CONSTELLATION BRANDS, INC.

Previous wording

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

Current wording

This section provides a description of our strategy, including our 2025 Restructuring Initiative, and a discussion of a recent development and certain acquisitions, divestitures, 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, 2026, and May 31, 2025. In addition, a brief description of certain 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, 2026, and August 31, 2025, and six months ended August 31, 2026, and August 31, 2025. In addition, a brief description of certain 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, Victoria, Kim Crawford, Ruffino, The Prisoner Wine Company, Robert Mondavi Winery, Mi CAMPO, and High West. In the U.S., we are one of the top dollar share gainers 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 overall U.S. beer market and the #2 dollar share gainer in the high-end. Within wine and spirits, we have implemented a multi-year strategy that

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, Victoria, Kim Crawford, Ruffino, The Prisoner Wine Company, Robert Mondavi Winery, Mi CAMPO, and High West. In the U.S., we are one of the top dollar share gainers 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 overall U.S. beer market

Previous wording

repositioned this business to a portfolio of exclusively higher-end brands that we believe is positioned for long-term growth, 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 and retailers. We conduct our business through entities we wholly own as well as through a variety of joint ventures and other entities.

Current wording

and the #2 dollar share gainer in the high-end. 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 is positioned for long-term growth, 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 and retailers. We conduct our business through entities we wholly own as well as through a variety of joint ventures and other entities.

Previous wording

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

Current wording

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

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 stronger growth rates relative to the industry. To capitalize on these ongoing trends and evolving consumer occasions and preferences, we will continue to employ our strategy dedicated to organic growth of our existing portfolio, supplemented by targeted investments and acquisitions. Our ongoing digital acceleration initiatives are aimed at driving results by enhancing our technology, data, and digital capabilities in key areas. 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 stronger growth rates relative to the industry. To capitalize on these ongoing trends and evolving consumer occasions and preferences, we will continue to employ our commercial and operational strategies, with a focus on capturing additional growth opportunities by winning with more consumers across more occasions. The strategic priorities to support our next phase of growth are organized around three distinct pillars:

Previous 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 seek 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 2027, we intend to continue to increase distribution for key brands,

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 seek 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. Additionally, we continue to invest in the next phase of modular capacity additions necessary to support our anticipated future growth with activities under our Brewery Projects. We now expect commercial production at the Veracruz Brewery to commence at the beginning of Fiscal 2028.

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 and may continue to be affected by the dynamic and evolving consumer environment largely driven by ongoing economic uncertainty and additional headwinds from other socioeconomic factors. These factors may include subdued spend, depressed sentiment, value-seeking behaviors, higher consumer prices and reductions in the discretionary income available to purchase our products among consumers, including from increased gas prices, elevated unemployment, inflation, other unfavorable global and regional economic conditions, demographic trends in the U.S., global supply chain disruptions and constraints, geopolitical events and tensions, wars, and military conflicts, including the conflict in the Middle East.

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 dynamic and evolving consumer environment largely driven by ongoing economic uncertainty and additional headwinds from other socioeconomic factors. These factors impacting consumers may include subdued spend, depressed sentiment, value-seeking behaviors, higher prices and reductions in the discretionary income available to purchase our products, including from increased fuel prices, elevated unemployment, inflation, other unfavorable global and regional economic conditions, demographic trends in the U.S., global supply chain disruptions and constraints, geopolitical events and tensions, wars, and military conflicts, including the conflict in the Middle East.

Previous wording

Developments in international trade relations, including significant additional changes in U.S. trade policy and actions which may include threatened, new, and increased tariffs imposed by the U.S. government on other countries, retaliatory tariffs and actions imposed on certain U.S. goods, and subsequent modifications and delays to or invalidation of various tariffs as well as associated litigation and developments have produced heightened uncertainty with respect to trade and tariff policies and regulations affecting trade between the U.S. and other countries, which could continue to alter the global trade environment. For example, the U.S. government has imposed tariffs on certain product imports, including on aluminum and aluminum derivatives, and certain other countries have implemented tariffs and other actions on U.S. goods, such as boycotts and tariffs on certain product imports originating from the U.S. imposed by the Canadian federal and some provincial governments and retaliatory tariffs in other international markets, although some of these tariffs were subsequently modified, delayed, suspended, or invalidated. Various tariffs and other actions negatively impacted our Fiscal 2026 and First Quarter 2027 results of operations. In April 2026, the U.S. government removed beer made from malt, which includes our beer products, from the scope of the Section 232 aluminum and aluminum derivative tariffs that had been in place at various rates since February 2025.

