FinanceLooker

Excrept from filing document 2025-02-28

The aggregate market value of the voting and non voting common equity held by non affiliates of the registrant based upon the closing sales price of the registrant s Class A Common Stock as reported on the New York Stock Exchange as of the last business day of the registrant s most recently completed second fiscal quarter was 38 5 billion
Market positions and industry data discussed in this Form 10 K are as of calendar 2024 and have been obtained or derived from industry and government publications and our estimates The industry and government publications include Beer Marketers Insights Beverage Information Group Impact Databank Review and Forecast International Wine and Spirits Research IWSR Circana Beer Institute and National Alcohol Beverage Control Association We have not independently verified the data from the industry and government publications Unless otherwise noted all references to market positions are based on U S dollar sales
This Form 10 K contains forward looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act These forward looking statements are subject to a number of risks and uncertainties many of which are beyond our control which could cause actual results to differ materially from those set forth in or implied by such forward looking statements All statements other than statements of historical fact included in this Form 10 K are forward looking statements including without limitation
upholding our leadership position in the U S beer market and repositioning our wine and spirits business including through the 2025 Wine Divestitures Transaction to a portfolio of exclusively higher end brands that we believe will generate higher growth and higher margins as well as expanding our supply channels
our innovation marketing sales and distribution plans activities and strategies access to and availability of production materials impacts of government regulations environmental sustainability CSR and human capital strategies aspirations and targets
our long term financial model target comparable net leverage and target dividend payout ratios future operations financial condition and position net sales expenses including potential future impairment losses hedging programs cost savings restructuring and efficiency initiatives capital expenditures effective tax rates and anticipated tax liabilities expected volume inventory supply and demand levels balance and trends access to capital markets liquidity and capital resources including our ability to consistently generate robust cash flow and raise or repay debt and prospects plans and objectives of management
the evolving consumer demand environment and trends non structural socioeconomic factors including subdued spend value seeking behaviors and reductions in the discretionary income 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
recent and potential future changes to trade and tariff policies particularly on imports from Mexico the European Union including Italy and New Zealand into the U S and retaliatory tariffs imposed on certain product imports originating from the U S
When used in this Form 10 K the words anticipate expect intend will and similar expressions are intended to identify forward looking statements although not all forward looking statements contain such identifying words All forward looking statements speak only as of the date of this Form 10 K We undertake no obligation to update or revise any forward looking statements whether as a result of new information future events or otherwise Although we believe that the expectations reflected in the forward looking statements are reasonable we can give no assurance that such expectations will prove to be correct In addition to the risks and
uncertainties of ordinary business operations and conditions in the general economy and markets in which we compete our forward looking statements contained in this Form 10 K are also subject to the risk uncertainty and possible variance from our current expectations regarding
impacts of our acquisition divestiture investment and NPD strategies and activities including the 2025 Wine Divestitures Transaction and our ability to complete the transaction on the expected terms conditions and timetable
dependence on limited facilities for production of our Mexican beer brands including beer operations expansion optimization and or construction activities scope capacity supply costs including impairments capital expenditures and timing
severe weather natural and man made disasters climate change environmental sustainability and CSR related regulatory compliance and failure to meet environmental sustainability and CSR targets commitments and aspirations
class action or other litigation we face or may face including relating to alleged securities law violations abuse or misuse of our products product liability marketing or sales practices including product labeling or other matters
changes to tax laws fluctuations in our effective tax rate accounting for tax positions the resolution of tax disputes changes to accounting standards elections assertions or policies and the potential impact of a global minimum tax rate
For additional information about risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by our forward looking statements contained in this Form 10 K are those described in Item 1A Risk Factors and elsewhere in this Form 10 K and in our other filings with the SEC
Unless the context otherwise requires the terms Company CBI we our or us refer to Constellation Brands Inc and its subsidiaries We use terms in this Form 10 K and in our Notes that are specific to us or are abbreviations that may not be commonly known or used
restatement agreement dated as of April 14 2022 that amended and restated our ninth amended and restated credit agreement dated as of March 26 2020 which was our then existing senior credit facility as of February 28 2022
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 with the majority of the work expected to be completed within Fiscal 2026 and net annualized cost savings expected to be fully realized by Fiscal 2028
in April 2025 we entered into a definitive agreement to fully divest and in certain instances exclusively license the trademarks of a portion of our wine and spirits business primarily centered around our remaining mainstream wine brands and associated inventory wineries vineyards offices and facilities
amended and restated term loan credit agreement dated as of March 26 2020 that provided for aggregate facilities of 491 3 million consisting of a five year term loan facility inclusive of amendments dated as of June 10 2021 and April 14 2022 now repaid in full
certain items affecting comparability that have been excluded because management uses this information in monitoring and evaluating the results and underlying business trends of the core operations of the Company and or in internal goal setting
direct to consumer inclusive of i a digital commerce experience for consumers to purchase directly from brand websites with inventory coming straight from the supplier and ii consumer purchases at hospitality locations tasting rooms and tap rooms from the supplier
such time as the domestic sale of marijuana could not reasonably be expected to violate the Controlled Substances Act the Civil Asset Forfeiture Reform Act as it relates to violation of the Controlled Substances Act and all related applicable anti money laundering laws
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 to reposition 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
Our mission is to build brands that people love because we believe elevating human connections is Worth Reaching For It is worth our dedication hard work and calculated risks to anticipate market trends and deliver more for our consumers stockholders employees and industry This dedication is what has driven us to become one of the fastest growing large CPG companies in the U S at retail
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 2025 we focused on end to end digital supply chain planning logistics procurement and revenue growth management In Fiscal 2026 we plan to expand this initiative to include consumer insights and analytics We believe our continued focus on maintaining a strong balance sheet provides a solid financial foundation to support our broader strategic initiatives As a result of this strategy we have realized impacts on each segment of our business
In our beer business we focus 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 We remain focused 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
In our wine and spirits business we continue to focus on delivering growth and improving margins beyond Fiscal 2026 by driving our higher end brands and operating efficiencies We have reshaped our portfolio through a series of strategic acquisitions and divestitures to drive our enhanced and following the anticipated completion of the 2025 Wine Divestitures Transaction exclusive focus on higher end wine and spirits brands that we believe will generate higher growth and higher margins aligned with our strategy to address consumer led premiumization trends and meet the evolving needs of our consumers We remain a key supplier in U S 3 tier brick and mortar distribution In addition we are advancing our aim to become a global omni channel competitor in line with consumer preferences as we continue our efforts to progressively expand into DTC channels including hospitality 3 tier eCommerce and international markets
Purchase of the remaining 25 noncontrolling interest of Tennessee based craft bourbon and whiskey products supported our focus on consumer led premiumization trends and meeting the evolving needs of consumers
