CONSTELLATION BRANDS INC

Previous wording

Strategy. This section provides a description of our strategy and a discussion of recent developments and significant divestitures and investments.

Current wording

Strategy. This section provides a description of our strategy and a discussion of significant divestitures, acquisitions, and investments.

Previous wording

Results of operations. This section provides an analysis of our results of operations presented on a business segment basis for the three months ended May 31, 2024, and May 31, 2023. In addition, a brief description of significant transactions and other items that affect the comparability of the results is provided.

Current wording

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, 2024, and August 31, 2023, and six months ended August 31, 2024, and August 31, 2023. In addition, a brief description of significant transactions and other items that affect the comparability of the results is provided.

Previous wording

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, Robert Mondavi Winery, 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 second-largest beer company in the U.S. and continue to strengthen our leadership position as the #1 share gainer in the high-end beer segment and the overall U.S. beer market. In Fiscal 2024, Modelo Especial became the #1 beer brand in the U.S. beer market in dollar sales and continues to hold that position. Within wine and spirits, we have reshaped our brand portfolio to a higher-end focused business and continue to expand our supply channels through DTC and international markets. 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.

Current wording

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, Robert Mondavi Winery, 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 second-largest beer company in the U.S. and continue to strengthen our leadership position as the #1 share gainer in the high-end beer segment and the overall U.S. beer market. In Fiscal 2024, Modelo Especial became the #1 beer brand in the U.S. beer market in dollar sales and continues to hold that position. Within wine and spirits, we have reshaped our brand portfolio to a higher-end focused business and continue our efforts to expand our supply channels through DTC and international markets. 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.

Previous wording

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, product, and purchasing 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 position within the DTC and 3-tier eCommerce channels. We believe our multi-year Digital Business Acceleration initiative will enable us to drive results by enhancing our technology capabilities in key areas. In Fiscal 2025, we continue to focus on end-to-end digital supply chain planning, logistics, and procurement, as well as introducing a new focus area, revenue growth management. Additionally, we believe our continued focus on maintaining a strong balance sheet provides a solid financial foundation to support our broader strategic initiatives.

Current wording

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, product, and purchasing trends, which we anticipate will continue to drive faster relative 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 relative growth rates is to invest and strengthen our position within the DTC and 3-tier eCommerce channels. We intend for our multi-year Digital Business Acceleration initiative to enable us to drive results by enhancing our technology capabilities in key areas. In Fiscal 2025, we continue to focus on end-to-end digital supply chain planning, logistics, and procurement, as well as introducing a new focus area, revenue growth management. Additionally, we believe our continued focus on maintaining a strong balance sheet provides a solid financial foundation to support our broader strategic initiatives.

Previous wording

Our business strategy for the Beer segment focuses on upholding our leadership position in the U.S. beer market, including the high-end segment, 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 investing in the next increment of modular capacity additions required to sustain our momentum. We continue to focus on consumer-led innovation by creating new line extensions behind celebrated, trusted brands and package formats, as well as new to world brands, that are intended to meet emerging needs.

Current wording

Our business strategy for the Beer segment focuses on upholding our leadership position in the U.S. beer market, including the high-end segment, 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 investing in the next increment of modular capacity additions required to sustain our momentum. We continue to focus on consumer-led innovation by creating new line extensions behind celebrated, trusted brands and package formats, as well as new to world brands, that are intended to meet emerging needs. Additionally, expansion, optimization, and/or construction activities continue under our Mexico Beer Projects to align with our anticipated future growth expectations.

Previous wording

Our business strategy for the Wine and Spirits segment continues to focus on higher-end brands, improving margins, and creating operating efficiencies. We have reshaped our portfolio primarily through an enhanced focus on higher-margin, higher-growth wine and spirits brands. Our business is now organized into three distinct category-based teams focused on (i) U.S. wine, (ii) international wine, and (iii) spirits. While each team has its own distinct brand execution strategy, all three 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 remaining a major supplier 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.

