CONSTELLATION BRANDS, INC.

Previous wording

This section provides a description of our strategy, including our 2025 Restructuring Initiative, a discussion of a recent development, as well as significant divestitures, acquisitions, and investments.

Current wording

This section provides a description of our strategy, including our 2025 Restructuring Initiative, and significant divestitures, acquisitions, and investments.

Previous wording

This section provides an analysis of our results of operations presented on a business segment basis for the three months ended May 31, 2025, and May 31, 2024. In addition, a brief description of significant transactions and other items that affect the comparability of the results is provided.

Current wording

This section provides an analysis of our results of operations presented on a business segment basis for the three months ended August 31, 2025, and August 31, 2024, and six months ended August 31, 2025, and August 31, 2024. 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 Modelo Especial, Corona Extra, Pacifico, Robert Mondavi Winery, Kim Crawford, 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 also the second-largest beer company and have the #1 beer brand, Modelo Especial, in dollar sales in the U.S. We continued to strengthen our leadership position in the U.S. beer market as the #1 share gainer in the high-end beer segment and the overall U.S. beer market. Within wine and spirits, we have implemented a multi-year strategy that repositioned this

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 Modelo Especial, Corona Extra, Pacifico, Robert Mondavi Winery, Kim Crawford, 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 also the second-largest beer company and have the #1 beer brand, Modelo Especial, in dollar sales in the U.S. We continued to strengthen our leadership position in the U.S. beer market as the #1 dollar share gainer in the high-end and the overall

Previous wording

business to a portfolio of exclusively higher-end brands that we believe will generate higher growth and higher margins, aligned to our focus on consumer-led premiumization trends, and we continue to progressively 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

U.S. beer market. Within wine and spirits, we have implemented a multi-year strategy that repositioned this business to a portfolio of exclusively higher-end brands that we believe will generate higher growth and higher margins, aligned to our focus on consumer-led premiumization trends, and we continue to progressively 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

Our internal management financial reporting consists oftwo business divisions: (i) Beer and (ii) Wine and Spirits andwe report our operating results in three segments: (i) Beer, (ii) Wine and Spirits, and (iii) Corporate Operations and Other. In the Beer segment, our portfolio consists of high-end imported beer brands and ABAs. We have an exclusive perpetual brand license to produce our Mexican beer portfolio and to import, market, and sell such portfolio in the U.S. In the Wine and Spirits segment, we sell aportfolio comprised ofexclusively higher-end wine and spirits brands. Amounts included in the Corporate Operations and Other segment consist of costs of corporate communications, corporate development, corporate finance, corporate strategy and growth, executive management, human resources, internal audit, investor relations, IT, legal, and public affairs, as well as our investments such as those 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.

Current wording

Our internal management financial reporting consists oftwo business divisions: (i) Beer and (ii) Wine and Spirits andwe report our operating results in three segments: (i) Beer, (ii) Wine and Spirits, and (iii) Corporate Operations and Other. In the Beer segment, our portfolio consists of high-end imported beer brands and ABAs. We have an exclusive perpetual brand license to produce our Mexican beer portfolio and to import, market, and sell such portfolio in the U.S. In the Wine and Spirits segment, we sell aportfolio comprised ofexclusively higher-end wine and spirits brands. Amounts included in the Corporate Operations and Other segment consist of costs of corporate communications, corporate development, corporate finance, corporate strategy, executive management, human resources, internal audit, investor relations, IT, legal, and public affairs, as well as our investments such as those 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.

Previous wording

We will continue to strive for success by ensuring consumer-led decision making drives all aspects of our business; building a strong 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 our strategy to address 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 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 2026, we continue to focus on end-to-end digital supply chain planning, logistics, procurement, and revenue growth management, as well as introducing a new focus area, consumer insights and analytics. 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 strong 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 our strategy to address consumer-led premiumization, product, and purchasing trends, which we anticipate will continue to drive faster growth rates relative to the industry. To continue capitalizing on

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. In Fiscal 2026, we intend to increase distribution for key brands, optimize growth through differentiated brand positioning, price pack architecture, and market prioritization as well as continue to invest in the next phase of modular capacity additions necessary to support our ongoing growth. Expansion, optimization, and/or construction activities continue under our Mexico Beer Projects to align with our anticipated future growth expectations. Additionally, 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 as a leader in 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. In Fiscal 2026, we intend to increase distribution for key brands, optimize growth through differentiated brand positioning, price pack architecture, and market prioritization as well as continue to invest in the next phase of modular capacity additions necessary to support our anticipated future growth expectations. Expansion, optimization, and/or construction activities continue under our Mexico Beer Projects. Additionally, 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.