We are the 1 brewer and seller of imported beer in the U S market We are also the leader in the high end segment of the U S beer market which includes the imported and ABA categories We have the exclusive right to import market and sell our Mexican beer brands in all 50 states of the U S which include the following
Notable achievements in the U S include the following i we had 5 of the top 15 share gaining brands across the total beer category ii Modelo Especial was the best selling beer overall iii Corona Extra was the second largest imported beer and fifth best selling beer overall and iv Pacifico and Victoria were the top two fastest growing major imported beer brands
During Fiscal 2025 we spent nearly 940 million on i planned expansions and execution of optimization initiatives and ii ongoing construction of the Veracruz Brewery Expansion optimization and or construction activities continue at our breweries in Mexico to support expected future business needs We expect to spend approximately 2 billion over Fiscal 2026 through Fiscal 2028 largely on such activities We believe these investments allow us the opportunity to further expand our leadership position in the high end segment of the
We are also building on the success of our leading import brand families through our innovation strategy For example our Modelo Chelada brands have become an important contributor to our portfolio as the leading chelada in the U S beer market In Fiscal 2025 we continued to build on our successful innovation platform with the launch of new products aligned with our focus on consumer led premiumization betterment and flavor trends including i two additional pack sizes of Modelo Oro a light and lower calorie Mexican beer to build on its launch in Fiscal 2024 ii Modelo Chelada Fresa Picante a strawberry and chile pepper michelada style beer iii Modelo Chelada Negra con Chile our first Modelo Negra chelada flavor launched in select markets and iv Corona Sunbrew a beer brewed with real citrus peels and a splash of real citrus juice also launched in select markets In Fiscal 2026 we launched Corona Sunbrew nationwide
We are a higher end wine and spirits company in the U S market with a portfolio that we believe will generate higher growth and higher margins Our wine portfolio is supported by grapes purchased from independent growers primarily in the U S and New Zealand and vineyard holdings in the U S New Zealand and Italy Our wine and spirits are primarily marketed in the U S and also sold in Australia Canada Italy New Zealand and other major world markets
In Fiscal 2025 the broader wine category continued to experience deceleration in both the U S wholesale and international markets particularly in the lower price point segments of the category As a result we have been actively working to address these continued headwinds The U S wholesale decline was partially offset by muted net sales growth in our international markets and DTC channel which represented 16 of total Wine and Spirits net sales in Fiscal 2025 We continue to believe that beyond Fiscal 2026 our wine and spirits business will return to net sales growth supported by our continued efforts to better align our portfolio with our focus on broader consumer led premiumization trends expand our omni channel capabilities and extend into select international markets In April 2025 we entered into a definitive agreement to fully divest and in certain instances exclusively license the trademarks of a portion of our wine and spirits business primarily centered around our remaining mainstream wine brands and associated inventory wineries vineyards offices and facilities For further information about this transaction refer to Recent Development in MD A and Note 2
The Corporate Operations and Other segment includes traditional corporate related items including 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 Canopy investment and investments made through our corporate venture capital function
To focus on their respective product categories build brand equity and increase sales we employ full time in house marketing sales and customer service functions for our i Beer and ii Wine and Spirits segments These functions engage in a range of marketing activities and strategies including market research consumer and trade advertising price promotions point of sale materials event sponsorship on premise activations and public relations
When we advertise our products to consumers we use a combination of methods to forecast the number of advertising impressions made on individuals at or above the legal drinking age Through our media placement agencies we leverage recognized audience measurement services such as Nielsen and ComScore to measure audience composition data on a regular and frequent basis This data helps us to ensure that our advertising placements are purchased in media outlets and audience buying platforms i e programmatic digital buys that are primarily targeted toward legal drinking age consumers and when appropriate specifically targeted to audiences that are age verified as of the legal drinking age Our Global Code of Responsible Practices for Beverage Alcohol Advertising and Marketing provides the fundamental framework for responsible brand advertising and marketing that helps ensure our messages are directed at legal drinking age consumers
We are a corporate member of Responsibility org a national not for profit that aims to empower adults to make a lifetime of responsible alcohol choices As part of our efforts to promote responsible beverage alcohol consumption our brand websites redirect a visitor who self identifies as being under the legal drinking age to Responsibility org for information on prevention of underage drinking ending drunk driving and drinking responsibly
In the U S our products are primarily distributed by wholesale distributors and we generally use separate distribution networks for i our beer portfolio and ii our wine and spirits portfolio In addition in states where the government acts as the distributor we distribute our products through state alcohol beverage control agencies which set the retail prices of our products As is the case with all other beverage alcohol companies products sold through these agencies are subject to obtaining and maintaining listings to sell our products in that agency s state State governments can also affect prices paid by consumers for our products through the imposition of taxes
Trademarks are an important aspect of our business We sell products under a number of trademarks which we own or use under license We also have various licenses and distribution agreements for the sale or the production and sale of our products and products of others These licenses and distribution agreements have varying terms and durations
The beverage alcohol industry is highly competitive We compete on the basis of quality price brand recognition and reputation and distribution strength Our beverage alcohol products compete with other alcoholic and non alcoholic beverages for consumer purchases as well as shelf space in retail stores restaurant presence and wholesaler attention We compete with numerous multinational producers and distributors of beverage alcohol products some of which have greater resources than we do Our principal competitors include
55 million hectoliters to support the growth of our high end beer brands through continued expansion optimization and or construction activities at our Mexican breweries For further information on these expansion optimization and or construction activities refer to i MD A and ii Note 5
In the U S we currently operate 12 wineries using many varieties of grapes grown principally in the Napa Sonoma Monterey and San Joaquin regions of California as well as the Willamette Valley region of Oregon Following the anticipated completion of the 2025 Wine Divestitures Transaction we expect to operate nine U S wineries We also operate two wineries in New Zealand and five wineries in Italy Grapes are normally harvested and crushed in August through November in the U S and Italy and in February through May in New Zealand and stored as wine until packaged for sale under our brand names or sold in bulk The inventories of wine are usually at their highest levels during and after the crush of each year s grape harvest and are reduced as sold throughout the year We currently operate four distilleries in the U S for the production of our spirits Certain of our wines and spirits must be aged for multiple years Therefore our inventories of wines and spirits may be larger in relation to sales and total assets than in many other businesses
For our Mexican beer brands packaging materials are the largest cost component of production with glass bottles representing the largest cost component of our packaging materials We aim to reduce operational waste and enhance our use of returnable recyclable or renewable packaging
As part of our long term beer glass sourcing strategy we are a partner in an equally owned joint venture with Owens Illinois one of the leading manufacturers of glass containers in the world The joint venture owns a state of the art Glass Plant adjacent to our Nava Brewery in Mexico The Glass Plant supplies nearly 60 of the total annual glass bottle supply for our Mexican beer brands We also have long term glass supply agreements with other glass producers
The current Mexican breweries each receive water originating from separate and distinct aquifers We believe we have adequate access to water to support these breweries ongoing requirements as well as future requirements after the completion of planned expansion optimization and or construction activities at our breweries These breweries employ comprehensive water management practices that focus on water efficiency and wastewater treatment operations to reuse water consumed as part of the production process
