income (loss) from unconsolidated investments within our consolidated results for Second Quarter 2024 and Six Months 2024.

Canopy investment

We have an investment in Canopy, a North American cannabis and CPG company providing medical and adult-use cannabis products, which expands our portfolio into adjacent categories. We expect to convert our Canopy common shares into Exchangeable Shares following the completion of the Canopy Transaction.

Canopy Equity Method Investment —

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

We evaluated the Canopy Equity Method Investment as of May 31, 2023, and determined there was an other-than-temporary impairment. Our conclusion was based on several contributing factors, including: (i) the fair value being less than the carrying value and the uncertainty surrounding Canopy’s stock price recovering in the near-term, (ii) Canopy recorded significant costs in its fourth quarter of fiscal 2023 results designed to align its Canadian cannabis operations and resources in response to continued unfavorable market trends, (iii) the substantial doubt about Canopy’s ability to continue as a going concern, as disclosed by Canopy, and (iv) Canopy’s identification of material misstatements in certain of its previously reported financial results related to sales in its BioSteel reporting unit that were accounted for incorrectly, including the recording of a goodwill impairment


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during its restated second quarter of fiscal 2023. As a result, the Canopy Equity Method Investment with a carrying value of $266.2 million was written down to its estimated fair value of $142.7 million, resulting in an impairment of $123.5 million. This loss from impairment was included in income (loss) from unconsolidated investments within our consolidated results for Six Months 2024.

Additionally, we evaluated the Canopy Equity Method Investment as of August 31, 2022, and determined that there was an other-than-temporary impairment. Our conclusion was based on several contributing factors, including: (i) the period of time for which the fair value had been less than the carrying value and the uncertainty surrounding Canopy’s stock price recovering in the near-term, (ii) Canopy recording a significant impairment of goodwill related to its cannabis operations during its first quarter of fiscal 2023, and (iii) the uncertainty of U.S. federal cannabis permissibility. As a result, the Canopy Equity Method Investment with a carrying value of $1,695.1 million was written down to its estimated fair value of $634.8 million, resulting in an impairment of $1,060.3 million. This loss from impairment was included in income (loss) from unconsolidated investments within our consolidated results for Second Quarter 2023 and Six Months 2023.

Other Canopy investments —

In July 2022, we received 29.2 million common shares of Canopy following the exchange of C$100.0 million principal amount of our Canopy Debt Securities. In April 2023, we extended the maturity of the remaining C$100.0 million principal amount of our Canopy Debt Securities by exchanging them for the 2023 Canopy Promissory Note. The fair value of the Canopy Debt Securities was $69.6 million as of February 28, 2023. As of May 31, 2023, we determined that the 2023 Canopy Promissory Note had no future economic value and, accordingly, the fair value was reduced to zero.

Plan to convert Canopy common stock ownership —

In October 2022, we entered into a Consent Agreement with Canopy pursuant to which we have provided our consent, subject to certain conditions, to the Canopy Transaction. Assuming the completion of the Canopy Transaction and the transactions contemplated by the Consent Agreement and that we elect to convert our Canopy common shares into Exchangeable Shares:

we intend to surrender our November 2018 Canopy Warrants to Canopy for cancellation;
we will only have an interest in Exchangeable Shares, which are non-voting and non-participating securities, and our 2023 Canopy Promissory Note (for which we intend to negotiate an exchange of the principal amount for Exchangeable Shares, although neither we nor Canopy has any binding obligation to do so);
we intend to terminate all legacy agreements and commercial arrangements between ourselves and Canopy, including the investor rights agreement but excluding the Consent Agreement and certain termination agreements;
we will have no further governance rights in relation to Canopy, including rights to nominate members to the board of directors of Canopy, or approval rights related to certain transactions;
all of our nominees will resign from the board of directors of Canopy; and
as our investment in Canopy common shares makes up our Canopy Equity Method Investment, we expect to no longer apply the equity method to our investment in Canopy, which we expect to instead be accounted for at fair value with changes reported in income (loss) from unconsolidated investments within our consolidated results.

For additional information on these divestitures, acquisitions, and investments refer to Notes 4, 5, and 7.


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Results of Operations

Financial Highlights

References to organic throughout the following discussion exclude the impact of the Wine Divestiture, as appropriate.

Second Quarter 2024 compared with Second Quarter 2023

*•*Our results of operations were impacted by (i) lower impairment losses related to our equity method investments as compared with Second Quarter 2023, driven by our Canopy Equity Method Investment, (ii) a decrease in equity in losses from Canopy’s results, and (iii) improvements within the Beer segment driven by shipment volume growth.

Net sales increased 7%** largely due to an increase in Beer net sales driven primarily by shipment volume growth and favorable impact from pricing.

*•*Operating income increased 20% largely due to (i) the improvements within the Beer segment as shipment volume growth exceeded higher operational costs, (ii) gains recognized on undesignated commodity derivative contracts for Second Quarter 2024 compared with losses for Second Quarter 2023, and (iii) Second Quarter 2023 Reclassification costs that did not recur.

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.