Previous 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 ratios for (i) comparable net leverage and (ii) dividend payout; 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 an evolving consumer demand environment largely driven by what we believe to be non-structural socioeconomic factors. These factors include subdued spend, value-seeking behaviors, and reductions in the discretionary income available to purchase our products among consumers, elevated unemployment, changing prices, inflation, other unfavorable global and regional economic conditions, demographic trends in the U.S., global supply chain disruptions and constraints, and geopolitical events, including the impact of military conflicts, as well as retailer destocking impacting our Wine and Spirits segment.

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 ratios for (i) comparable net leverage and (ii) dividend payout; 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 and may continue to be affected by the evolving consumer demand environment largely driven by what we believe to be ongoing socioeconomic factors. These factors may include subdued spend, depressed sentiment, value-seeking behaviors, and reductions in the discretionary income available to purchase our products among consumers, elevated unemployment, changing prices, inflation, other unfavorable global and regional economic conditions, demographic trends in the U.S., global supply chain disruptions and constraints, and geopolitical events, including the impact of military conflicts.

Previous wording

programs. However, there can be no assurance that we will be able to adequately respond to softer consumer demand trends or fully mitigate rising costs, including as a result of new or increased tariffs, through increased selling prices, cost, productivity, efficiency, and inventory management initiatives, optimized marketing plans, and/or our commodity and foreign exchange hedging programs. Furthermore, to the extent severe weather events that impact our business, such as wildfires, droughts, floods, extreme heat, and/or late frosts, or other weather conditions that constrain purchasing occasions for our consumers, 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 expect some or all of these market conditions and their impacts to continue in Fiscal 2026 which could have a material impact on our results of operations and financial condition. We intend to continue to monitor the evolving consumer demand and socioeconomic environments and their impacts on our business. In addition, we have implemented the 2025 Restructuring Initiative, which is an enterprise-wide cost savings and restructuring initiative designed to help optimize the performance of our business, including through enhanced organizational efficiency and optimized expenditures across our organization. We also intend to continue our commodity and foreign exchange hedging programs. However, there can be no assurance that we will be able to adequately respond to softer consumer demand trends or fully mitigate rising costs, including as a result of new or increased tariffs, through increased selling prices, cost, productivity, efficiency, and inventory management initiatives, optimized marketing plans, and/or our commodity and foreign exchange hedging programs. Furthermore, to the extent severe weather events that impact our business, such as wildfires, droughts, floods, extreme heat, and/or late frosts, or other weather conditions that constrain purchasing occasions for our consumers, continue to occur or accelerate in future periods, it could have a material impact on our results of operations and financial condition.

Previous wording

We have implemented the 2025 Restructuring Initiative which is expected to yield over $200 million in net annualized cost savings by Fiscal 2028. The majority of the work associated with the 2025 Restructuring Initiative is expected to be completed within Fiscal 2026 and is estimated to result in $80 million to $100 million of cumulative pre-tax costs once all phases are fully implemented. In connection with the 2025 Restructuring Initiative, we recognized $13.3 million of pre-tax restructuring costs in First Quarter 2026 and $63.0 million of cumulative pre-tax costs since the inception of this initiative. These costs were included in selling, general, and administrative costs within our consolidated results. For additional information on the 2025 Restructuring Initiative, refer to Note 3.

Current wording

We have implemented the 2025 Restructuring Initiative which is expected to yield over $200 million in net annualized cost savings by Fiscal 2028. The majority of the work associated with the 2025 Restructuring Initiative is expected to be completed within Fiscal 2026 and is estimated to result in $80 million to $100 million of cumulative pre-tax costs once all phases are fully implemented. In connection with the 2025 Restructuring Initiative, we recognized $21.6 million of pre-tax restructuring costs in Six Months 2026 and $71.3 million of cumulative pre-tax costs since the inception of this initiative. These costs were included in selling, general, and administrative costs within our consolidated results. For additional information on the 2025 Restructuring Initiative, refer to Note 3.