Most of our annual grape requirements are satisfied by grower purchases from each year s harvest During Fiscal 2025 we received grapes from approximately 350 independent growers located in the U S and 35 independent growers located in New Zealand and Italy We enter into purchase agreements with a majority of these growers with pricing that generally varies year to year and is largely based on then current market prices
As of February 28 2025 we owned or leased approximately 18 000 acres of land and vineyards either fully bearing or under development in the U S New Zealand and Italy This acreage supplied only a small percentage of our overall total grape needs for wine production However most of this acreage was used to supply a large portion of the grapes used for the production of certain of our higher end wines Following the anticipated completion of the 2025 Wine Divestitures Transaction we expect to own or lease approximately 11 400 acres of land and vineyards
All of our owned and leased vineyards in California routinely adhere to documented water management plans as required by Sustainable Grape Growing Certifications including the California Sustainable Winegrowing Alliance and Fish Friendly Farming We use the guidance of these plans to identify the designated beneficial use of the water body based on grape growing goals set before the growing season that account for soil types slopes irrigation water availability and quality and energy efficiency
We believe that we have adequate sources of grape supplies to meet our sales expectations However when demand for certain wine products exceeds expectations we look to source the extra requirements from the bulk wine markets around the world
The distilled spirits manufactured and imported by us require various agricultural products neutral grain spirits and bulk spirits which we fulfill through purchases from various sources by contractual arrangement and through purchases on the open market We believe that adequate supplies of the aforementioned products are available at the present time
We utilize glass and polyethylene terephthalate bottles and other materials such as caps corks capsules labels and cardboard cartons in the bottling and packaging of our wine and spirits products After grape purchases glass bottles are the largest component of our cost of product sold comprising more than 95 of our package format mix of our wine and spirits portfolio volume sold for Fiscal 2025 In the U S the glass bottle industry is highly concentrated with only a small number of producers We have traditionally obtained and continue to obtain our glass requirements from a limited number of producers under long term supply arrangements Currently one producer supplies most of our glass container requirements for our U S operations We have been able to satisfy our requirements with respect to the foregoing and consider our sources of supply to be adequate at this time
We are subject to a range of laws and regulations in the countries in which we operate Where we produce products we are subject to environmental laws and regulations and may be required to obtain environmental and alcohol beverage permits and licenses to operate our facilities Where we market and sell products we may be subject to laws and regulations on brand registration packaging labeling and recycling
distribution methods and relationships pricing and price changes sales promotions advertising and public relations The countries in which we operate impose duties excise taxes and other taxes on beverage alcohol products and on certain raw materials used to produce our beverage alcohol products in varying amounts We are also subject to rules and regulations relating to changes in officers or directors ownership or control
We believe we are in compliance in all material respects with all applicable governmental laws and regulations in the countries in which we operate We also believe that the cost of administration and compliance with and liability under such laws and regulations does not have and is not expected to have a material adverse impact on our financial condition results of operations and or cash flows
The beverage alcohol industry is subject to seasonality in each major category As a result in response to wholesaler and retailer demand which precedes consumer purchases our beer sales have historically been highest during the first and second quarters of our fiscal year which correspond to the Spring and Summer periods in the U S Our wine and spirits sales have generally been highest during the third quarter of our fiscal year primarily due to seasonal holiday buying
We believe our environmental sustainability and CSR strategies and aspirations enable us to better create and protect value for our business in support of our longer term business strategy reflect our Company values and help address needs that are important to our stockholders communities consumers and employees We focus on i serving as good stewards of our environment ii investing in our communities and iii promoting responsible beverage alcohol consumption
As part of our brewery expansion efforts and commitment to making a positive impact on the communities where we operate we plan to continue working with local authorities and community based organizations on sustainability initiatives that benefit local residents Critical local projects are identified through community collaboration and input and guidance from third party water restoration organizations This is in addition to other benefits we provide including local job creation and fueling economic development
As of February 28 2025 we had approximately 10 600 employees including approximately 1 300 employees through our equally owned joint venture with Owens Illinois The number of employees will change throughout the year such as when we employ additional workers during the grape crushing seasons and due to anticipated reductions in connection with the 2025 Wine Divestitures Transaction and the 2025 Restructuring Initiative within Fiscal 2026
Approximately 20 of the employees are covered by collective bargaining agreements Collective bargaining agreements expiring within one year are minimal We consider our employee relations generally to be good
To achieve our mission of building brands that people love we believe it is essential to cultivate a workforce that reflects the consumers and communities we serve We also believe that building an inclusive culture where all employees can come together and develop strong relationships rooted in mutual understanding respect and trust is important to developing a high performing team winning with an evolving consumer base and achieving our strategic ambitions
We strive to provide pay benefits and services that meet the needs of our employees The main components of compensation are i base pay ii long term incentives dependent on a number of factors such as geographic location market prevalence and level which can include restricted stock units stock options and performance share units iii short term incentives and iv recognition awards Base and incentive compensation is reviewed on an annual basis seeking to ensure it is competitive in the market and giving employees opportunities to earn more for exceeding expectations Our total rewards program also offers valuable benefits tools and resources designed to help employees stay healthy and well while achieving security growth satisfaction and success
Building strong talent pipelines delivering best in class people development and championing professional advancement are key components of our human capital strategy which is designed to position our business for long term growth We are committed to offering programs resources and experiences that empower employees to grow their careers The University of Constellation Brands our learning and development center allows employees to find opportunities to grow develop gain new skills and insights explore and expand interests through regularly updated curricula In Fiscal 2025 we i spent over 17 million in development and training costs including the delivery of six executive leadership and other development programs as well as
We have a comprehensive succession planning process led by our human resources team and overseen by the Human Resources Committee of our Board of Directors In addition to the Human Resources Committee s enhanced focus on executive senior leader and high potential employee succession our full Board of Directors is also involved in Chief Executive Officer succession planning as well as succession and people development for the broader employee population As part of the succession planning process we review and discuss potential successors to key roles and examine backgrounds capabilities and appropriate developmental opportunities
We assess employee engagement through global engagement and targeted pulse surveys which provide feedback on a variety of topics such as belonging teamwork recognition enablement and well being During Fiscal 2025 we conducted a company wide global culture and engagement survey where we had a response rate of 83 and a favorable engagement measurement of 86 across our surveyed population
We are committed to ensuring the safety of our employees Our global EHS policy describes our dedication to providing a safe and healthy working environment and developing and maintaining a culture where all employees take responsibility for their own safety as well as the safety of others while minimizing our impact on the environment in the communities where we live and work With a focus on continuous improvement we are developing more robust EHS management systems strengthening employee awareness and training and ensuring senior leadership engagement on safety Work related injuries resulting from the production of our beer wine and spirits products are well below industry average Our recordable incident rate as compared to the industry average is as follows