Current wording

with respect to trade and tariff policies and regulations affecting trade between the U.S. and other countries, which could continue to alter the global trade environment. For example, the U.S. government has imposed tariffs on certain product imports, including on aluminum and aluminum derivatives, and certain other countries have implemented tariffs and other actions on U.S. goods, such as boycotts and tariffs on certain product imports originating from the U.S. imposed by the Canadian federal and some provincial governments and retaliatory tariffs in other international markets, although some of these tariffs were subsequently modified, delayed, suspended, or invalidated. Various tariffs and other actions negatively impacted our results of operations for Fiscal 2026 and are expected to continue to have a negative impact for Fiscal 2027. In April 2026, the U.S. government removed beer made from malt, which includes our beer products, from the scope of the Section 232 aluminum and aluminum derivative tariffs that had been in place at various rates since February 2025.

Previous wording

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.

Current wording

We expect some or all of these market conditions and their impacts to continue during the remainder of Fiscal 2027 which could have a material impact on our results of operations and financial condition. We intend to continue to monitor the dynamic and evolving consumer and socioeconomic environments and their impacts on our business. In addition, we have executed the majority of the work associated with 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 was executed within Fiscal 2026. The 2025 Restructuring Initiative is estimated to result in nearly $130 million of cumulative pre-tax costs once all phases are fully implemented. In connection with the 2025 Restructuring Initiative, we recognized $0.6 million of pre-tax restructuring costs in First Quarter 2027 and $122.5 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 2.

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 was executed within Fiscal 2026. The 2025 Restructuring Initiative is estimated to result in nearly $130 million of cumulative pre-tax costs once all phases are fully implemented. In connection with the 2025 Restructuring Initiative, we recognized $5.5 million of pre-tax restructuring costs in Six Months 2027 and $127.4 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 2.

Previous wording

In May 2026, we entered into a definitive agreement to divest eight small-scale domestic-market New Zealand mainstream wine brands and associated inventory, equipment, a winery, and vineyards which were reclassified to net assets held for sale as of May 31, 2026. The New Zealand Wine Divestitures transaction was completed in June 2026 and supports our strategic focus on consumer-led premiumization trends and meeting the evolving needs of our consumers. The net cash proceeds from this transaction were used for general corporate purposes.

Current wording

In June 2026, we sold eight small-scale domestic-market New Zealand mainstream wine brands and associated inventory, equipment, a winery, and vineyards. The net cash proceeds from this transaction were used for general corporate purposes.

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 then-owned mainstream wine brands and associated inventory, wineries, vineyards, offices, and facilities. We received $845.9 million of cash proceeds, which were used for the repayment of debt. This divestiture supports our strategic focus on consumer-led premiumization trends and meeting the evolving needs of our consumers.

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. We received $846.5 million of cash proceeds, which were used for the repayment of debt.

Previous wording

For additional information on these acquisitions and divestitures refer to Note 6.

Current wording

For additional information on these acquisitions, divestitures, and investments refer to Notes 5 and 6.

Previous wording

Operating income increased 18% largely due to (i) favorable Comparable Adjustments led by net gains recognized on undesignated commodity derivative contracts for First Quarter 2027 compared with net losses for First Quarter 2026 and lower First Quarter 2027 losses associated with asset impairment and related expenses and (ii) continued successful execution of efficiency and cost optimization initiatives, including the 2025 Restructuring Initiative, partially offset bythe lower net sales as a result of the 2025 Wine Divestitures.

Current wording

Operating income increased 4% primarily due to (i) shipment volume growth within the Beer segment, (ii) favorable Comparable Adjustments led by higher net gains recognized on undesignated commodity derivative contracts for Six Months 2027 compared with Six Months 2026, (iii) lower tariff costs as compared to Six Months 2026, and (iv) continued successful execution of efficiency and cost optimization initiatives, including the 2025 Restructuring Initiative, partially offset by (i)higher marketing spend and (ii)the lower Wine and Spirits segment net sales as a result of the 2025 Wine Divestitures.