Previous wording

On June 2, 2025, we sold and, in certain instances, exclusively licensed the trademarks of a portion of our wine and spirits business, primarily centered around our mainstream wine brands and associated inventory, wineries, vineyards, offices, and facilities for $857.6 million, subject to certain post-closing adjustments. The net cash proceeds from the 2025 Wine Divestitures were used for the repayment of debt. Prior to the completion of the 2025 Wine Divestitures, we recorded the results of operations of the divested and exclusively licensed brands in the Wine and Spirits segment. This transaction supports our strategic focus on consumer-led premiumization trends and meeting the evolving needs of our consumers. For additional information, refer to Notes 2 and 10.

Current wording

On June 2, 2025, we sold and, in certain instances, exclusively licensed the trademarks of a portion of our wine and spirits business, primarily centered around our then-owned mainstream wine brands and associated inventory, wineries, vineyards, offices, and facilities for $846.5 million, subject to certain post-closing adjustments. The net cash proceeds from the 2025 Wine Divestitures were used for the repayment of debt. Prior to the completion of the 2025 Wine Divestitures, we recorded the results of operations of the divested and exclusively licensed brands in the Wine and Spirits segment.

Previous wording

In April 2024, we elected to convert our Canopy common shares and exchange a portion of the principal amount of a promissory note issued to us by Canopy. 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 for First Quarter 2025.

Current wording

In April 2024, we elected to convert our Canopy common shares and exchange a portion of the principal amount of a promissory note issued to us by Canopy. 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 for Six Months 2025.

Previous wording

For additional information on these divestitures, acquisitions, and investments refer to Notes 2 and 9.

Current wording

For additional information on these divestitures, acquisitions, and investments refer to Notes 2, 10, and 11.

Previous wording

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

Current wording

References to organic throughout the following discussion exclude the impacts of the 2025 Wine Divestitures and the SVEDKA Divestiture, collectively referred to as the “Wine and Spirits Divestitures,” where appropriate.

Previous wording

Net sales decreased 6% due to a decline in Wine and Spirits net sales led by a decrease in organic branded shipment volume and a decrease in Beer net sales driven primarily by a shipment volume decline, partially offset by a favorable impact from pricing.

Current wording

Net sales decreased 15% due to (i) the loss of net sales as a result of the Wine and Spirits Divestitures, (ii) a decrease in Beer net sales driven primarily by a shipment volume decline, partially offset by a favorable impact from pricing, and (iii) a decline in organic Wine and Spirits net sales driven by changes in financial and volume related contractual obligations with distributors.

Previous wording

Net income attributable to CBI and diluted net income per common share attributable to CBI decreased 41% and 39%, respectively, largely due to (i) the items discussed above, (ii) a First Quarter 2025 net gain in connection with Exchangeable Shares, and (iii) higher provision for income taxes.

Current wording

Net income attributable to CBI and diluted net income per common share attributable to CBI increased 405% and 414%, respectively, largely due to the items discussed above, partially offset by (i) a Six Months 2026 provision for income taxes as compared to a benefit from income taxes for Six Months 2025 and (ii) a Six Months 2025 net gain in connection with Exchangeable Shares.

Previous wording

We recognized costs primarily in connection with losses on write-downs of excess inventory resulting from our initiatives to streamline, increase efficiencies, and reduce our cost structure primarily within our Wine and Spirits segment (First Quarter 2026).

Current wording

We recognized costs primarily in connection with losses on write-downs of excess inventory resulting from our initiatives to streamline, increase efficiencies, and reduce our cost structure primarily within our Wine and Spirits segment (Second Quarter 2026, Six Months 2026).

Previous wording

We recognized a net loss from the sales of businesses (First Quarter 2026).

Current wording

We recognized a net loss from the sales of businesses largely in connection with the 2025 Wine Divestitures (Second Quarter 2026, Six Months 2026).

Previous wording

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

Current wording

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

Previous wording

We recognized costs in connection with an enterprise-wide cost savings and restructuring initiative designed to help optimize the performance of our business (First Quarter 2026).