The recordable incident rate is defined as total number of worldwide CBI work related injuries cases beyond first aid per 100 full time employees The industry average is calculated by taking the weighted average of the most recent 2022 U S Bureau of Labor Statistics data for wineries breweries and distilleries based on our portfolio mix in February 2025 February 2024 and February 2023 for the years ended February 28 2025 February 29 2024 and February 28 2023 respectively
Giving back to our communities is a value instilled by our founder Marvin Sands and remains core to our Company s DNA We empower our employees to engage in the communities where they live and work in a variety of ways including volunteering time and through a charitable matching program available to all U S employees
Executive officers of the Company are generally chosen or elected to their positions annually and hold office until the earlier of their removal or resignation or until their successors are chosen and qualified Information with respect to our executive officers as of April 23 2025 is as follows
Mr Newlands has served as Chief Executive Officer of the Company and as a director since March 2019 and as President since February 2018 He served as Chief Operating Officer from January 2017 through February 2019 and as Executive Vice President from January 2015 until February 2018 From January 2016 to January 2017 he performed the role of President Wine and Spirits Division and from January 2015 through January 2016 he performed the role of Chief Growth Officer Mr Newlands joined the Company in January 2015 Prior to that he served from October 2011 until August 2014 as Senior Vice President and President North America of Beam Inc as Senior Vice President and President North America of Beam Global Spirits Wine Inc from December 2010 to October 2011 and as Senior Vice President and President USA of Beam Global Spirits Wine Inc from February 2008 to December 2010 Beam Inc a producer and seller of branded distilled spirits products merged with a subsidiary of Suntory Holding Limited a Japanese company in 2014 Prior to October 2011 Beam Global Spirits Wine Inc was the spirits operating segment of Fortune Brands Inc which was a leading consumer products company that made and sold branded consumer products worldwide in the distilled spirits home and security and golf markets
Executive Vice President and Chief Legal Officer of the Company having served in the role since December 2017 and as the Company s Secretary since April 2017 Prior to that he served as the Company s Senior Vice President and General Counsel Corporate Development from September 2014 until December 2017 Before joining the Company Mr Bourdeau was an attorney with the law firm of Nixon Peabody LLP from July 2000 through September 2014 and a partner from February 2005 through September 2014 Mr Bourdeau was associated with another law firm from 1995 to 2000
Ms Erickson is the Executive Vice President and Chief Human Resources Officer of the Company having served in the role since April 2025 Before joining the Company Ms Erickson served as Senior Vice President Chief People Culture and Communications Officer with Beam Suntory Inc now known as Suntory Global Spirits from January 2023 until April 2024 as Senior Vice President Chief Human Resources Officer from November 2014 until December 2022 and as Vice President Global Communications and Public Relations from 2008 until November 2014 Prior to that she worked for Ace Hardware Corporation from 1991 to 2008 in various leadership positions across advertising brand development communications and public relations
March 2024 Prior to that he served as the Company s Senior Vice President Global Operations and International Sales for the Wine and Spirits Division from March 2021 until March 2024 Senior Vice President Global Operations Wine and Spirits from September 2018 until March 2021 Senior Vice President Production Wine and Spirits from May 2016 until September 2018 and President and Managing Director New Zealand and Australia from March 2014 until May 2016 Before joining the Company Mr Glaetzer served in roles of increasing responsibility with Treasury Wine Estates and its predecessors from 1996 until 2014
Mr Hankinson is the Executive Vice President and Chief Financial Officer of the Company having served in the role since January 2020 Prior to that he served as the Company s Senior Vice President Corporate Development from February 2016 until January 2020 Vice President Corporate Development from October 2009 until February 2016 Vice President Business Development for Constellation s prior Canadian business from October 2007 until October 2009 and Director of Corporate Development from March 2004 until October 2007
Mr McGrew is the Executive Vice President Chief Communications CSR and Inclusion Officer of the Company He has been an Executive Vice President of the Company since April 2020 when he was promoted to Executive Vice President Chief Communications and CSR Officer Mr McGrew also served as Chief Strategy Officer from December 2023 to October 2024 in addition to his other roles He joined Constellation in September 2014 as Senior Director Communications Beer Division and held a number of progressive leadership roles within the Company prior to becoming an Executive Vice President Before joining the Company he held a number of roles with increasing responsibility at Grainger then a 9 billion global provider of industrial supplies and equipment While at Grainger from 2011 to 2013 Mr McGrew served as Director U S Business Communications from January 2013 to October 2013 he served as Senior Director U S Business Global Supply Chain Communications and from October 2013 to September 2014 he served as Senior Director Communications Americas among other roles
Ms Monteiro is the Executive Vice President Managing Director Beer Brands and Interim Chief Growth and Strategy Officer of the Company having served in the roles since October 2024 and March 2025 with respect to her Interim role Prior to that she served as the Company s Executive Vice President Chief Growth and Digital Officer and Managing Director Beer Brands from December 2023 to October 2024 Executive Vice President Chief Growth Strategy and Digital Officer from March 2021 to November 2023 Executive Vice President Chief Growth and Strategy Officer from October 2019 to February 2021 and Senior Vice President Chief Growth Officer from October 2018 to September 2019 She joined Constellation in October 2016 as Vice President Beer Innovation and was given additional responsibilities as Chief of Staff to the Company s Executive Management Committee in July 2018 Before joining the Company from July 2014 to September 2016 Ms Monteiro was a Senior Marketing Director at Anheuser Busch InBev Prior to joining Anheuser Busch InBev she served in roles of increasing responsibility with Beam Suntory Inc including as Associate Brand Manager Jim Beam from July 2007 to June 2009 Brand Manager Cognac from July 2009 to December 2011 and Senior Brand Manager Vodka from January 2012 to June 2014
Mr Sabia is the Executive Vice President and President Beer Division of the Company having served in the roles since January 2022 and February 2022 respectively Prior to that he served as Executive Vice President Managing Director Beer Division from March 2021 until January 2022 Executive Vice President Chief Marketing Officer from May 2018 until March 2021 Chief Marketing Officer of the Company s Beer Division from 2009 until May 2018 and Vice President Marketing of the Company s spirits business from 2007 until 2009 Before joining the Company Mr Sabia was with Molson Coors Brewing Company for 17 years
Our website is https www cbrands com and our investor relations website is https ir cbrands com Our filings with the SEC including our Form 10 K quarterly reports on Form 10 Q current reports on Form 8 K and amendments to those reports filed or furnished pursuant to Section 13 a or 15 d of the Exchange Act are accessible free of charge on our investor relations website as soon as reasonably practicable after we electronically file such material with or furnish it to the SEC The SEC maintains a website https www sec gov that contains reports proxy and information statements and other information regarding issuers such as ourselves that file electronically with the SEC
Our Chief Executive Officer and Senior Financial Executive Code of Ethics specifically applies to our chief executive officer our principal financial officer and our controller and is available on our investor relations website This Chief Executive Officer and Senior Financial Executive Code of Ethics meets the requirements as set forth in the Exchange Act Item 406 of Regulation S K Our Code of Business Conduct and Ethics applies to all employees directors and officers including each person who is subject to the Chief Executive Officer and Senior Financial Executive Code of Ethics The Code of Business Conduct and Ethics together with our Global Code of Responsible Practices for Beverage Alcohol Advertising and Marketing is available on our website under Our Policies Copies of these materials are available in print to any stockholder who requests them Stockholders should direct such requests in writing to Investor Relations Department Constellation Brands Inc 50 East Broad Street Rochester New York 14614 or by telephoning our Investor Center at 1 888 922 2150