Current wording

Our business strategy for the Wine and Spirits segment continues to focus on delivering growth and improving margins by driving our higher-end brands and operating efficiencies, while also seeking to enhance the performance of our mainstream brands. We have reshaped our portfolio primarily through an enhanced focus on higher-margin, higher-growth wine and spirits brands. Our business is organized into three distinct category-based teams focused on (i) U.S. wine, (ii) international wine, and (iii) spirits. While each team has its own distinct brand execution strategy, all three 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 its efforts to progressively expand into DTC channels (including hospitality), 3-tier eCommerce, and international markets, while remaining a major supplier 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.

Previous wording

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, and geopolitical events. We expect some or all of these impacts to continue in Fiscal 2025 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 are continuing our commodity and foreign exchange hedging programs while also seeking to identify additional cost savings initiatives. 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.

Current wording

We remain committed to our long-term financial model of: growing sales, expanding margins, and increasing cash flow in order to continue to achieve comparable earnings per share growth as well as our target net leverage ratio on a comparable basis 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 macroeconomic headwinds, including rising unemployment, inflation, changing prices, other unfavorable global and regional economic conditions, global supply chain disruptions and constraints, and geopolitical events, as well as reductions in the discretionary income of consumers available to purchase our products and shifting consumer behaviors. Additionally, ongoing macroeconomic headwinds, particularly rising unemployment, have led to a recent deceleration in the rate of growth of consumer demand for our products. We expect some or all of these impacts to continue during the remainder of Fiscal 2025 which could have a material impact on our results of operations. We intend to continue to monitor the economic environment, the shifting behavior of consumers, and their impacts on our business. In addition, we are continuing our commodity and foreign exchange hedging programs while also seeking to identify additional cost savings and efficiency initiatives. However, there can be no assurance that we will be able to fully mitigate rising costs through increased selling prices and/or cost savings and efficiency initiatives. Furthermore, to the extent climate-related severe weather events, such as droughts, floods, wildfires, extreme heat, and/or late frosts, or other weather conditions that constrain consumer purchasing occasions, continue to occur or accelerate in future periods, it could have a material impact on our results of operations and financial condition.

Previous wording

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 and create and protect value for our business, reflects our Company values, and directly address pressing environmental and societal needs that are important to our stockholders, communities, consumers, and employees.

Current wording

We believe our ESG strategy enables us to better meet stakeholder expectations and create and protect value for our business, reflects our Company values, and directly addresses pressing environmental and societal needs that are important to our stockholders, communities, consumers, and employees.

Previous wording

In June 2024, we acquired the Sea Smoke business, including a California-based luxury wine brand, vineyards, and a production facility. This transaction also included the acquisition of a trademark, inventory, and goodwill. The results of operations of Sea Smoke will be reported in the Wine and Spirits segment and will be included in our consolidated results of operations from the date of acquisition. This acquisition supports our strategic focus on consumer-led premiumization trends and meeting the evolving needs of our consumers.

Current wording

In June 2024, we acquired the Sea Smoke business, including a California-based luxury wine brand, vineyards, and a production facility. This transaction also included the acquisition of goodwill, inventory, and a trademark. The results of operations of Sea Smoke are reported in the Wine and Spirits segment and have been included in our consolidated results of operations from the date of acquisition. This acquisition supports our strategic focus on consumer-led premiumization trends and meeting the evolving needs of our consumers.

Previous wording

In April 2024, we elected to convert our 17.1 million Canopy common shares into Exchangeable Shares on a one-for-one basis. Additionally, in April 2024, we exchanged C$81.2 million of the principal amount of our 2023 Canopy Promissory Note for 9.1 million Exchangeable Shares and forgave all accrued but unpaid interest together with the remaining principal amount of the note. As a result of these transactions, we (i) have 26.3 million Exchangeable Shares and (ii) recognized an $83.3 million net gain based on the fair value of Exchangeable Shares on the date of the conversion and exchange. This net gain is included in income (loss) from unconsolidated investments within our consolidated results of operations for First Quarter 2025. For additional information, refer to Note 7.

Current wording

In April 2024, we elected to convert our 17.1 million Canopy common shares into Exchangeable Shares on a one-for-one basis. Additionally, in April 2024, we exchanged C$81.2 million of the principal amount of our 2023 Canopy Promissory Note for 9.1 million Exchangeable Shares and forgave all accrued but unpaid interest together with the remaining principal amount of the note. As a result of these transactions, we (i) have 26.3 million Exchangeable Shares and (ii) recognized an $83.3 million net gain based on the fair value of Exchangeable Shares on the date of the conversion and exchange. This net gain is included in income (loss) from unconsolidated investments within our consolidated results of operations for Six Months 2025.