Previous wording

Net income attributable to CBI and diluted net income per common share attributable to CBI increased 27% and 31%, respectively, largely due to the items discussed above.

Current wording

Net income attributable to CBI and diluted net income per common share attributable to CBI increased 24% and 28%, respectively, primarily due to a lower provision for income taxes and the items discussed above.

Previous wording

We recognized net costs primarily in connection with losses on write-downs of excess inventory resulting from our initiatives to streamline operations, improve efficiencies, and reduce our cost structure primarily within our Wine and Spirits segment.

Current wording

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

Previous wording

We recognized net costs in connection with activities intended to streamline operations, improve efficiencies, and reduce our cost structure.

Current wording

We recognized (i) costs in connection with activities intended to streamline operations, improve efficiencies, and reduce our cost structure and (ii) a loss on settlement of a receivable related to the sale of a previously-owned facility (Second Quarter 2027, Six Months 2027).

Previous wording

We recognized (i) an impairment on assets held for sale in connection with the New Zealand Wine Divestitures (First Quarter 2027) and (ii)contract liabilities and inventory obsolescence expenses associated with the 2025 Wine Divestitures, partially offset by changes in then-existing net assets held for sale (First Quarter 2026). For additional information, refer to Note 5.

Current wording

We recognized (i) impairments on assets held for sale associated with management’s plan to divest the Nelson’s Green Brier business (Second Quarter 2027, Six Months 2027) and on then-existing net assets held for sale in connection with the New Zealand Wine Divestitures (Six Months 2027) and (ii)contract liabilities and inventory obsolescence expenses associated with the 2025 Wine Divestitures, partially offset by changes in the carrying value of those then-existing net assets held for sale (Six Months 2026). For additional information, refer to Note 5.

Previous wording

The increase in Beer net sales is largely due to (i) $40.7 million of shipment volume growth and (ii) $17.6 million of favorable impact from pricing in select markets, partially offset by $9.3 million of unfavorable product mix primarily from a shift in package types. While our shipment volume growth benefited from consumer demand, we believe our net sales continued to be impacted by the economic uncertainty and socioeconomic factors discussed above.

Current wording

The increase in Beer net sales is due to (i) $130.2 million of shipment volume growth, as distributors sought to rebuild inventory days-on-hand and (ii) $12.8 million of favorable impact from pricing in select markets, partially offset by $14.4 million of unfavorable product mix primarily from a shift in package types.

Previous wording

The increase in Beer gross profit is largely due to (i) $20.9 million of shipment volume growth, (ii) the $17.6 million favorable impact from pricing, and (iii) $2.6 million of decreased cost of product sold, partially offset by $9.9 million of unfavorable product mix. The decrease in cost of product sold is primarily due to cost reductions and other efficiencies, including (i) $30.7 million of favorable fixed cost absorption related to increased production levels as compared to First Quarter 2026, (ii) $5.1 million of lower depreciation, and (iii) $5.0 million of decreased transportation costs, partially offset by the following increases (i) $17.3 million of materials costs, including glass, starch, and cartons, (ii) $13.0 million of tariffs, largely on aluminum imports under Section 232, and (iii) $7.8 million of warehousing and obsolescence costs.

Current wording

The increase in Beer gross profit is due to (i) $68.8 million of shipment volume growth, (ii) $33.9 million of decreased cost of product sold, and (iii) the $12.8 million favorable impact from pricing, partially offset by $17.8 million of unfavorable product mix. The decrease in cost of product sold is primarily due to (i) $24.1 million of lower tariffs as compared to Second Quarter 2026, largely on aluminum imports under Section 232, (ii) $23.3 million of favorable fixed cost absorption related to increased production levels as compared to Second Quarter 2026, and (iii) $9.4 million of lower depreciation, partially offset by the following increases (i) $10.3 million of warehousing and obsolescence costs and (ii) $10.2 million of materials costs, including glass, aluminum, and paper.

Previous wording

The increase in Beer selling, general, and administrative expenses is largely due to $8.1 million and $5.2 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 unfavorable foreign currency impact. Marketing as a percentage of net sales is flat year-over-year in continued support of our high-end imported beer brands.