Our Board of Directors Corporate Governance Guidelines and the Charters of the Board s Audit Committee Human Resources Committee which serves as the Board s compensation committee and Corporate Governance Nominating and Responsibility Committee are accessible on our investor relations website Amendments to and waivers granted to our directors and executive officers under our codes of ethics if any will be posted in this area of our investor relations website
In addition to information discussed elsewhere in this Form 10 K you should carefully consider the following factors as well as additional factors not presently known to us or that we currently deem to be immaterial which could materially affect our business liquidity financial condition and or results of operations in future periods These factors some of which have occurred and or are occurring and any of which could occur in the future are not the only ones we face The following factors are organized under relevant headings however they may be relevant to other headings as well
Our business depends upon consumers consumption of our beer wine and spirits brands and sales of our Mexican beer brands in the U S represent the vast majority of our business Consumer preferences behaviors perception and sentiment may shift due to a variety of factors including changes in taste preferences and leisure dining and beverage purchasing and consumption patterns U S demographic trends trends involving environmental sustainability and CSR matters changing market dynamics including consumer led premiumization moderation and betterment trends pricing perceived value branding marketing and reputational considerations geopolitical tensions and other negative trends impacting our products business and the beverage alcohol industry Further a limited or general decline in consumption in one or more of our product categories has occurred before and could occur again in the future due to a variety of factors including
concern about the health consequences of consuming beverage alcohol products including moderation and betterment trends and the impacts of alcohol related health warning recommendations such as cancer risk warnings and about drinking and driving or other safety considerations
reduced consumption of beverage alcohol products including as a result of stricter laws such as those relating to consumption or driving while under the influence of alcohol or resulting from consumer dietary preference changes weight loss regimens and pharmaceuticals including GLP 1 drugs or consumers substituting legalized cannabis or hemp derived or other similar products in lieu of beverage alcohol
increased activity from governmental entities anti alcohol groups or other bodies such as the World Health Organization and the former U S Surgeon General advocating measures or guidelines designed to reduce or eliminate the consumption of beverage alcohol products or require more stringent labeling or warning requirements
If these or any other factors cause or continue to cause a decline in the growth rate amount or profitability of sales of our Mexican beer brands in the U S or any material shift in consumer preferences behaviors perception and sentiment in our major markets away from our beer wine and spirits brands and our Mexican beer brands in particular or from the categories in which they compete or if our financial or operational
From time to time we acquire businesses assets or securities of companies that we believe will provide a strategic fit with our business We integrate acquired businesses with our existing operations our overall internal control over financial reporting processes and our financial operations and information systems If the financial performance of our business as supplemented by the assets and businesses acquired does not meet our expectations it may make it more difficult for us to service our debt obligations and our results of operations may fail to meet market expectations or otherwise be adversely affected We may not effectively assimilate the business or product offerings of acquired companies into our business or within the anticipated costs or timeframes retain key customers and suppliers or key employees of acquired businesses or successfully implement our business plan for the combined business In addition our final determinations and appraisals of the estimated fair value of assets acquired and liabilities assumed in our acquisitions may vary materially from earlier estimates and we may fail to fully realize anticipated cost savings growth opportunities or other potential synergies The fair value of acquired businesses or investments may not remain constant
We also divest businesses assets or securities of companies from time to time including those that we believe no longer provide a strategic fit with our business such as the pending 2025 Wine Divestitures Transaction We have provided and in the future may provide various indemnifications in connection with divestitures of businesses or assets Divestitures of portions of our business have also resulted and may continue to result in costs stranded in our remaining business Delays in developing or implementing plans to address such costs could delay or prevent the accomplishment of our financial objectives and we may be unsuccessful in partially or fully mitigating such costs The failure to complete any planned divestitures may also result in negative business and financial results The amount of contingent consideration if any received in divestitures may also vary based on various factors including actual future brand performance
We have acquired or retained ownership interests in companies which we do not control such as our joint venture to operate the Glass Plant our interest in Canopy and investments made through our corporate venture capital function and we have acquired control of companies which we did not wholly own We have also acquired full ownership of companies that we partially owned such as our acquisitions of the remaining ownership interests in Austin Cocktails My Favorite Neighbor and Nelson s Green Brier These types of transactions could occur again in the future Our joint venture partners or the other parties that hold or may hold the remaining ownership interests in companies which we do not control may at any time have economic business or legal interests or goals that are inconsistent with our goals or the goals of the joint ventures or those companies Our joint venture arrangements and the arrangements through which we acquired or hold our other equity or membership interests often require us to among other matters pay certain costs make capital investments fulfill alone our joint venture partners obligations or purchase other parties interests The entities in which we have an interest have been and may continue to be subject to litigation which may have an adverse impact on their ability to do business or under which they may incur costs and expenses which could have a material adverse impact on their operations or financial condition which in turn could negatively impact the value of our investment
In addition our continued success depends in part on our ability to develop new products The launch and ongoing success of new products are inherently uncertain especially with respect to consumer appeal and our ability to deliver optimized marketing in an evolving and dynamic media landscape including through existing and emerging digital technologies such as AI and data analytics A new product launch can give rise to a variety of costs An unsuccessful launch can among other things affect consumer perception of existing brands and our reputation Unsuccessful implementation or short lived popularity of our product innovations has resulted and may in the future result in inventory write offs and other costs
We may not complete acquisitions divestitures or investments on our expected terms conditions and timetables and we may not realize the expected benefits of acquisitions divestitures investments or NPD We have recognized significant impairment losses and or write offs in connection with acquired and divested businesses and investments such as our recent Wine and Spirits and Canopy related impairments and we may do so again in the future Furthermore our acquisitions investments or joint ventures may not be profitable our
forecasts regarding acquisition divestiture or investment activities may not be accurate or the internal control over financial reporting of entities which we must consolidate as a result of our investment activities but do not control or wholly own may not be as robust as our internal control over financial reporting Our failure to adequately manage the risks associated with acquisitions divestitures investments or NPD or the failure of an entity in which we have an equity or membership interest could have a material adverse effect on our business liquidity financial condition and or results of operations
Our future success depends significantly on our ability to protect our current and future brands and products and to defend our intellectual property rights We have been granted numerous trademark registrations and use certain trademarks under license covering our brands and products and we have filed and expect to continue to file or have filed on our behalf trademark applications seeking to protect newly developed brands and products We cannot be sure that trademark registrations will be issued with respect to any such trademark applications We could also fail to timely renew or protect a trademark and our competitors could challenge invalidate or circumvent any existing or future trademarks issued to or licensed by us We have been and may continue to be subject to litigation related to our trademarks and intellectual property rights Litigation is inherently unpredictable and subject to substantial uncertainties and unfavorable developments and resolutions could occur In addition the amount of time and cost to defend ourselves could be substantial A substantial adverse judgment or other unfavorable resolution of these matters or our failure to otherwise protect our intellectual property rights as well as the costs associated with such activities could have a material adverse effect on our business liquidity financial condition and or results of operations