Current wording

We recognized costs in connection with an enterprise-wide cost savings and restructuring initiative designed to help optimize the performance of our business (Second Quarter 2026, Six Months 2026).

Previous wording

Largely in connection with the 2025 Wine Divestitures we recognized contract liabilities and inventory obsolescence expenses, partially offset by changes in net assets held for sale (First Quarter 2026). For additional information, refer to Note 6.

Current wording

Largely in connection with the 2025 Wine Divestitures we recognized contract liabilities and inventory obsolescence expenses, partially offset by changes in then-existing net assets held for sale (Six Months 2026). For additional information, refer to Note 7.

Previous wording

favorable impact from pricing in select markets. We believe our net sales continue to be suppressed by the non-structural socioeconomic factors discussed above.

Current wording

The decrease in Beer net sales is largely due to a $219.3 million decrease in shipment volume, partially offset by $40.6 million of favorable impact from pricing in select markets. We believe our net sales continue to be suppressed by the socioeconomic factors discussed above. Additionally, shipments trailed depletions as distributors rebalanced inventory levels during Second Quarter 2026.

Previous wording

The decrease in Beer gross profit is due to (i) a $40.2 million decline in shipment volume, (ii) $27.4 million of increased cost of product sold, and (iii) $3.4 million of unfavorable product mix, partially offset by the $44.9 million favorable impact from pricing. The increase in cost of product sold is primarily due to (i) $22.6 million of unfavorable fixed cost absorption related to decreased production levels as compared to First Quarter 2025 and (ii) $16.3 million of higher material costs, including aluminum, glass, and starch, of which $6.9 million is attributable to tariffs on aluminum cans, partially offset by $11.7 million of decreased transportation costs, largely driven by efficiency initiatives. To partially offset the increase in cost of product sold we are executing efficiency and cost optimization initiatives focused largely on procurement and logistics that resulted in an approximate $40 million net benefit for First Quarter 2026.

Current wording

The decrease in Beer gross profit is largely due to (i) a $118.3 million decline in shipment volume and (ii) $42.9 million of increased cost of product sold, partially offset by the $35.8 million favorable impact from pricing. The increase in cost of product sold is primarily due to (i) $22.6 million in tariffs on aluminum cans, (ii) $10.0 million of unfavorable fixed cost absorption related to decreased production levels as compared to Second Quarter 2025, (iii) $8.0 million of increased transportation costs, and (iv) $6.7 million of higher depreciation resulting from the Mexico Beer Projects. To partially offset the increase in cost of product sold we are executing efficiency and cost optimization initiatives focused largely on procurement and logistics that resulted in nearly $65 million of net benefit for Second Quarter 2026.

Previous wording

The decrease in Wine and Spirits selling, general, and administrative expenses is largely due to $6.0 million and $1.1 million of decreased marketing spend and general and administrative expenses, respectively. Marketing as a percentage of net sales increased year-over-year driven by support of our largest brands.

Current wording

The decrease in Wine and Spirits selling, general, and administrative expenses is largely due to $16.0 million and $2.2 million of decreased marketing spend and general and administrative expenses, respectively. The decrease in marketing spend is primarily driven by our smaller portfolio of exclusively higher-end wine and spirits brands, however, as a percentage of net sales, it increased year-over-year driven by support of our largest brands. The decrease in general and administrative expenses was largely driven by cost savings measures as a result of the 2025 Restructuring Initiative.

Previous wording

Selling, general, and administrative expenses as a percent of net sales increased to 19.9% for First Quarter 2026 as compared to 17.4% for First Quarter 2025. Theincrease is largely driven by (i) approximately 120 basis points of rate growth from higher Beer selling, general, and administrative expenses, (ii) an unfavorable change in Comparable Adjustments, contributing approximately 90 basis points, and (iii) approximately 25 basis points of rate growth from Wine and Spirits as the decrease in Wine and Spirits net sales exceeded the decrease in selling, general, and administrative expenses.