Current wording

The increase in Beer selling, general, and administrative expenses is primarily due to $54.5 million and $30.7 million of increased marketing spend and general and administrative expenses, respectively. Marketing as a percentage of net sales increased year-over-year in continued support of our high-end imported beer brands. The increase in general and administrative expenses is primarily due to higher compensation and benefits, led by unfavorable short-term incentive accruals as compared to Second Quarter 2026.

Previous wording

The decrease in Wine and Spirits selling, general, and administrative expenses is largely due to $18.5 million and $17.2 million of decreased marketing spend and general and administrative expenses, respectively. The decrease in marketing spend is driven by our smaller portfolio of exclusively higher-end wine and spirits brands. The decrease in general and administrative expenses was largely driven by cost savings measures as a result of the 2025 Restructuring Initiative.

Current wording

The decrease in Wine and Spirits selling, general, and administrative expenses is primarily due to $5.7 million and $5.0 million of decreased marketing spend and general and administrative expenses, respectively. The decrease in marketing spend is driven by investment optimization for our smaller portfolio of exclusively higher-end wine and spirits 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

The decrease in Corporate Operations and Other selling, general, and administrative expenses is largely driven by cost savings measures as a result of the 2025 Restructuring Initiative, partially offset by higher stock-based compensation expense as compared to First Quarter 2026.

Current wording

The increase in Corporate Operations and Other selling, general, and administrative expenses is largely driven by higher compensation and benefits, led by unfavorable short-term incentive accruals, as compared to Second Quarter 2026.

Previous wording

The increase in Beer operating income is largely attributable to the shipment volume growth and favorable impact from pricing, partially offset by the unfavorable product mix and higher selling, general, and administrative expenses, as described above.

Current wording

The increase in Beer operating income is primarily attributable to the shipment volume growth, lower cost of product sold, and favorable impact from pricing, partially offset by the higher marketing spend and compensation and benefits, led by unfavorable short-term incentive accruals, as described above.

Previous wording

As previously discussed, the decrease in Corporate Operations and Other operating loss is largely attributable to the 2025 Restructuring Initiative, partially offset by higher stock-based compensation expense.

Current wording

As previously discussed, the increase in Corporate Operations and Other operating loss is largely attributable to the higher compensation and benefits as compared to Second Quarter 2026.

Previous wording

Interest expense, net decreased to $85.8 million for First Quarter 2027 as compared to $98.9 million for First Quarter 2026. This decrease of $13.1 million, or 13%, is due to approximately $905 million of lower average borrowings and five basis points of lower weighted average interest rates. For additional information, refer to Note 8.

Current wording

Interest expense, net decreased to $83.4 million for Second Quarter 2027 as compared to $87.6 million for Second Quarter 2026. This decrease of $4.2 million, or 5%, is due to approximately $235 million of lower average borrowings, partially offset by approximately five basis points of higher weighted average interest rates. For additional information, refer to Note 8.

Previous wording

The provision for income taxes increased to $88.1 million for First Quarter 2027 from $87.6 million for First Quarter 2026. Our effective tax rate for First Quarter 2027 was 11.6% as compared with 14.3% for First Quarter 2026. In comparison to prior year, our effective tax rate was largely impacted by:

Current wording

The provision for income taxes decreased to $147.1 million for Second Quarter 2027 from $296.8 million for Second Quarter 2026. Our effective tax rate for Second Quarter 2027 was 20.2% as compared with 37.9% for Second Quarter

Previous wording

•a net income tax benefit resulting from changes to valuation allowances; partially offset by

Current wording

In comparison to prior year, our effective tax rate was primarily impacted by a net income tax benefit resulting from changes to valuation allowances; partially offset by the resolution of various tax examinations and assessments related to prior periods. For additional information, refer to Note 9.

Previous wording

Net income attributable to CBI increased to $653.8 million for First Quarter 2027 from $516.1 million for First Quarter 2026. This increase of $137.7 million, or 27%, is largely attributable to the (i) net gains recognized on undesignated commodity derivative contracts for First Quarter 2027 compared with net losses for First Quarter 2026 and (ii) lower First Quarter 2027 losses associated with asset impairment and related expenses. Additionally, First Quarter 2027 benefited from the continued successful execution of efficiency and cost optimization initiatives, including the 2025 Restructuring Initiative, partially offset by the lower net sales as a result of the 2025 Wine Divestitures.