The success of our brands depends upon consumer perception including having a positive image of those brands and maintaining a good reputation is critical to selling our branded products Our reputation could also be impacted negatively by public perception adverse publicity whether or not valid negative comments or campaigns in social media or other public forums or our responses relating to among other things
perceptions and demands toward and publicity surrounding or our performance related to our environmental sustainability and CSR strategies initiatives targets commitments and aspirations including impacts of advocacy protests boycotts and similar activities as well as associated reporting regulations standards frameworks and ratings
allegations that we or persons currently or formerly employed by or associated with us have allegedly or actually violated applicable laws or regulations including those related to safety employment discrimination harassment whistleblowing privacy corporate citizenship improper business practices or cybersecurity or have otherwise engaged in negatively perceived activities
Various stakeholders have expressed widely divergent views on environmental sustainability social human capital and governance related matters among others and we are faced with conflicting expectations and regulations regarding such matters which has inhibited and may continue to inhibit our ability to achieve a
consistently positive perception across our entire stakeholder base Failure to comply with applicable laws and regulations maintain an effective system of internal controls provide accurate and timely financial information or protect our information systems against service interruptions theft or misappropriation of data or breaches of security could also hurt our reputation Damage to our reputation or loss of consumer confidence in our products for any of these or other reasons could result in decreased demand for our products and could have a material adverse effect on our business liquidity financial condition and or results of operations as well as require additional resources to rebuild our reputation competitive position and brand equity and renew investor confidence
new or emerging entrants in our market or categories including from the convergence of beverage categories or from the participation and expansion of large non alcoholic beverage companies some of which have greater resources than we do into the beverage alcohol space
pricing purchasing financing operating advertising or promotional and shelf space decisions made by wholesalers state and local agencies and retailers as well as in DTC channels which may affect supply of or consumer demand for our products
a general decline in beverage alcohol consumption or changes in consumer preferences away from our products including due to consumer dietary preference changes weight loss regimens pharmaceuticals or consumers substituting legalized cannabis or hemp derived or other similar products in lieu of beverage alcohol or
Our continued success also depends on our ability to attract and retain a high quality and inclusive workforce in a competitive environment for talent and to implement our human capital strategy priorities and initiatives We could experience higher expenses to deliver on our human capital strategy priorities and initiatives such as for investment in our personnel including due to employee turnover wage inflation and or other current or emerging employment trends particularly in the U S to defend ourselves in investigations or against existing or new litigation or for other reasons We may be unable to increase our prices to pass along any increased costs we incur to our customers
We have production facilities in the U S Mexico New Zealand and Italy and employees in various countries and our products are sold in numerous countries The countries in which we operate impose duties excise taxes and or other taxes on beverage alcohol products and or on certain raw materials used to produce our beverage alcohol products in varying amounts Governmental bodies may propose changes to international trade agreements treaties tariffs taxes and other government rules and regulations including but not limited to environmental treaties and regulations Recent developments in international trade relations including significant changes in U S trade policy and actions which include threatened new and increased tariffs on other countries and retaliatory tariffs and actions imposed on certain U S goods such as the tariffs on product imports from certain countries such as Mexico the European Union including Italy and New Zealand imposed by the U S government in April 2025 tariffs implemented by certain other countries on U S goods such as the tariffs on certain product imports originating from the U S imposed by the Canadian government in March 2025 and subsequent modifications and delays to the various tariffs 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
Significant new or increased tariffs import and excise duties or other taxes on or impacting beverage alcohol products including raw and packaging materials particularly on imports from Mexico Italy and New Zealand and any additional retaliatory tariffs imposed by those governments on product imports from the U S could have a material adverse effect on our business liquidity financial condition and or results of operations Meanwhile escalating geopolitical tensions and trade disputes have resulted and may continue to result in additional sanctions tariffs import export restrictions boycotts or trade wars These activities when combined with any retaliatory actions that have or may be taken by other countries have impacted and could continue to pose a significant risk to our business as well as the global economy such as by shifting consumer behaviors inhibiting sales increasing costs causing further economic and supply chain disruptions including impacts on prices and supply of certain commodities such as aluminum corn crude oil natural gas and steel and inflationary pressures and reducing economic activity The extent and duration of tariffs and the resulting impacts on general economic conditions stock credit and capital market volatility and our business are uncertain and depend on various factors many of which are out of our control
In addition governmental agencies extensively regulate the beverage alcohol products industry concerning such matters as licensing warehousing trade and pricing practices permitted and required labeling advertising and relations with wholesalers and retailers Certain regulations also require warning labels and signage We may be subject to new or revised regulations increased licensing fees requirements or taxes regulatory enforcement actions or longer review periods for applicable regulatory approvals Additionally various jurisdictions may seek to adopt significant additional product labeling or warning requirements limitations or guidelines on the marketing or sale of our products because of what our products contain or allegations that our products cause adverse health effects If these types of requirements become applicable to one or more of our major products under current or future laws or regulations they may inhibit sales of such products or increase our costs These uncertainties and changes as well as the decisions policies and economic strength of our suppliers and distributors could have a material adverse effect on our business liquidity financial condition and or results of operations
Supply of quality water agricultural and other raw materials certain raw and packaging materials purchased under supply contracts supply chain disruptions and other factors limited group of certain suppliers
The quality and quantity of water available for use is important to the supply of our agricultural raw materials and our ability to operate our business Water is a limited resource in many parts of the world If climate patterns change and droughts continue or become more severe or other restrictions on currently available water resources are imposed there may be a scarcity of water or poor water quality which may affect our and our suppliers operations increase production costs or impose capacity constraints We are dependent on sufficient amounts of quality water for operation of our breweries wineries and distilleries as well as to irrigate our vineyards and conduct our other operations The suppliers of the agricultural raw materials we purchase are also dependent upon sufficient supplies of quality water for their vineyards and fields In addition water purification and waste treatment infrastructure limitations could increase costs or constrain operations at our production facilities and vineyards A substantial reduction in water supplies could result in material losses of crops such as corn barley hops or grapes as well as grape vines which could lead to a shortage of our product supply
We have substantial brewery operations in Mexico and substantial wine operations in the U S primarily in California New Zealand and Italy as well as brewery and distillery operations in the U S California has endured and may continue to experience prolonged drought conditions which have resulted in the imposition of certain restrictions on water usage and which could recur Over the last several years certain areas of California have also experienced wildfires and flooding If these conditions or restrictions persist and or increase in severity it could have an adverse effect upon those operations The water supplies for our current Mexican breweries and the Veracruz Brewery which originate from separate and distinct aquifers are subject to disruption which could impact our ability to produce our products The sources of water methods of water delivery water quality or water needs to support our ongoing requirements may change materially in the future We may incur additional expenses for improving water delivery quality and efficiency as well as for securing additional water sources