Previous wording

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 Sports Nutrition Inc. reporting unit that were accounted for incorrectly, including the recording of a goodwill impairment 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 First Quarter 2024. We no longer apply the equity method to our investment in Canopy following the April 2024 conversion of our Canopy common shares to Exchangeable Shares.

Current wording

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 Sports Nutrition Inc. reporting unit that were accounted for incorrectly, including the recording of a goodwill impairment during its restated second quarter of fiscal 2023. As a result, the Canopy Equity Method Investment with a $266.2 million carrying value was written down to $142.7 million, its estimated fair value, resulting in a $123.5 million impairment. This loss from impairment was included in income (loss) from unconsolidated investments within our consolidated results for Six Months 2024. We no longer apply the equity method to our investment in Canopy following the April 2024 conversion of our Canopy common shares to Exchangeable Shares.

Previous wording

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

Current wording

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

Previous wording

•Net sales increased 6% largely due to an increase in Beer net sales driven primarily by shipment volume growth and favorable impact from pricing, partially offset by a decline in Wine and Spirits net sales driven primarily by a decrease in branded shipment volume.

Current wording

•Net sales increased 3% largely due to an increase in Beer net sales driven primarily by shipment volume growth and favorable impact from pricing, partially offset by a decline in Wine and Spirits net sales led by a decrease in branded shipment volume and unfavorable product mix.

Previous wording

•Operating income increased 23%largely due to the improvements within the Beer segment resulting from First Quarter 2025 shipment volume growth, favorable pricing, and lower cost of product sold, driven by the successful execution of cost savings initiatives. The operating income growth from the Beer segment was partially offset by declines in (i) the Wine and Spirits segment driven by higher cost of product sold and the decrease in branded shipment volume and (ii) the Corporate Operations and Other segment from higher compensation and benefits as compared to First Quarter 2024.

Current wording

•Operating loss increased largely due to the Wine and Spirits goodwill impairment, partially offset by the improvements within the Beer segment resulting from Second Quarter 2025 shipment volume growth, favorable pricing, and lower cost of product sold, driven by the successful execution of cost savings initiatives.

Previous wording

•Net income attributable to CBI anddiluted net income per common share attributable to CBI increased largely due to the items discussed above and lower provision for income taxes.

Current wording

•Net loss attributable to CBI anddiluted net loss per common share attributable to CBI increased largely due to the items discussed above, partially offset by a benefit from income taxes as compared to a provision for income taxes for Second Quarter 2024.

Previous wording

•Our results of operations were positively impacted by Canopy-related activities, including (i) no longer recognizing equity losses from Canopy’s results following the conversion of our Canopy common shares to Exchangeable Shares, (ii) an impairment of our then-existing Canopy Equity Method Investment recognized in First Quarter 2024, (iii) a decrease in unrealized net losses from the changes in fair value of our investment in Canopy, and (iv) a net gain on the common shares conversion and 2023 Canopy Promissory Note exchange to Exchangeable Shares in First Quarter 2025, and improvements within the Beer segment driven by 7.6% shipment volume growth and a successful execution of cost savings initiatives.

Current wording

•Our results of operations were negatively impacted by the Wine and Spirits goodwill impairment, partially offset by Canopy-related activities, including (i) no longer recognizing equity losses from Canopy’s results following the conversion of our Canopy common shares to Exchangeable Shares, (ii) an impairment of our then-existing Canopy Equity Method Investment (Six Months 2024), (iii) a decrease in unrealized net losses from the changes in fair value of our investment in Canopy, and (iv) a net gain on the common shares conversion and 2023 Canopy Promissory Note exchange to Exchangeable Shares during the Six Months 2025, and improvements within the Beer segment driven by 6.0% shipment volume growth and the successful execution of cost savings initiatives.

Previous wording

We recognized costs in connection with certain activities which are intended to streamline, increase efficiencies, and reduce our cost structure.