Current wording

Selling, general, and administrative expenses as a percent of net sales increased to 17.6% for Second Quarter 2026 as compared to 16.8% for Second Quarter 2025. Theincrease is driven by (i) approximately 125 basis points of unfavorable impact from the Wine and Spirits Divestitures and (ii) approximately 105 basis points of rate growth as the decline in Beer net sales exceeded the decrease in selling, general, and administrative expenses, partially offset by (i) a favorable change in Comparable Adjustments, contributing approximately 75 basis points of rate decline and

Previous wording

The decrease in Beer operating income is largely attributable to the (i) decline in shipment volume and related unfavorable fixed cost absorption, (ii) increased materials costs, and (iii) higher general and administrative expenses and marketing spend, partially offset by the favorable impact from pricing and cost initiatives, as described above.

Current wording

The decrease in Beer operating income is largely attributable to the decline in shipment volume and the unfavorable impacts from tariffs on aluminum cans and fixed cost absorption, partially offset by the favorable impacts from pricing and efficiency and cost optimization initiatives, as described above.

Previous wording

The decrease in Wine and Spirits operating income is largely attributable to the (i) decline in organic branded wine and spirits shipment volume, (ii) SVEDKA Divestiture, (iii) unfavorable impact from pricing actions in certain markets, and (iv) decline in contractual distributor payments, partially offset by lower marketing spend, as described above.

Current wording

The decrease in Wine and Spirits operating income is largely attributable to the (i) Wine and Spirits Divestitures, (ii) unfavorable product mix, (iii) decline in contractual distributor payments, and (iv) decline in organic branded wine and spirits shipment volume, partially offset by lower marketing spend, as described above.

Previous wording

Interest expense, net decreased to $98.9 million for First Quarter 2026 as compared to $102.8 million for First Quarter 2025. This decrease of $3.9 million, or 4%, is due to approximately $375 million of lower average borrowings. For additional information, refer to Note 10.

Current wording

Interest expense, net decreased to $87.6 million for Second Quarter 2026 as compared to $104.0 million for Second Quarter 2025. This decrease of $16.4 million, or 16%, is due to approximately $1.1 billion of lower average borrowings and approximately 15 basis points of lower weighted average interest rates. For additional information, refer to Note 11.

Previous wording

The provision for income taxes increased to $87.6 million for First Quarter 2026 from $28.0 million for First Quarter 2025. Our effective tax rate for First Quarter 2026 was 14.3% as compared with 3.0% for First Quarter 2025. In comparison to prior year, our effective tax rate was largely impacted by a higher net income tax benefit from the resolution of various tax examinations and assessments related to prior periods recognized in First Quarter 2025 as compared to First Quarter 2026. For additional information, refer to Note 11.

Current wording

The (provision for) benefit from income taxes increased to $(296.8) million for Second Quarter 2026 from $152.2 million for Second Quarter 2025. Our effective tax rate for Second Quarter 2026 was 37.9% as compared with 11.4% for Second Quarter 2025. In comparison to prior year, our effective tax rate was largely impacted by:

Previous wording

Net income attributable to CBI decreased to $516.1 million for First Quarter 2026 from $877.0 million for First Quarter 2025. This decrease of $360.9 million, or 41%, is largely attributable to (i) the net sales declines in both the Wine and Spirits and Beer segments, (ii) the First Quarter 2025 net gain in connection with Exchangeable Shares, (iii) higher provision for income taxes as compared to First Quarter 2025, and (iv) the First Quarter 2026 assets held for sale impairment and related expenses.

Current wording

Net income attributable to CBI increased to $466.0 million for Second Quarter 2026 from $(1,199.0) million for Second Quarter 2025. This increase of $1,665.0 million, or 139%, is largely attributable to the Second Quarter 2025 Wine and Spirits goodwill impairment, partially offset by the (i) net sales declines in both the Wine and Spirits and Beer segments, (ii) Second Quarter 2026 provision for income taxes as compared to a benefit from income taxes for Second Quarter 2025, and (iii) Second Quarter 2025 net gain in connection with Exchangeable Shares.

Previous wording

The decrease in Beer net sales is due to (i) a $75.7 million decrease in shipment volume and (ii) $7.5 million of unfavorable product mix primarily from a shift in package types, partially offset by $44.9 million of

Current wording

The decrease in Beer net sales is largely due to a (i) $295.1 million decrease in shipment volume and (ii) $14.0 million of unfavorable product mix primarily from a shift in package types, partially offset by $85.6 million of favorable impact from pricing in select markets. We believe our net sales continue to be suppressed by the socioeconomic factors discussed above. Additionally, shipments trailed depletions as distributors rebalanced inventory levels during Second Quarter 2026. We expect shipment volume to generally align with depletion volume for Fiscal 2026.