Six Months 2024 compared to Six Months 2023

*•*Our results of operations were impacted by (i) lower impairment losses related to our equity method investments as compared with Six Months 2023, driven by our Canopy Equity Method Investment, (ii) a decrease in equity in losses from Canopy’s results, (iii) improvements within the Beer segment driven by shipment volume growth, and (iv) a decrease in unrealized net loss from the changes in fair value of our investment in Canopy.

Net sales increased 7%** largely due to an increase in Beer net sales driven primarily by shipment volume growth and favorable impact from pricing.
Operating income increased 7%** largely due to (i) the improvements with the Beer segment as shipment volume exceeded higher operational costs and an increase in media investments, (ii) lower Reclassification costs, and (iii) decreased losses on undesignated commodity derivative contracts, partially offset by increased restructuring and other strategic business development costs as compared to Six Months 2023.

*•*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.

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.


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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:


	Second Quarter 2024		Second Quarter 2023		Six Months 2024		Six Months 2023
(in millions)
Cost of product sold
Net gain (loss) on undesignated commodity derivative contracts	$	19.1	$	(15.4)	$	(15.6)	$	33.1
Settlements of undesignated commodity derivative contracts	5.6		(31.3)		6.2		(54.6)

Flow through of inventory step-up	(0.8)		(0.9)		(1.5)		(1.9)
Net flow through of reserved inventory	—		1.2		—		1.2
Recovery of (loss on) inventory write-down	—		—		—		0.2


Comparable Adjustments, Cost of product sold	23.9		(46.4)		(10.9)		(22.0)

Selling, general, and administrative expenses

Transition services agreements activity	(7.0)		(4.5)		(12.7)		(7.9)
Restructuring and other strategic business development costs	(3.4)		(1.2)		(18.3)		(2.6)
Transaction, integration, and other acquisition-related costs	(0.3)		(0.5)		(0.6)		(0.7)
Costs associated with the Reclassification	—		(20.6)		0.2		(21.3)



Other gains (losses)	(2.3)		3.6		(9.3)		8.8
Comparable Adjustments, Selling, general, and administrative expenses	(13.0)		(23.2)		(40.7)		(23.7)



Comparable Adjustments, Operating income (loss)	$	10.9	$	(69.6)	$	(51.6)	$	(45.7)

Comparable Adjustments, Income (loss) from unconsolidated investments	$	(7.4)	$	(1,685.5)	$	(391.8)	$	(1,820.9)

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.

Flow through of inventory step-up

In connection with acquisitions, the allocation of purchase price in excess of book value for certain inventories on hand at the date of acquisition is referred to as inventory step-up. Inventory step-up represents an assumed manufacturing profit attributable to the acquired business prior to acquisition.

Net flow through of reserved inventory

We sold reserved inventory previously written down following the 2020 U.S. West Coast wildfires.


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Recovery of (loss on) inventory write-down

We recognized a gain from a change in estimate on reserved bulk wine inventory and certain grapes as a result of smoke damage sustained during the 2020 U.S. West Coast wildfires.

Selling, general, and administrative expenses

Transition services agreements activity

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

Restructuring and other strategic business development costs

We recognized costs in connection with certain activities which are intended to streamline, increase efficiencies, and reduce our cost structure primarily within the Wine and Spirits segment.

Transaction, integration, and other acquisition-related costs

We recognized transaction, integration, and other acquisition-related costs in connection with our investments, acquisitions, and divestitures.

Costs associated with the Reclassification

We recognized costs primarily related to professional and consulting fees and all filing and other fees paid to the SEC in connection with the Reclassification.

Other gains (losses)

We recognized other gains (losses) primarily from (i) losses on the sales of the Daleville Facility and Craft Beer Divestitures (Second Quarter 2024, Six Months 2024), (ii) recognition of a previously deferred gain upon release of a related indemnity (Second Quarter 2024, Six Months 2024), (iii) a gain recognized on the remeasurement of our previously held equity interests to the acquisition-date fair value (Six Months 2023), and (iv) a decrease in estimated fair value of a contingent liability associated with a prior period acquisition (Second Quarter 2023, Six Months 2023).

Income (loss) from unconsolidated investments

We recognized income (loss) primarily from (i) comparable adjustments to equity in losses from Canopy’s results, (ii) an impairment of our Canopy Equity Method Investment (Second Quarter 2023, Six Months 2024, and Six Months 2023), (iii) unrealized net losses from the changes in fair value of our securities measured at fair value, and (iv) impairments of certain other equity method investments (Second Quarter 2024, Six Months 2024). For additional information, refer to Notes 4 and 7.

Business Segments

Second Quarter 2024 compared to Second Quarter 2023

Net sales


	Second Quarter 2024		Second Quarter 2023		Dollar Change		Percent Change
(in millions)
Beer	$	2,392.7	$	2,139.3	$	253.4	12	%
Wine and Spirits:
Wine	383.9		442.0		(58.1)		(13	%)
Spirits	60.2		73.8		(13.6)		(18	%)
Total Wine and Spirits	444.1		515.8		(71.7)		(14	%)

Consolidated net sales	$	2,836.8	$	2,655.1	$	181.7	7	%


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	Beer segment	Second Quarter 2024		Second Quarter 2023		Dollar Change		Percent Change
(in millions, branded product, 24-pack, 12-ounce case equivalents)
Net sales		$	2,392.7	$	2,139.3	$	253.4	12	%


Shipments		123.0		113.2				8.7	%


Depletions								7.9	%

The increase in Beer net sales is largely due to (i) $188.2 million of shipment volume growth within our Mexican beer portfolio, which benefited from continued consumer demand, (ii) $59.3 million of favorable impact from pricing in select markets within our Mexican beer portfolio, and (iii) $8.5 million of favorable product mix primarily from a shift in package types.