Current wording

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

Previous wording

We recognized other gains (losses) primarily from the sale of the Daleville Facility (First Quarter 2024).

Current wording

We recognized other gains (losses) primarily from (i) a net loss on foreign currency as a result of the resolution of various tax examinations and assessments (Second Quarter 2025, Six Months 2025), (ii) losses on the sales of the Daleville Facility and Craft Beer Divestitures (Second Quarter 2024, Six Months 2024), and (iii) recognition of a previously deferred gain upon release of a related indemnity (Second Quarter 2024, Six Months 2024).

Previous wording

We recognized income (loss) primarily from (i) a net gain on conversion and exchange to Exchangeable Shares (First Quarter 2025), (ii) comparable adjustments to equity in losses from Canopy’s results (First Quarter 2024), (iii) an impairment of our Canopy Equity Method Investment (First Quarter 2024), and (iv) unrealized net losses from the changes in fair value of our securities measured at fair value (First Quarter 2024). For additional information, refer to Notes 4 and 7.

Current wording

We recognized income (loss) primarily from (i) a net gain on conversion and exchange to Exchangeable Shares (Six Months 2025), (ii) comparable adjustments to equity in losses from Canopy’s results (Second Quarter 2024, Six Months 2024), (iii) an impairment of our then-existing Canopy Equity Method Investment (Six Months 2024), (iv) unrealized net losses from the changes in fair value of our securities measured at fair value, and (v) impairments of certain other equity method investments. For additional information, refer to Notes 4 and 7.

Previous wording

The increase in Beer net sales is largely due to (i) $157.4 million of shipment volume growth, which benefited from continued consumer demand, and (ii) $33.4 million of favorable impact from pricing in select markets, partially offset by $16.6 million of unfavorable product mix primarily from a shift in package types.

Current wording

The increase in Beer net sales is due to (i) $108.9 million of shipment volume growth, which benefited from continued consumer demand, and (ii) $50.2 million of favorable impact from pricing in select markets, partially offset by $21.6 million of unfavorable product mix primarily from a shift in package types.

Previous wording

The increase in Beer gross profit is due to (i) $86.1 million of shipment volume growth, (ii) the $33.4 million favorable impact from pricing, and (iii) $8.9 million of reduced cost of product sold, partially offset by $14.0 million of unfavorable product mix. The reduced cost of product sold is primarily due to (i) $12.5 million of favorable fixed cost absorption related to increased production levels as compared to First Quarter 2024 and (ii) $10.8 million of decreased transportation costs and $9.5 million of lower material costs, including aluminum, glass, and lumber, each driven by efficiency initiatives, partially offset by (i) $7.5 million of foreign currency transactional losses, (ii) a $6.8 million increase in brewery costs, including compensation and benefits and IT expenses, and (iii) $5.0 million of higher depreciation resulting from the Mexico Beer Projects. To partially offset the expected increases in cost of product sold we are executing efficiency initiatives focused largely on logistics and procurement that resulted in nearly $50 million of cost savings for First Quarter 2025.

Current wording

The increase in Beer gross profit is due to (i) $55.9 million of shipment volume growth, (ii) the $50.2 million favorable impact from pricing, and (iii) $44.5 million of reduced cost of product sold, partially offset by $12.9 million of unfavorable product mix. The reduced cost of product sold is primarily due to (i) $18.8 million of favorable fixed cost absorption related to increased production levels as compared to Second Quarter 2024, (ii) $12.7 million of decreased transportation costs and $7.7 million of lower material costs, including cartons, aluminum, and lumber, each driven by efficiency initiatives, and (iii) $16.2 million of Second Quarter 2024 costs related to a voluntary product recall of select kegs, partially offset by (i) $5.8 million of higher depreciation resulting from the Mexico Beer Projects and (ii) a $5.0 million increase in brewery costs, including compensation and benefits. To partially offset the expected increases in cost of product sold we are executing efficiency initiatives focused largely on logistics and procurement that resulted in over $65 million of cost savings for Second Quarter 2025.