Current wording

Net income attributable to CBI increased to $565.8 million for Second Quarter 2027 from $466.0 million for Second Quarter 2026. This increase of $99.8 million, or 21%, is primarily attributable to the (i)lower provision for income taxes and (ii)shipment volume growth, partially offset by (i) Second Quarter 2027 asset impairment and related expenses, (ii) higher marketing spend, and (iii) unfavorable short-term incentive accruals. Additionally, Second Quarter 2027 benefited from the continued successful execution of efficiency and cost optimization initiatives, including the 2025 Restructuring Initiative.

Previous wording

The decrease in Wine and Spirits net sales is due to $142.0 million from the 2025 Wine Divestitures that are no longer part of our business, partially offset by a $10.7 million increase in organic net sales. The increase in organic net sales is largely driven by $17.2 million of branded wine and spirits shipment volume growth, partially offset by a (i) $4.9 million decrease in non-branded net sales led by a decline in bulk sales and (ii) $3.2 million decrease from strategic pricing actions taken on select brands. 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.

Current wording

The decrease in Wine and Spirits net sales is due to $142.0 million from the 2025 Wine Divestitures that are no longer part of our business, partially offset by a $34.1 million increase in organic net sales. The increase in organic net sales is primarily driven by $38.0 million of branded wine and spirits shipment volume growth, which benefited from strategic pricing actions on select brands in our U.S. wholesale channel, partially offset by a decline in non-branded bulk sales. Additionally, we expect shipment volume to decline during the second half of Fiscal 2027 as we continue to progress against mutually agreed-upon finished goods inventory reductions with key distributors.

Previous wording

The decrease in Wine and Spirits gross profit is due to $34.1 million from the 2025 Wine Divestitures that is no longer part of our business, partially offset by a $2.1 million increase in organic gross profit. The increase in organic gross profit is largely attributable to (i) $15.3 million of branded wine and spirits shipment volume growth and (ii) $2.1 million of decreased cost of product sold partially offset by (i) $12.7 million of unfavorable product mix and (ii) the $3.2 million decrease from strategic pricing actions. The decrease in cost of product sold is largely attributable to cost savings measures as a result of the 2025 Restructuring Initiative, partially offset by incremental U.S. tariffs imposed.

Current wording

The decrease in Wine and Spirits gross profit is due to $34.1 million from the 2025 Wine Divestitures that is no longer part of our business, partially offset by a $17.8 million increase in organic gross profit. The increase in organic gross profit is primarily attributable to (i) a $25.3 million increase in branded wine and spirits shipment volume and (ii) a $10.0 million decrease in cost of product sold, partially offset by (i) $11.9 million of unfavorable product mix and (ii) a $5.7 million decrease from strategic pricing actions. The decrease in cost of product sold is largely driven by U.S. tariff claims recoveries and cost savings measures as a result of the 2025 Restructuring Initiative, partially offset by higher transportation and warehousing costs as compared to Six Months 2026.

Previous wording

Gross profit as a percent of net sales increased to 54.3% for First Quarter 2027 compared with 50.4% for First Quarter 2026. This increase was largely driven by rate growth from (i) a favorable change in Comparable Adjustments, contributing 220 basis points, (ii) divestitures of lower-margin brands, contributing approximately 160 basis points, (iii) favorable impact from beer pricing, contributing approximately 35 basis points, and (iv) organic branded wine and spirits shipment volume growth, contributing approximately 25 basis points. These increases were partially offset by 55 basis points of unfavorable product mix shift within the Wine and Spirits segment.

Current wording

Gross profit as a percent of net sales increased to 53.6% for Six Months 2027 compared with 51.6% for Six Months 2026. This increase was primarily due to rate growth from (i) divestitures of lower-margin brands, contributing approximately 80 basis points, (ii) 70 basis points and 20 basis points from lower cost of product sold within the Beer and Wine and Spirits segments, respectively, (iii) a favorable change in Comparable Adjustments, contributing approximately 50 basis points, and (iv) approximately 30 basis points of favorable impact from beer pricing. These increases were partially offset by approximately 30 basis points of rate decline from unfavorable product mix shift within both the Beer and Wine and Spirits segments, respectively.