Previous wording

The decrease in Wine and Spirits net sales is due to a $72.5 million decrease in organic net sales and $36.0 million from the SVEDKA Divestiture that are no longer part of our business. The decrease in organic net sales is driven by (i) a $53.2 million decrease in branded wine and spirits shipment volume, (ii) an $8.9 million decrease from pricing actions in certain markets, (iii) a $7.9 million decrease in contractual distributor payments as compared to First Quarter 2025, and (iv) $4.9 million of unfavorable product mix. The decrease in branded wine and spirits shipment volume and unfavorable product mix are both attributable to our U.S. wholesale market, including the cadence of shipments to better align with ongoing weaker consumer demand particularly affecting the mainstream price segments. We continue to expect depletion volume to outpace shipment volume for Fiscal 2026, most notably during the first half of Fiscal 2026.

Current wording

The decrease in Wine and Spirits net sales is due to $256.5 million from the Wine and Spirits Divestitures that are no longer part of our business and a $104.7 million decrease in organic net sales. The decrease in organic net sales is largely driven by (i) a $66.8 million decrease in branded wine and spirits shipment volume, (ii) a $17.7 million decrease from pricing actions in certain markets, (iii) $12.5 million in lower contractual distributor payments as compared to Six Months 2025, and (iv) $9.7 million of unfavorable product mix. The decrease in branded wine and spirits shipment volume and unfavorable product mix are primarily attributable to our U.S. wholesale market, including the continued change in cadence of shipments to better align with ongoing weaker consumer demand particularly affecting the overall mainstream price segments prior to the 2025 Wine Divestitures. Additionally, we believe our branded wine and spirits shipment volume was negatively impacted by both tariffs imposed by the U.S. government and by retaliatory tariffs and actions in certain international markets. We also continue to expect depletion volume to outpace shipment volume for Fiscal 2026.

Previous wording

The decrease in Wine and Spirits gross profit is due to a $57.5 million decrease in organic gross profit and $15.1 million from the SVEDKA Divestiture that is no longer part of our business. The decrease in organic gross profit is attributable to (i) a $33.3 million decline in branded wine and spirits shipment volume, (ii) the $8.9 million unfavorable pricing, (iii) the $7.9 million decrease in contractual distributor payments, and (iv) $7.0 million of unfavorable product mix. Cost of product sold remained relatively flat as unfavorable fixed cost absorption related to decreased production levels as compared to First Quarter 2025 was offset by decreased transportation costs.

Current wording

The decrease in Wine and Spirits gross profit is due to $98.5 million from the Wine and Spirits Divestitures that is no longer part of our business and an $83.3 million decrease in organic gross profit. The decrease in organic gross profit is largely attributable to (i) a $42.5 million decrease in branded wine and spirits shipment volume, (ii) the $17.7 million of unfavorable pricing, (iii) the $12.5 million decrease in contractual distributor payments, and (iv) a $6.9 million increase in cost of product sold. The increase in cost of product sold is largely attributable to unfavorable fixed cost absorption related to decreased production levels as compared to Six Months 2025 and a higher Six Months 2026 short-term incentive accrual, partially offset by decreased transportation costs.

Previous wording

Gross profit as a percent of net sales decreased to 50.4% for First Quarter 2026 compared with 52.7% for First Quarter 2025. This decrease was largely driven by rate declines from (i) an unfavorable change in Comparable Adjustments, contributing approximately 150 basis points, (ii) approximately 110 basis points from higher cost of product sold within the Beer segment, (iii) approximately 30 basis points as a result of pricing actions in certain markets and lower distributor payments both within the Wine and Spirits segment, and (iv) approximately 20 basis points due to lower branded Wine and Spirits shipment volume as compared to First Quarter 2025. These declines were partially offset by a favorable impact from Beer pricing, which contributed rate growth of approximately 85 basis points.