	Wine and Spirits segment	Second Quarter 2024		Second Quarter 2023		Dollar Change		Percent Change
(in millions, branded product, 9-liter case equivalents)
Net sales		$	444.1	$	515.8	$	(71.7)	(14	%)

Shipments
Total		6.1		7.4				(17.6	%)
Organic (1)		6.1		7.2				(15.3	%)

U.S. Domestic		5.4		6.4				(15.6	%)
Organic U.S. Domestic (1)		5.4		6.3				(14.3	%)





Depletions (1)								(7.8	%)

(1)Includes an adjustment to remove volume associated with the Wine Divestiture for the period June 1, 2022, through August 31, 2022.

The decrease in Wine and Spirits net sales is due to a $57.3 million decrease in organic net sales and $14.4 million from the Wine Divestiture. The decrease in organic net sales is driven by (i) a $73.6 million decrease in branded wine and spirits shipment volume and (ii) a $7.4 million decrease in non-branded net sales primarily due to a decline in bulk sales as compared to Second Quarter 2023, partially offset by (i) $19.4 million from favorable product mix, driven by consumer-led premiumization, and (ii) $4.7 million of favorable impact from pricing. The decrease in branded wine and spirits shipment volume is attributable to declines within our U.S. wholesale market, primarily driven by our lower-end brands. The favorable impact from pricing was driven by price increases and higher contractual distributor payments as compared to Second Quarter 2023, partially offset by increases in promotional activity.

Gross profit


	Second Quarter 2024		Second Quarter 2023		Dollar Change		Percent Change
(in millions)
Beer	$	1,228.7	$	1,147.6	$	81.1	7	%
Wine and Spirits	197.3		224.7		(27.4)		(12	%)
Comparable Adjustments	23.9		(46.4)		70.3		NM
Consolidated gross profit	$	1,449.9	$	1,325.9	$	124.0	9	%


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			The increase in Beer gross profit is primarily due to (i) $101.3 million of shipment volume growth and (ii) the $59.3 million favorable impact from pricing, partially offset by $80.0 million of higher cost of product sold. The higher cost of product sold is largely due to (i) $39.4 million of higher material costs, including glass, malt, aluminum, and starch, driven by inflation and global supply chain constraints, (ii) $16.2 million of costs related to a voluntary product recall of select kegs for quality assurance, (iii) $12.1 million of higher depreciation resulting from the Mexico Beer Projects, and (iv) $3.6 million of higher inventory obsolescence as compared to Second Quarter 2023, partially offset by $7.0 million of favorable fixed cost absorption related to increased production levels as compared to Second Quarter 2023. To partially offset the increases in cost of product sold we are executing initiatives that have resulted in nearly $20 million of net cost savings for Second Quarter 2024.


			The decrease in Wine and Spirits gross profit is due to a $18.8 million decrease in organic gross profit and $8.6 million from the Wine Divestiture. The decrease in organic gross profit is attributable to (i) a $36.8 million decrease in branded wine and spirits shipment volume and (ii) a $7.9 million decrease in non-branded net sales, partially offset by (i) $12.0 million of lower cost of product sold, (ii) $8.4 million of favorable product mix, and (iii) the $4.7 million favorable impact from pricing. The decrease in cost of product sold was largely attributable to (i) $9.7 million of decreased transportation and warehousing costs, including ocean freight shipping, and (ii) $2.3 million of cost savings initiatives, primarily resulting in lower grape costs, as well as lower materials and packaging costs, driven by our sustainable packaging projects.

Gross profit as a percent of net sales increased to 51.1% for Second Quarter 2024 compared with 49.9% for Second Quarter 2023. This increase was largely due to (i) a favorable change of approximately 255 basis points in Comparable Adjustments, (ii) 105 basis points of favorable impact from Beer pricing in select markets, and (iii) approximately 45 basis points of rate growth from lower cost of product sold within the Wine and Spirits segment, partially offset by approximately 290 basis points of rate decline from higher cost of product sold within the Beer segment, driven by the increase in material and other operational costs.

Selling, general, and administrative expenses


	Second Quarter 2024		Second Quarter 2023		Dollar Change		Percent Change
(in millions)
Beer	$	274.8	$	282.0	$	(7.2)	(3	%)
Wine and Spirits	116.6		125.3		(8.7)		(7	%)
Corporate Operations and Other	66.8		82.3		(15.5)		(19	%)
Comparable Adjustments	13.0		23.2		(10.2)		NM
Consolidated selling, general, and administrative expenses	$	471.2	$	512.8	$	(41.6)	(8	%)


			The decrease in Beer selling, general, and administrative expenses is driven largely by $3.8 million and $3.3 million of decreased marketing spend and general and administrative expenses, respectively. The decrease in marketing spend is primarily driven by the Craft Divestitures. The decrease in general and administrative expenses was driven primarily by favorable foreign currency impact.