Previous wording

Gross profit as a percent of net sales increased to 52.7% for First Quarter 2025 compared with 50.0% for First Quarter 2024. This increase was largely due to (i) a favorable change of 215 basis points in Comparable Adjustments, (ii) approximately 60 basis points of favorable impact from Beer pricing in select markets, and (iii) approximately 35 basis points of rate growth from lower cost of product sold within the Beer segment, partially offset by approximately 50 basis points of rate decline resulting from higher cost of product sold within the Wine and Spirits segment.

Current wording

Gross profit as a percent of net sales increased to 51.8% for Second Quarter 2025 compared with 51.1% for Second Quarter 2024. This increase was largely due to (i) approximately 155 basis points of rate growth from lower cost of product sold within the Beer segment, (ii) 85 basis points of favorable impact from Beer pricing, and (iii) approximately 30 basis points of favorable impact driven by higher contractual distributor payments within the Wine and Spirits segment, partially offset by (i) an unfavorable change of approximately 150 basis points in Comparable Adjustments and (ii) approximately 65 basis points of rate decline resulting from unfavorable product mix within the Wine and Spirits segment.

Previous wording

As previously discussed, the increase in Corporate Operations and Other operating loss is largely due to the higher compensation and benefits expense as compared to First Quarter 2024.

Current wording

As previously discussed, the decrease in Corporate Operations and Other operating loss is largely due to the tax credit.

Previous wording

The decrease in Wine and Spirits net sales is driven by (i) a $23.6 million decrease in branded wine and spirits shipment volume and (ii) $8.1 million of unfavorable product mix, primarily driven by a decline in demand for certain of our mainstream and premium brands and an increase in lower-margin spirits brands, partially offset by $4.3 million from higher contractual distributor payments as compared to First Quarter 2024. The decrease in branded wine and spirits shipment volume is primarily attributable to our U.S. wholesale market, driven by declines in both the overall wine market and in our mainstream and premium wine brands. For First Quarter 2025, the depletions decline outpaced the U.S. Wholesale shipments decline largely driven by challenging U.S. market conditions. We expect U.S. Wholesale shipment volume to align with depletion volume for Fiscal 2025.

Current wording

The decrease in Wine and Spirits net sales is largely driven by (i) a $58.1 million decrease in branded wine and spirits shipment volume, (ii) $37.0 million of unfavorable product mix, primarily driven by a decline in demand for certain of our mainstream and premium brands, and (iii) an $8.2 million decrease in non-branded net sales led by a decline in bulk wine sales, partially offset by $18.6 million from higher contractual distributor payments as compared to Six Months 2024. The decrease in branded wine and spirits shipment volume is attributable to our U.S. wholesale market, primarily driven by declines in both the overall wine market and in our mainstream and premium wine brands, as well as retailer inventory destocking. For Six Months 2025, the depletions decline outpaced the U.S. Wholesale shipments decline largely driven by challenging U.S. market conditions. We expect U.S. Wholesale shipment volume to generally align with depletion volume for Fiscal 2025.

Previous wording

The decrease in Wine and Spirits gross profit is attributable to (i) $12.9 million of higher cost of product sold, (ii) a $12.1 million decrease in branded wine and spirits shipment volume, and (iii) $5.7 million of unfavorable product mix from lower-margin net sales, partially offset by the $4.3 million favorable impact from higher contractual distributor payments. The increase in cost of product sold was largely attributable to increased raw materials, including grapes, partially offset by decreased transportation and warehousing costs.

Current wording

The decrease in Wine and Spirits gross profit is attributable to (i) $38.2 million of unfavorable product mix from lower-margin net sales, (ii) a $30.4 million decrease in branded wine and spirits shipment volume, and (iii) $10.6 million of increased cost of product sold, partially offset by the $18.6 million favorable impact from higher contractual distributor payments. The increase in cost of product sold was largely attributable to unfavorable fixed cost absorption related to decreased production levels as compared to Six Months 2024 and increased raw materials costs, including grapes, partially offset by lower operational costs, including short-term incentive accruals, and decreased transportation and warehousing costs.