Previous wording

Selling, general, and administrative expenses as a percent of net sales decreased to 18.8% for First Quarter 2027 as compared to 19.9% for First Quarter 2026. Thedecrease is driven by rate declines from(i) lower selling, general, and administrative expenses in the Wine and Spirits segment, contributing approximately 170 basis points and (ii) a favorable change in Comparable Adjustments, contributing approximately 80 basis points, partially offset by (i) approximately 130 basis points of unfavorable impact from the 2025 Wine Divestitures and (ii) approximately 15 basis points of rate growth from higher selling, general, and administrative expenses in the Beer segment.

Current wording

Selling, general, and administrative expenses as a percent of net sales increased to 19.6% for Six Months 2027 as compared with 18.7% for Six Months 2026. Theincrease is primarily driven by(i) 125 basis points and approximately 50 basis points of rate growth from higher selling, general, and administrative expenses within the Beer and Corporate Operations and Other segments, respectively, and (ii) approximately 50 basis points of unfavorable impact from the 2025 Wine Divestitures. These increases were partially offset by(i) approximately 100 basis points of rate decline from decreases in selling, general, and administrative expenses within the Wine and Spirits segment and (ii)an unfavorable change in Comparable Adjustments, contributing approximately 40 basis points of rate decline.

Previous wording

We now expect our reported effective tax rate for Fiscal 2027 to be in the range of 16% to 18%.

Current wording

We now expect our reported effective tax rate for Fiscal 2027 to be in the range of 11% to 13%. This range includes an estimated income tax benefit of approximately $100 million to $150 million to be recognized during the three months ending November 30, 2026, as a result of certain foreign tax reform enacted in September 2026.

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 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 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, we use our short-term borrowings, including borrowings under our commercial paper program, to support our working capital requirements, capital expenditures, and other general corporate purposes, as well as to maintain our access to the capital markets.

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, 2026, and February 28, 2026, the amount payable to this participating financial institution for suppliers who voluntarily participate in the supply chain finance program was $55.0 million and $50.7 million, respectively, and was included with accounts payable on 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, 2026, and February 28, 2026, the amount payable to this participating financial institution for suppliers who voluntarily participate in the supply chain finance program was $61.7 million and $50.7 million, respectively, and was included with accounts payable on 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 increase in net cash provided by (used in) operating activities consists of:

Current wording

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

Previous wording

The $92.3 million net change in operating assets and liabilities was largely driven by lower shipment volume growth year-over-year in the Beer segment, resulting in a smaller increase in accounts receivable, partially offset by lower accounts receivables for the Wine and Spirits segment due to lower net sales, reflecting the impact of the 2025 Wine Divestitures. Additionally, net cash provided by operating activities was negatively impacted by higher First Quarter 2027 income tax payments as compared to First Quarter 2026 following the resolution of various tax examinations and assessments.

Current wording

The $91.9 million net change in operating assets and liabilities was largely driven by lower accounts receivable for the Wine and Spirits segment due to lower net sales, reflecting the impact of the 2025 Wine Divestitures, partially offset by (i) higher accounts receivable for the Beer segment as a result of timing of sales and collections and (ii) favorable changes in contract liabilities in connection with distribution arrangements for our U.S. wine and spirits brand portfolio. Additionally, net cash provided by operating activities was negatively impacted by higher Six Months 2027 income tax payments as compared to Six Months 2026.

Previous wording

Net cash used in investing activities decreased to $193.2 million for First Quarter 2027 from $196.1 million for First Quarter 2026. This decrease of $2.9 million, or 1%, was primarily due to $15.6 million of reduced capital expenditures for First Quarter 2027 as compared to First Quarter 2026, partially offset by $15.3 million of increased business acquisition activity for First Quarter 2027, driven by the April 2026 purchase of the remaining ownership interest in HOPWTR.

Current wording

Net cash provided by (used in) investing activities decreased to $(350.4) million for Six Months 2027 from $464.8 million for Six Months 2026. This decrease of $815.2 million, or 175%, was primarily due to $837.2 million lower proceeds from sale of business, driven by the 2025 Wine Divestitures, partially offset by $56.0 million of reduced capital expenditures for Six Months 2027 as compared to Six Months 2026.