			The decrease in Wine and Spirits selling, general, and administrative expenses is primarily due to a $9.8 million decrease in marketing spend driven by less planned media investments for our lower-end brands as compared to Second Quarter 2023 and a reduction in third-party services, partially offset by litigation expenses.


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			The decrease in Corporate Operations and Other selling, general, and administrative expenses is largely due to (i) a $15 million reduction in third-party services, driven by lower Digital Business Acceleration investments, and (ii) a $7 million decrease in compensation and benefits, including favorability from the November 2022 Reclassification, partially offset by a Second Quarter 2024 loss on the sale of an asset and unfavorable depreciation expense.

Selling, general, and administrative expenses as a percent of net sales decreased to 16.6% for Second Quarter 2024 as compared to 19.3% for Second Quarter 2023. The decrease is largely driven by (i) approximately 195 basis points and 60 basis points of rate decline from the decreases in Beer and Corporate Operations and Other selling, general, and administrative expenses, respectively, and (ii) a favorable change in Comparable Adjustments, contributing approximately 40 basis points of rate decline.

Operating income (loss)


	Second Quarter 2024		Second Quarter 2023		Dollar Change		Percent Change
(in millions)
Beer	$	953.9	$	865.6	$	88.3	10	%
Wine and Spirits	80.7		99.4		(18.7)		(19	%)
Corporate Operations and Other	(66.8)		(82.3)		15.5		19	%
Comparable Adjustments	10.9		(69.6)		80.5		NM
Consolidated operating income (loss)	$	978.7	$	813.1	$	165.6	20	%


			The increase in Beer operating income is largely attributable to the shipment volume growth within our Mexican beer portfolio and the favorable pricing impact, partially offset by higher material costs.


			The decrease in Wine and Spirits operating income is largely attributable to the decline in branded wine and spirits shipment volume, the Wine Divestiture, and the decrease in non-branded net sales, partially offset by the lower cost of product sold and marketing spend.


			As previously discussed, the Corporate Operations and Other decrease in operating loss is largely due to the lower Digital Business Acceleration investments and compensation and benefits.

Income (loss) from unconsolidated investments


	Second Quarter 2024		Second Quarter 2023		Dollar Change		Percent Change
(in millions)
Impairment of equity method investments	$	(12.3)	$	(1,060.3)	$	1,048.0	99	%
Unrealized net gain (loss) on securities measured at fair value	(2.6)		(9.3)		6.7		72	%
Equity in earnings (losses) from Canopy and related activities	(12.0)		(650.7)		638.7		98	%
Equity in earnings (losses) from other equity method investees and related activities	6.7		1.2		5.5		NM

	$	(20.2)	$	(1,719.1)	$	1,698.9	99	%

Interest expense

Interest expense increased to $110.6 million for Second Quarter 2024 as compared to $94.3 million for Second Quarter 2023. This increase of $16.3 million, or 17%, is due to approximately 35 basis points of higher


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weighted average interest rates and approximately $895 million of higher average borrowings, partially offset by an increase in capitalized interest in connection with the Mexico Beer Projects. The higher weighted average interest rates and average borrowings are largely attributable to funding the aggregate cash payment to holders of Class B Stock in connection with the Reclassification. For additional information, refer to Note 8.

Loss on extinguishment of debt

Loss on extinguishment of debt primarily consists of make-whole payments in connection with early redemption of our 3.20% February 2018 Senior Notes and 4.25% May 2013 Senior Notes (Second Quarter 2023).

(Provision for) benefit from income taxes

The provision for income taxes increased to $147.2 million for Second Quarter 2024 from $132.4 million for Second Quarter 2023. Our effective tax rate for Second Quarter 2024 was 17.4% as compared with (13.1)% for Second Quarter 2023. In comparison to prior year, our income taxes were impacted primarily by:

an increase in the valuation allowance related to our investment in Canopy, driven by the Canopy Equity Method Investment impairment recognized in the Second Quarter 2023; partially offset by
a net income tax benefit from the realization of tax losses related to a prior period divestiture recognized in the Second Quarter 2023; and
the effective tax rates applicable to our foreign businesses.

For additional information, refer to Note 9.

Net income (loss) attributable to CBI

Net income (loss) attributable to CBI increased to $690.0 million for Second Quarter 2024 from $(1,151.2) million for Second Quarter 2023. This increase of $1,841.2 million is largely attributable to (i) the Second Quarter 2023 impairment of our Canopy Equity Method Investment, (ii) the decrease in equity in losses from Canopy’s results, and (iii) the Second Quarter 2024 improvements within the Beer segment as shipment volume growth and favorable pricing exceeded higher operational costs.