Previous wording

Selling, general, and administrative expenses as a percent of net sales decreased to 17.4% for First Quarter 2025 as compared to 19.6% for First Quarter 2024. The decrease is largely driven by(i) approximately 165 basis points of rate decline from Beer as the increase in Beer net sales significantly outpaced the decrease in selling, general, and administrative expenses and (ii) a favorable change in Comparable Adjustments, contributing approximately 90 basis points of rate decline, partially offset by approximately 35 basis points of rate growth from the increase in Corporate Operations and Other selling, general, and administrative expenses.

Current wording

Selling, general, and administrative expenses as a percent of net sales decreased to 17.1% for Six Months 2025 as compared with 18.0% for Six Months 2024. The decrease is largely driven by (i) approximately 95 basis points of rate decline as the increase in Beer net sales exceeded the increase in selling, general, and administrative expenses and (ii) approximately 25 basis points of rate decline from a decrease in Wine and Spirits’ selling, general, and administrative expenses, partially offset by an unfavorable change in Comparable Adjustments, contributing approximately 25 basis points of rate growth.

Previous wording

The increase in Beer operating income is largely attributable to the shipment volume growth, cost savings initiatives, favorable pricing impact, and lower material costs, partially offset by the unfavorable product mix.

Current wording

The increase in Beer operating income is largely attributable to the shipment volume growth, cost savings initiatives, and favorable impacts from pricing and fixed cost absorption, partially offset by the unfavorable product mix as describe above.

Previous wording

The decrease in Wine and Spirits operating income is largely attributable to the higher cost of product sold, decline in branded wine and spirits shipment volume, and unfavorable product mix, partially offset by the higher contractual distributor payments and decreased selling, general, and administrative expenses, as described above.

Current wording

The decrease in Wine and Spirits operating income is largely attributable to the unfavorable product mix, the decline in branded wine and spirits shipment volume, and the higher cost of product sold, partially offset by decreased selling, general, and administrative expenses and the higher contractual distributor payments, as described above.

Previous wording

Interest expense, net decreased to $102.8 million for First Quarter 2025 as compared to $118.9 million for First Quarter 2024. This decrease of $16.1 million, or 14%, is due to (i) approximately $565 million of lower average borrowings driven by reduced commercial paper outstanding, (ii) approximately 10 basis points of lower weighted average interest rates, and (iii) an increase in capitalized interest in connection with the Mexico Beer Projects as compared to the First Quarter 2024. For additional information, refer to Note 8.

Current wording

Interest expense, net decreased to $206.8 million for Six Months 2025 as compared to $229.5 million for Six Months 2024. This decrease of $22.7 million, or 10%, is due to (i) approximately $380 million of lower short-term and long-term average borrowings, (ii) an increase in capitalized interest in connection with the Mexico Beer Projects as compared to Six Months 2024, and (iii) approximately 5 basis points of lower weighted average interest rates. For additional information, refer to Note 8.

Previous wording

The provision for income taxes decreased to $28.0 million for First Quarter 2025 from $91.2 million for First Quarter 2024. Our effective tax rate for First Quarter 2025 was 3.0% as compared with 39.6% for First Quarter 2024. In comparison to prior year, our income taxes were impacted primarily by:

Current wording

The (provision for) benefit from income taxes increased to $124.2 million for Six Months 2025 from $(238.4) million for Six Months 2024. Our effective tax rate for Six Months 2025 was 30.0% as compared with 22.1% for Six Months 2024. In comparison to prior year, our income taxes were impacted primarily by:

Previous wording

•a First Quarter 2025 net income tax benefit recognized as a result of the resolution of various tax examinations and assessments related to prior periods; partially offset by

Current wording

•a Six Months 2025 net income tax benefit recognized as a result of the resolution of various tax examinations and assessments related to prior periods; partially offset by

Previous wording

We expect our reported effective tax rate for Fiscal 2025 to be in the range of 11% to 13%. This range includes an expected net income tax benefit following the July 2024 closing on the sale of the remaining assets at the canceled Mexicali Brewery.

Current wording

We expect our reported effective tax rate for Fiscal 2025 to be in the range of 8% to 10%.

Previous wording

Net income attributable to CBI increased to $877.0 million for First Quarter 2025 from $135.9 million for First Quarter 2024. This increase of $741.1 million is largely attributable to the (i) favorable impact from Canopy-related activities, (ii) the First Quarter 2025 improvements within the Beer segment driven by shipment volume growth and the successful execution of cost savings initiatives, and (iii) the lower provision from income taxes, partially offset by the decline in performance within the Wine and Spirits segment.