Our breweries the Glass Plant our wineries and our distilleries use a large volume of agricultural and other raw materials to produce our products These include corn starch and sugars malt hops fruits yeast and water for our breweries soda ash and silica sand for the Glass Plant grapes and water for our wineries and grain
and water for our distilleries Our breweries wineries and distilleries all use large amounts of various packaging materials including glass aluminum cardboard and other paper products Our production facilities also use electricity natural gas and diesel fuel in addition to renewable energy sources in their operations Certain raw materials and packaging materials are purchased under contracts of varying maturities The supply on time availability and price of raw packaging and other materials energy and other commodities have been and may continue to be affected by many factors beyond our control including economic factors tariffs supply chain disruptions inflationary pressures market demand global geopolitical events and military conflicts weather events or natural or man made disasters including droughts storms and wildfires plant diseases and theft
Our breweries wineries and distilleries are also dependent upon an adequate supply of glass bottles Glass bottle costs are one of our largest components of cost of product sold The Glass Plant produces a majority of the total annual glass bottle supply for our Mexican beer brands and we have a small number of other suppliers of glass bottles for our Mexican beer brands At times we have experienced glass bottle purchasing shortages Meanwhile we have two aluminum can suppliers that provide all of our total annual requirements for our Mexican beer brands with one of those suppliers providing a majority of such aluminum can requirements In the U S glass bottles have only a small number of producers Currently one producer supplies a majority of our glass container requirements for our U S wine and spirits operations
To the extent any of the foregoing factors impact our business or operations including by increasing the costs of our products and we are unable or choose not to pass along such rising costs to consumers through increased selling prices leading to a shortage of our product supply or inventory levels or requiring unplanned diversions of funds resources and talent to address such factors we could experience a material adverse effect on our business liquidity financial condition and or results of operations
We depend on IT to enable us to operate efficiently and interface with customers suppliers and consumers maintain financial accuracy and efficiency and effect accurate and timely governmental reporting among other activities If we do not allocate and effectively manage the resources to build and sustain appropriate technology infrastructure including our global enterprise resource planning system and our planned unified finance platform implementation we could be subject to transaction or data integrity errors processing inefficiencies increased costs loss of customers business disruptions loss of or damage to intellectual property or proprietary information including through a security breach penalties associated with the failure to timely file governmental reports and or other difficulties Many groups on a worldwide basis have experienced increases in electronic security breaches cyberattacks and other hacking activities such as phishing attacks denial of service malware ransomware and cyber extortion and there is the possibility of retaliatory cyberattacks including by state sponsored organizations As with all large IT systems we have been a target of cyberattackers and other hacking activities and our systems could be penetrated by increasingly sophisticated external or internal threat actors including through the use of existing and emerging technologies such as AI intent on extracting confidential or proprietary information corrupting our information disrupting our business processes engaging in the unauthorized use of strategic information about us or our employees customers or consumers or demanding monetary payment Such unauthorized access could disrupt our operations and result in various costs and adverse consequences including the loss of assets decreased sales litigation regulatory actions remediation costs increased cybersecurity protection costs damage to our reputation harm to our employees or the failure by us to retain or attract customers or consumers following such an event
We have outsourced various functions to third party service providers and may outsource other functions in the future We rely on such third parties to provide services on a timely and effective basis but we do not ultimately control their performance In addition our distributors wholesalers suppliers joint venture partners and other external business partners utilize their own IT systems that are subject to similar risks to us as described above Their failure to perform as expected or as required by contract or additional cyberattacks on them that disrupts their systems could result in significant disruptions and costs to our operations or in the case of third party service providers a penetration of our systems
The swift pace of technological change has led to a nonuniform and complex set of cybersecurity and data privacy laws regulations and standards Meanwhile the recent proliferation and rapid evolution of AI
technologies including generative AI and machine learning has resulted in new challenges including business legal and regulatory and ethical considerations and uncertainty For example the use of AI technologies without adequate safeguards could produce flawed or inaccurate recommendations suggestions or outcomes or other unintended results or potential vulnerabilities or expose us to liability or adverse legal or regulatory consequences AI technologies may also intensify the risk of threat actors using such technologies to enhance their capabilities We have implemented a governance framework that includes policies and processes to address the use of AI technologies by our employees and third party service providers Nevertheless our employees and third party service providers may not follow our governance framework including if such providers incorporate AI technologies into their products or systems without disclosing this use to us We expect that our continued success will depend in part on our and our third party service providers ability to continue to effectively leverage existing and emerging technologies such as AI and data analytics to gain relevant insights and enhance our business These circumstances may create risks in our ability to address existing or rapidly developing regulatory or industry standards related to AI technologies and data privacy and to successfully and responsibly utilize AI technologies
To the extent any of the foregoing factors result in significant disruptions and costs to our operations fail to produce the anticipated benefits compromise confidential or sensitive information imperil our intellectual property result in harm to our reputation and the public perception of the effectiveness of our IT systems and cybersecurity measures result in litigation or regulatory actions and or reduce the effectiveness of our internal control over financial reporting it could have a material adverse effect on our business liquidity financial condition and or results of operations
We are dependent on our current Mexican breweries to fulfill our Mexican beer brands production requirements both now as well as for the near term Expansion optimization and or construction activities continue at our breweries in Mexico These are multi billion dollar activities with risks of completion delays cost overruns and asset impairments such as the prior impairment of certain long lived assets at the canceled Mexicali Brewery We may not achieve the intended financial and operational benefits of these investments including if we develop excess capacity that outpaces demand for our Mexican beer brands
Expansion and optimization of current production facilities and construction of new production facilities are subject to various regulatory and developmental risks including but not limited to our ability to obtain timely certificate authorizations necessary approvals and permits from regulatory agencies on terms that are acceptable to us or at all potential changes in federal state and local laws and regulations including environmental requirements that prevent a project from proceeding or increase the anticipated cost of the project our inability to acquire rights of way or land or water rights on a timely basis on terms that are acceptable to us or our inability to acquire the necessary energy supplies including electricity natural gas and diesel fuel Any of these or other unanticipated events could halt or delay the expansion optimization or construction of our production facilities