Six Months 2024 compared to Six Months 2023

Net sales


	Six Months 2024		Six Months 2023		Dollar Change		Percent Change
(in millions)
Beer	$	4,491.3	$	4,037.5	$	453.8	11	%
Wine and Spirits:
Wine	744.9		846.1		(101.2)		(12	%)
Spirits	115.5		134.7		(19.2)		(14	%)
Total Wine and Spirits	860.4		980.8		(120.4)		(12	%)

Consolidated net sales	$	5,351.7	$	5,018.3	$	333.4	7	%


	Beer segment	Six Months 2024		Six Months 2023		Dollar Change		Percent Change
(in millions, branded product, 24-pack, 12-ounce case equivalents)
Net sales		$	4,491.3	$	4,037.5	$	453.8	11	%


Shipments		230.0		212.7				8.1	%


Depletions								6.8	%


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The increase in Beer net sales is largely due to (i) $329.3 million of shipment volume growth within our Mexican beer portfolio, which benefited from continued consumer demand, (ii) $121.7 million of favorable impact from pricing in select markets within our Mexican beer portfolio, and (iii) $6.1 million of favorable product mix primarily from a shift in package types.


	Wine and Spirits segment	Six Months 2024		Six Months 2023		Dollar Change		Percent Change
(in millions, branded product, 9-liter case equivalents)
Net sales		$	860.4	$	980.8	$	(120.4)	(12	%)

Shipments
Total		12.0		14.2				(15.5	%)
Organic (1)		12.0		13.7				(12.4	%)

U.S. Domestic		10.6		12.2				(13.1	%)
Organic U.S. Domestic (1)		10.6		11.9				(10.9	%)





Depletions (1)								(7.0	%)

(1)Includes an adjustment to remove volume associated with the Wine Divestiture for the period March 1, 2022, through August 31, 2022.

The decrease in Wine and Spirits net sales is due to a $85.6 million decrease in organic net sales and $34.8 million from the Wine Divestiture. The decrease in organic net sales is driven by (i) a $109.7 million decrease in branded wine and spirits shipment volume and (ii) an $11.1 million decrease in non-branded net sales primarily due to a decline in bulk sales as compared to Six Months 2023, partially offset by (i) $19.4 million of favorable product mix, driven by consumer-led premiumization, and (ii) $16.6 million of favorable impact from pricing. The decrease in branded wine and spirits shipment volume is attributable to declines within our U.S. wholesale market, primarily driven by our lower-end brands. The favorable impact from pricing was driven by price increases, decreases in promotional activity, and higher contractual distributor payments as compared to Six Months 2023.

Gross profit


	Six Months 2024		Six Months 2023		Dollar Change		Percent Change
(in millions)
Beer	$	2,327.4	$	2,167.1	$	160.3	7	%
Wine and Spirits	391.2		435.8		(44.6)		(10	%)
Comparable Adjustments	(10.9)		(22.0)		11.1		NM
Consolidated gross profit	$	2,707.7	$	2,580.9	$	126.8	5	%


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			The increase in Beer gross profit is primarily due to (i) $176.6 million of shipment volume growth, (ii) the $121.7 million favorable impact from pricing, and (iii) $3.7 million of favorable product mix, partially offset by $144.4 million of higher cost of product sold. The higher cost of product sold is primarily due to (i) $82.1 million of higher material costs, including aluminum, malt, glass, and starch, driven by inflation and global supply chain constraints, (ii) $21.3 million of higher depreciation resulting from the Mexico Beer Projects, (iii) $16.2 million of costs related to a voluntary product recall of select kegs for quality assurance, (iv) $8.8 million of increased transportation costs, and (v) a $7.3 million increase in brewery costs primarily driven by increased compensation and benefits, partially offset by $8.0 million of favorable fixed cost absorption related to increased production levels as compared to Six Months 2023. To partially offset the increases in cost of product sold we are executing initiatives that have resulted in approximately $50 million of net cost savings for Six Months 2024.


			The decrease in Wine and Spirits gross profit is due to a $24.1 million decrease in organic gross profit and $20.5 million from the Wine Divestiture. The decrease in organic gross profit is attributable to (i) a $54.2 million decrease in branded wine and spirits shipment volume and (ii) a $10.4 million decrease in non-branded net sales, partially offset by (i) $21.5 million of lower cost of product sold and (ii) the $16.6 million favorable impact from pricing. The decrease in cost of product sold was largely attributable to (i) $14.7 million of decreased transportation and warehousing costs, including ocean freight shipping, and (ii) $8.2 million of cost savings initiatives, primarily resulting in lower grape costs, as well as lower materials and packaging costs, driven by our sustainable packaging projects, partially offset by an increase in inventory obsolescence as compared to Six Months 2023.

Gross profit as a percent of net sales decreased to 50.6% for Six Months 2024 compared with 51.4% for Six Months 2023. This decrease was largely due to approximately 260 basis points of rate decline from higher cost of product sold within the Beer segment, driven by the increase in material and other operational costs, partially offset by (i) approximately 105 basis points of favorable impact from Beer pricing in select markets, (ii) approximately 40 basis points of rate growth from lower cost of product sold with the Wine and Spirits segment, and (iii) a favorable change of 20 basis points in Comparable Adjustments.