Current wording

Gross profit as a percent of net sales decreased to 51.6% for Six Months 2026 compared with 52.2% for Six Months 2025. This decrease was largely due to (i) approximately 160 basis points and 15 basis points of rate decline from higher cost of product sold within the Beer and Wine and Spirits segments, respectively, (ii) 30 basis points as a result of pricing actions in certain markets and lower contractual distributor payments within the Wine and Spirits segment, and (iii) approximately 15 basis points of lower organic branded Wine and Spirits shipment volume. These declines were partially offset by (i) approximately 80 basis points of favorable impact from Beer pricing and (ii) approximately 75 basis points driven by divestitures of lower-margin brands.

Previous wording

The increase in Beer selling, general, and administrative expenses is largely driven by $12.9 million and $10.2 million of increased general and administrative expenses and marketing spend, respectively. The increase in general and administrative expenses is primarily due to higher compensation and benefits and consulting costs. The higher marketing spend is primarily led by increased media investment to support our high-end imported beer brands.

Current wording

The increase in Beer selling, general, and administrative expenses is largely driven by $15.4 million and $7.4 million of increased general and administrative expenses and marketing spend, respectively. The increase in general and administrative expenses is primarily due to higher compensation and benefits and consulting costs. Marketing as a percentage of net sales increased year-over-year to support our high-end imported beer brands. We now expect marketing as a percentage of net sales to approximate 9% for Fiscal 2026.

Previous wording

The decrease in Corporate Operations and Other selling, general, and administrative expenses is largely due to a net decrease in compensation and benefits, driven by lower stock-based compensation expense as compared to First Quarter 2025, partially offset by higher depreciation expense as a result of our June 2024 corporate headquarters relocation.

Current wording

The decrease in Corporate Operations and Other selling, general, and administrative expenses is largely due to a decrease in compensation and benefits driven by lower (i) stock-based compensation expense as compared to Six Months 2025, (ii) headcount resulting from the 2025 Restructuring Initiative, and (iii) short-term incentive accruals, partially offset by the Six Months 2025 tax credit and higher depreciation expense, each as a result of our June 2024 corporate headquarters relocation.

Previous wording

As previously discussed, the decrease in Corporate Operations and Other operating loss is largely due to the decrease in net compensation and benefits, partially offset by higher depreciation expense, as described above.

Current wording

As previously discussed, the decrease in Corporate Operations and Other operating loss is largely due to the decrease in compensation and benefits, partially offset by the Six Months 2025 tax credit and higher depreciation expense.

Previous wording

We expect our reported effective tax rate for Fiscal 2026 to be in the range of 14% to 16%.

Current wording

We now expect our reported effective tax rate for Fiscal 2026 to be in the range of 17% to 19%, inclusive of (i) our initial evaluation of the OB3 Act and (ii) Pillar Two. We will continue to assess the implications of the OB3 Act and Pillar Two. As it relates to the OB3 Act, our income tax provision may continue to be impacted as additional clarifications or interpretive guidance related to the OB3 Act is released.

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, 2025, and February 28, 2025, the amount payable to this participating financial institution for suppliers who voluntarily participate in the supply chain finance program was $8.5 million and $3.8 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, 2025, and February 28,

Previous wording

The $21.7 million net change in operating assets and liabilities was largely driven by changes in inventory levels for the Beer segment. These changes were partially offset by accounts payable in both the Beer and Wine and Spirits segments resulting from the timing of payments. Additionally, net cash provided by operating activities was positively impacted by lower First Quarter 2026 income tax payments as compared to First Quarter 2025 following the resolution of various tax examinations and assessments.

Current wording

The $72.5 million net change in operating assets and liabilities was largely driven by higher accounts receivable for the Beer segment as a result of timing of collections, as well as lower (i) contract liabilities in connection with distribution arrangements for our U.S. wine and spirits brand portfolio following the completion of the 2025 Wine Divestitures and (ii) accounts payable for both the Beer and Wine and Spirits segments, driven by the timing of purchases and lower purchasing activity following the Wine and Spirits Divestitures, respectively. These changes were partially offset by lower accounts receivables for the Wine and Spirits segment due to lower net sales, reflecting the impact of the Wine and Spirits Divestitures. Additionally, net cash provided by operating activities was positively impacted by lower Six Months 2026 income tax payments as compared to Six Months 2025 following the resolution of various tax examinations and assessments.