Current wording

Net income (loss) attributable to CBI decreased to $(322.0) million for Six Months 2025 from $825.9 million for Six Months 2024. This decrease of $1,147.9 million is largely attributable to the Wine and Spirits goodwill impairment, partially offset by (i) the favorable impact from Canopy-related activities, (ii) the benefit from income taxes, and (iii) Six Months 2025 improvements within the Beer segment driven by shipment volume growth and the successful execution of cost savings initiatives.

Previous wording

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.

Current wording

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

Previous wording

We have an agreement with a financial institution for payment services and to facilitate a voluntary supply chain finance program through this participating financial institution. 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 May 31, 2024 and February 29, 2024, the amount payable to this participating financial institution for suppliers who voluntarily participate in the supply chain finance program was $5.3 million and $7.3 million, respectively, and was included in accounts payable within our consolidated balance sheets. 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.

Current wording

We have an agreement with a financial institution for payment services and to facilitate a voluntary supply chain finance program through this participating financial institution. 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, 2024 and February 29, 2024, the amount payable to this participating financial institution for suppliers who voluntarily participate in the supply chain finance program was $7.5 million and $7.3 million, respectively, and was included in accounts payable within our consolidated balance sheets. 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.

Previous wording

The $69.8 million net change in operating assets and liabilities was largely driven by higher (i) inventory levels for the Wine and Spirits segment and (ii) accounts receivable for the Beer segment resulting from net sales growth. These changes were offset by (i) a decrease in accounts receivable for the Wine and Spirits segment resulting from reduced net sales and (ii) changes in prepaid expenses and other current assets for the Beer segment driven by the timing of collections for recoverable value-added taxes. Additionally, net cash provided by operating activities was negatively impacted by higher First Quarter 2025 income tax payments following the resolution of various tax examinations and assessments as compared to First Quarter 2024.

Current wording

The $54.5 million net change in operating assets and liabilities was largely driven by higher (i) accounts payable for the Beer segment resulting from the timing of payments and (ii) inventory levels for the Wine and Spirits segment led by declines in both the overall wine market and in our mainstream and premium wine brands, as well as retailer inventory destocking. These changes were offset by lower (i) inventory levels for the Beer segment driven by higher demand for our products and (ii) accounts receivable for the Wine and Spirits segment resulting from reduced net sales. Additionally, net cash provided by operating activities was negatively impacted by higher Six Months 2025 income tax payments following the resolution of various tax examinations and assessments as compared to Six Months 2024.

Previous wording

Net cash used in investing activities increased to $377.4 million for First Quarter 2025 from $291.9 million for First Quarter 2024. This increase of $85.5 million, or 29%, was primarily due to $98.3 million of additional capital expenditures for First Quarter 2025 largely related to the Mexico Beer Projects, partially offset by $12.9 million in proceeds from the sale of assets for First Quarter 2025.

Current wording

Net cash used in investing activities increased to $857.6 million for Six Months 2025 from $600.9 million for Six Months 2024. This increase of $256.7 million, or 43%, was primarily due to a $150.8 million increase in business acquisitions, driven by the June 2024 Sea Smoke acquisition, and $121.1 million of additional capital expenditures, largely related to the Mexico Beer Projects. The increase in net cash used in investing activities was partially offset by $18.0 million in higher proceeds from the sale of assets for Six Months 2025 as compared to Six Months 2024.

Previous wording

(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 $795.5 million and $746.5 million as of May 31, 2024, and June 28, 2024, respectively.

Current wording

(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 $509.0 million and $361.0 million as of August 31, 2024, and September 30, 2024, respectively.

Previous wording

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 2024 Annual Report.

Current wording

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 2024 Annual Report as supplemented by the additional factors set forth under Item 1A. “Risk Factors” included in this Form 10-Q.

Previous wording

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 2024 Annual Report.

Current wording

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 2024 Annual Report as supplemented by the additional factors set forth under Item 1A. “Risk Factors” included in this Form 10-Q.