Selling, general, and administrative expenses


	Six Months 2024		Six Months 2023		Dollar Change		Percent Change
(in millions)
Beer	$	575.7	$	538.7	$	37.0	7	%
Wine and Spirits	231.2		245.4		(14.2)		(6	%)
Corporate Operations and Other	116.7		143.6		(26.9)		(19	%)
Comparable Adjustments	40.7		23.7		17.0		NM
Consolidated selling, general, and administrative expenses	$	964.3	$	951.4	$	12.9	1	%


			The increase in Beer selling, general, and administrative expenses is driven largely by $25.1 million and $11.9 million of increased marketing spend and general and administrative expenses, respectively. The increase in marketing spend is primarily driven by ongoing media investments to build awareness of our high-end imported beer brands. The increase in general and administrative expenses was driven primarily by increased legal expenses and higher compensation and benefits, primarily related to incremental headcount to support the growth of our Mexican beer portfolio, partially offset by decreased costs associated with the short-term incentive accrual as compared to Six Months 2023.


			The decrease in Wine and Spirits selling, general, and administrative expenses is primarily due to a $16.4 million decrease in marketing spend driven by less planned media investments for our lower-end brands as compared to Six Months 2023, partially offset by litigation expenses.


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			The decrease in Corporate Operations and Other selling, general, and administrative expenses is largely due to (i) a $27 million reduction in third-party services, driven by lower Digital Business Acceleration investments, and (ii) a $6 million decrease in compensation and benefits, including favorability from the November 2022 Reclassification, partially offset by unfavorable impacts from the sale of assets and depreciation expense.

Selling, general, and administrative expenses as a percent of net sales decreased to 18.0% for Six Months 2024 as compared with 19.0% for Six Months 2023. The decrease is largely driven by (i) approximately 90 basis points of rate decline as the increase in Beer net sales exceeded the increase in selling, general, and administrative expenses and (ii) approximately 60 basis points of rate decline from a decrease in the Corporate Operations and Other segment’s selling, general, and administrative expenses, partially offset by an unfavorable change in Comparable Adjustments, contributing approximately 35 basis points of rate growth.

Operating income (loss)


	Six Months 2024		Six Months 2023		Dollar Change		Percent Change
(in millions)
Beer	$	1,751.7	$	1,628.4	$	123.3	8	%
Wine and Spirits	160.0		190.4		(30.4)		(16	%)
Corporate Operations and Other	(116.7)		(143.6)		26.9		19	%
Comparable Adjustments	(51.6)		(45.7)		(5.9)		NM
Consolidated operating income (loss)	$	1,743.4	$	1,629.5	$	113.9	7	%


			The increase in Beer operating income is largely attributable to the shipment volume growth within our Mexican beer portfolio and the favorable pricing impact, partially offset by higher material costs and marketing spend.


			The decrease in Wine and Spirits operating income is largely attributable to the decline in branded wine and spirits shipment volume, the Wine Divestiture, and the decrease in non-branded net sales, partially offset by the lower cost of product sold and the favorable pricing impact and marketing spend.


			As previously discussed, the Corporate Operations and Other increase in operating loss is largely due to the lower Digital Business Acceleration investments and compensation and benefits.

Income (loss) from unconsolidated investments


	Six Months 2024		Six Months 2023		Dollar Change		Percent Change
(in millions)
Impairment of equity method investments	$	(135.8)	$	(1,060.3)	$	924.5	87	%
Unrealized net gain (loss) on securities measured at fair value	(74.4)		(31.7)		(42.7)		(135	%)
Equity in earnings (losses) from Canopy and related activities	(231.8)		(815.7)		583.9		72	%
Equity in earnings (losses) from other equity method investees	6.4		0.7		5.7		NM

	$	(435.6)	$	(1,907.0)	$	1,471.4	77	%

Interest expense

Interest expense increased to $228.8 million for Six Months 2024 as compared to $182.8 million for Six Months 2023. This increase of $46.0 million, or 25%, is due to higher average borrowings of approximately


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$1.4 billion and approximately 45 basis points of higher weighted average interest rates, partially offset by an increase in capitalized interest in connection with the Mexico Beer Projects. The higher average borrowings and weighted average interest rates are largely attributable to funding the aggregate cash payment to holders of Class B Stock in connection with the Reclassification. For additional information, refer to Note 8.

Loss on extinguishment of debt

Loss on extinguishment of debt primarily consists of a premium payment and the write-off of debt issuance costs in connection with the tender offers of our 3.20% February 2018 Senior Notes and 4.25% May 2013 Senior Notes and make-whole payments in connection with the early redemption of those notes (Six Months 2023).

(Provision for) benefit from income taxes

The provision for income taxes decreased to $238.4 million for Six Months 2024 from $257.8 million for Six Months 2023. Our effective tax rate for Six Months 2024 was 22.1% as compared with (53.3)% for Six Months 2023. In comparison to prior year, our income taxes were impacted primarily by:

an increase in the valuation allowance related to our investment in Canopy, driven by the Canopy Equity Method Investment impairment recognized in the Six Months 2023; partially offset by
a net income tax benefit from the realization of tax losses related to a prior period divestiture recognized in the Six Months 2023;
a net income tax benefit as a result of a change in tax entity classification recognized in the Six Months 2024; and
the effective tax rates applicable to our foreign businesses.

For additional information, refer to Note 9.

We continue to expect our reported effective tax rate for Fiscal 2024 to be in the range of 19% to 21%. This range does not reflect 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 $825.9 million for Six Months 2024 from $(761.7) million for Six Months 2023. This increase of $1,587.6 million is primarily attributable to (i) lower Canopy Equity Method Investment impairment losses, (ii) the decrease in equity in losses from Canopy’s results, and (iii) the Six Months 2024 improvements within the Beer segment as shipment volume growth and favorable pricing exceeded higher operational costs and the increase in media investments.

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, among other things.

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


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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 have an agreement with a financial institution for payment services and began to facilitate a voluntary supply chain finance program through this participating financial institution during Fiscal 2023. The program is available to certain of our suppliers allowing them the option to manage their cash flow. We are not 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, are not impacted. As of August 31, 2023, the amount payable to this participating financial institution for suppliers who voluntarily participate in the supply chain finance program was $4.7 million and was included in accounts payable within our consolidated balance sheet. We account for payments made under the supply chain finance program the same as our other accounts payable, as a reduction to our cash flow from operating activities.

Cash Flows


	Six Months 2024		Six Months 2023		Dollar Change
(in millions)
Net cash provided by (used in):
Operating activities	$	1,622.0	$	1,654.3	$	(32.3)
Investing activities	(600.9)		(486.0)		(114.9)
Financing activities	(1,072.4)		(1,198.6)		126.2
Effect of exchange rate changes on cash and cash equivalents	1.1		(4.0)		5.1
Net increase (decrease) in cash and cash equivalents	$	(50.2)	$	(34.3)	$	(15.9)

Operating activities

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


	Six Months 2024		Six Months 2023		Dollar Change
(in millions)
Net income (loss)	$	839.9	$	(741.4)	$	1,581.3
Unrealized net (gain) loss on securities measured at fair value	74.4		31.7		42.7
Deferred tax provision (benefit)	26.3		208.6		(182.3)
Equity in (earnings) losses of equity method investees and related activities, net of distributed earnings	226.5		815.6		(589.1)
Impairment of equity method investments	135.8		1,060.3		(924.5)
Other non-cash adjustments	388.4		374.3		14.1
Change in operating assets and liabilities, net of effects from purchase and sale of business	(69.3)		(94.8)		25.5
Net cash provided by (used in) operating activities	$	1,622.0	$	1,654.3	$	(32.3)

The $25.5 million net change in operating assets and liabilities was largely driven by increases for the Beer segment in (i) inventory levels and (ii) accounts receivable, driven by timing of collections. These changes were partially offset by the timing of collections for (i) recoverable value-added taxes for the Beer segment and (ii) accounts payable for both the Beer and Wine and Spirits segments. Additionally, net cash provided by operating activities benefited from lower income tax payments in Six Months 2024 as compared to Six Months 2023.


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Investing activities

Net cash used in investing activities increased to $600.9 million for Six Months 2024 from $486.0 million for Six Months 2023. This increase of $114.9 million, or 24%, was primarily due to additional capital expenditures of $147.0 million for Six Months 2024 largely related to the Mexico Beer Projects, partially offset by a decrease in business acquisitions of $29.7 million. The Six Months 2023 business acquisitions consisted of Lingua Franca and Austin Cocktails.

Financing activities

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


	Six Months 2024		Six Months 2023		Dollar Change
(in millions)
Net proceeds from (payments of) debt, current and long-term, and related activities	$	(763.5)	$	499.7	$	(1,263.2)
Dividends paid	(327.6)		(295.3)		(32.3)
Purchases of treasury stock	(35.0)		(1,400.5)		1,365.5
Net cash provided by stock-based compensation activities	75.0		20.0		55.0
Distributions to noncontrolling interests	(21.3)		(22.5)		1.2

Net cash provided by (used in) financing activities	$	(1,072.4)	$	(1,198.6)	$	126.2

Debt

Total debt outstanding as of August 31, 2023, amounted to $11,706.5 million, a decrease of $754.8 million from February 28, 2023. This decrease consisted of:

3772


						Debt repayment						Debt issuance

Bank facilities

In May 2023, we repaid the outstanding three-year term loan facility borrowings under our August 2022 Term Credit Agreement with proceeds from the May 2023 Senior Notes (see “Senior notes” below). In August 2023, we repaid the outstanding five-year term loan facility borrowings under our April 2022 Term Credit Agreement with proceeds from commercial paper borrowings.


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Senior notes

In May 2023, we issued the May 2023 Senior Notes. Proceeds from this offering, net of discount and debt issuance costs, of $739.8 million were used for general corporate purposes, including the repayment of outstanding borrowings under the August 2022 Term Credit Agreement and to reduce outstanding commercial paper borrowings.

General

The majority of our outstanding borrowings as of August 31, 2023, consisted of fixed-rate senior unsecured notes, with maturities ranging from calendar 2024 to calendar 2050.

Additionally, we have a commercial paper program which provides for the issuance of up to an aggregate principal amount of $2.25 billion of commercial paper. Our commercial paper program is backed by unused commitments under our revolving credit facility under our 2022 Credit Agreement. Accordingly, outstanding borrowings under our commercial paper program reduce the amount available under our revolving credit facility.

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 will 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:


	August 31, 2023		September 30, 2023
(in millions)
Revolving credit facility (1)	$	1,770.5	$	1,994.0

(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 (excluding unamortized discount) of $468.0 million and $244.5 million as of August 31, 2023, and September 30, 2023, respectively.

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.

As of August 31, 2023, we and our subsidiaries were 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 August 31, 2023, under our 2022 Credit Agreement, the minimum interest coverage ratio was 2.5x and the maximum net leverage ratio was 4.0x.

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 August 31, 2023, we were in compliance with our covenants under our 2022 Credit Agreement and our indentures, and have met all debt payment obligations.


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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 2023 Annual Report and Note 8.

Common Stock Dividends

On October 4, 2023, our Board of Directors declared a quarterly cash dividend of $0.89 per share of Class A Stock and $0.80 per share of Class 1 Stock payable on November 17, 2023, to stockholders of record of each class as of the close of business on November 3, 2023.

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 2023 Annual Report as supplemented by the additional factors set forth under Item 1A. “Risk Factors” included in this Form 10-Q.

Share Repurchase Program

Our Board of Directors authorized the repurchase of our publicly traded common stock of up to $2.0 billion under the 2021 Authorization. As of August 31, 2023, total shares repurchased under this authorization are as follows:


			Class A Stock
	Repurchase Authorization		Dollar Value of Shares Repurchased		Number of Shares Repurchased
(in millions, except share data)
2021 Authorization	$	2,000.0	$	1,171.6	4,985,847

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 will become treasury shares, including shares previously repurchased under the 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 2023 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 2023 Annual Report and Note 10.

Accounting Guidance

Accounting guidance adopted for Six Months 2024 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


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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 MD&A regarding:

◦our business strategy, growth plans, innovation, and Digital Business Acceleration initiatives, new products, future operations, financial position, net sales, expenses, cost savings initiatives, capital expenditures, effective tax rates and anticipated tax liabilities, expected volume, inventory, and demand levels and trends, long-term financial model, access to capital markets, liquidity and capital resources, and prospects, plans, and objectives of management;

◦our beer expansion, optimization, and/or construction activities, including anticipated scope, capacity, costs, capital expenditures, and timeframes for completion;

◦the potential sale of the remaining assets at the Mexicali Brewery;

◦our ESG strategy, sustainability initiatives, and environmental stewardship targets;

◦anticipated inflationary pressures, changing prices, and reductions in consumer discretionary income as well as other unfavorable global and regional economic conditions, geopolitical events, and military conflicts, and our responses thereto;

◦the potential impact to supply, production levels, and costs due to global supply chain disruptions and constraints and shifting consumer behaviors;

◦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 continued 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:

◦the potential completion of the Canopy Transaction, including the Canopy Amendment, and the transactions contemplated by the Consent Agreement, including conversion of our Canopy common shares for Exchangeable Shares, and related results and impacts of such transactions;

◦the potential exchange of our 2023 Canopy Promissory Note for Exchangeable Shares;

◦our activities surrounding our investment in Canopy;

◦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;
the actual impact to supply, production levels, and costs from global supply chain disruptions and constraints, transportation challenges (including from labor strikes or other labor activities), shifting consumer behaviors, wildfires, and severe weather events, due to, among other reasons, actual supply


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chain and transportation performance, actual consumer behaviors, and the actual severity and geographical reach of wildfires and severe weather events;

reliance on complex information systems and third‐party global networks;
the actual balance of supply and demand for our products, the actual performance of our distributors and 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, and other factors as determined by management;
results of the potential sale of the remaining assets at the Mexicali Brewery or obtaining other forms of recovery;
the impact of the military conflict in Ukraine and associated internal destabilization in Russia, geopolitical tensions, and responses, including on inflation, supply chains, commodities, energy, and cybersecurity;
contamination and degradation of product quality from diseases, pests, weather, and other conditions;
communicable disease outbreaks, pandemics, or other widespread public health crises, such as the COVID-19 pandemic, and associated governmental containment actions, which may include the closure of non-essential businesses (including our manufacturing facilities);
the amount, timing, and source of funds for any share repurchases, 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; 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 accuracy of management’s projections relating to the Canopy investment due to Canopy’s actual results and market and economic conditions, and the impact of our investment in Canopy, including recording our proportional share of Canopy’s estimated pre-tax losses;
the timeframe and amount of any potential future impairment of our Canopy Equity Method Investment;
Canopy’s failure to receive the requisite approval of its shareholders necessary to approve the Canopy Transaction, any other delays with respect to, or the failure to complete, the Canopy Transaction, the ability to recognize the anticipated benefits of the Canopy Transaction and the impact of the Canopy Transaction on the market price of Canopy’s common stock;
completion of the Canopy Transaction, the exchange of our 2023 Canopy Promissory Note for Exchangeable Shares, and the impact from converting our Canopy common shares for Exchangeable Shares on our relationship with and investment in Canopy;
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;
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;
general economic, geopolitical, domestic, international, and regulatory conditions, world financial market and banking sector instability, including economic slowdown or recession, and a potential U.S. federal government shutdown;
the ability to continue to recognize anticipated benefits of the Reclassification; 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 2023 Annual Report as supplemented by the additional factors set forth under Item 1A. “Risk Factors” included in this Form 10-Q.


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