We may not be able to satisfy our product supply requirements for our Mexican beer brands in the event of a significant disruption at or the partial or total destruction of the current Mexican breweries or the Glass Plant difficulty shipping and or warehousing raw materials and product into within and or out of the U S or Mexico including in the event of rail or other freight shipping disruptions with our major providers in each country or a temporary inability to produce our product due to closure or lower production levels of one or more of our current Mexican breweries A prolonged closure or restriction of the border between the U S and Mexico particularly at key product and supply crossing points could result in temporary or longer term disruptions of sales consumption and trade patterns supply chains production processes and or operations Also if the contemplated expansion optimization and or construction activities at our breweries in Mexico are abandoned or not otherwise completed by their targeted completion dates we may not be able to produce sufficient quantities of our Mexican beer to satisfy our needs in the future Under such circumstances we may be unable to obtain our Mexican beer at a reasonable price from another source if at all A significant disruption at our current Mexican breweries or the Glass Plant even on a short term basis could impair our ability to produce and ship products to market on a timely basis Alternative facilities with sufficient capacity or capabilities may not readily be
available may cost substantially more or may take a significant time to start production any of which could have a material adverse effect on our product supply business liquidity financial condition and or results of operations
All of our Mexican beer products are produced at our current Mexican breweries Many of the workers at these breweries are covered by collective bargaining agreements The Glass Plant produces a majority of the total annual glass bottle supply for our Mexican beer brands Several of our vineyards and production and distribution facilities including certain California and Oregon wineries are in areas prone to seismic activity Additionally we have various vineyards and wineries in California and Oregon which have experienced wildfires landslides and or severe winter storms
If any of these or other of our properties and production facilities were to experience a significant operational disruption or catastrophic loss it could delay or disrupt production shipments and sales and result in potentially significant expenses to repair or replace these properties or find suitable alternative providers Also our production facilities are asset intensive As our operations are concentrated in a limited number of production and distribution facilities we are more likely to experience a significant operational disruption or catastrophic loss in any one location from acts of war or terrorism natural or man made disasters public health crises labor strikes or other labor activities cyberattacks and other attempts to penetrate our or our third party service providers IT systems or the IT used by our non production employees who work remotely or unavailability of raw or packaging materials We may be impacted by increases in global energy prices or reduced supply particularly for crude oil and natural gas including as a result of geopolitical events and military conflicts If a significant operational disruption or catastrophic loss were to occur we could breach agreements our reputation could be harmed and our business liquidity financial condition and or results of operations could be adversely affected by among other items higher maintenance charges unexpected capital spending or product supply constraints
Our insurance policies do not cover certain types of catastrophes and may not cover certain events such as pandemics Economic conditions and uncertainties in global markets may adversely affect the cost and other terms upon which we are able to obtain insurance coverage including for property damage and business interruption If our insurance coverage is adversely affected or to the extent we have elected to self insure there may be greater risk that we may experience an adverse impact to our business liquidity financial condition and or results of operations
Severe weather and natural or man made disasters climate change environmental sustainability and CSR related regulatory compliance failure to meet environmental sustainability and CSR targets commitments and aspirations
Our business depends upon agricultural activity and natural and human capital resources There has been much public discussion related to concerns that GHGs may have an adverse impact on global temperatures weather patterns and the frequency and severity of extreme weather and natural disasters Severe weather events and natural disasters such as our experiences with wildfires drought and or flooding in California and Oregon severe winter storms in California Texas or Mexico or late frosts or flooding in New Zealand and climate change may negatively affect agricultural productivity in the regions from which we source our various agricultural raw materials or the energy powering our production facilities Decreased availability of our raw materials may increase our cost of product sold Severe weather events and natural or man made disasters or changes in their frequency or intensity can also impact product quality disrupt our supply chains which may affect production operations insurance cost and coverage and delivery of our products to wholesalers retailers and consumers and negatively affect the ability of consumers to purchase our products
The landscape related to environmental sustainability and CSR related regulation compliance and reporting is constantly evolving including changing in scope and complexity For example the European Commission and the SEC have promulgated rules that would require significantly increased disclosures related to climate change although each body has taken subsequent actions to limit or abandon their rules such as the European Commission s adoption of a package of proposals to simplify and delay various European Union rules and the SEC s stay of the effectiveness of its rules and its withdrawal of its defense of the rules in the pending
litigation in the U S Court of Appeals for the Eighth Circuit Meanwhile various stakeholders including governmental bodies have increasingly expressed or pursued opposing views sentiments policies legislation and investment expectations with respect to environmental sustainability social human capital and similar initiatives
We may experience significant future increases in the costs associated with environmental sustainability and CSR related matters including fees licenses personnel consultants reporting and the cost of capital improvements for our operating facilities to meet environmental regulatory requirements to address other regulations standards frameworks ratings and activities from various governmental entities and other stakeholders in our ongoing handling of investor activist or influencer activities and campaigns and or in the event of investigations or litigation related to such matters We have disclosed various targets in these areas including on restoration of water withdrawals GHG emissions waste reduction and circular packaging and we may disclose new or updated targets or aspirations in these areas in the future The achievement of such targets or aspirations along with our broader value chain engagement efforts have required and will continue to require us and in some cases third parties with which we do business such as our suppliers to make investments and allocate resources
In addition we may be party to various environmental remediation obligations arising in the normal course of our business or relating to historical activities of businesses we acquire Due to regulatory complexities governmental or contractual requirements uncertainties inherent in litigation and the risk of unidentified contaminants at our current and former properties the potential exists for remediation liability indemnification and other costs to differ materially from the costs that we have estimated We may also incur costs associated with environmental compliance arising from events we cannot control such as natural or man made disasters We may not allot sufficient resources to attain may not ultimately achieve may be unable to satisfy all stakeholders regarding and or may be subject to government enforcement actions fines proceedings or litigation related to our targets and aspirations and our costs in relation to any of the foregoing matters may exceed our projections which could have a material adverse effect upon our business liquidity financial condition and or results of operations Even if we achieve our environmental sustainability and CSR targets commitments and aspirations we may not realize all of the benefits that we expected
We are seeking to unlock cost savings through a wide range of initiatives and restructuring actions including the 2025 Restructuring Initiative and we may institute additional cost savings restructuring and efficiency measures in the future These cost reduction and efficiency measures include but are not limited to enhancing our organizational efficiency and optimizing expenditures across our organization such as future opportunities identified across supplier and sourcing optimization innovation to reduce material and manufacturing costs and productivity gains across logistics We may not achieve the anticipated savings or efficiencies from our cost savings restructuring and efficiency initiatives For example actual charges costs and adjustments in connection with these activities may vary materially from our estimates and events and circumstances such as financial or strategic difficulties delays and unexpected developments may occur These activities may also cause potential disruptions to our business or divert management s time and attention from other business priorities If we are unable to realize all or a portion of the anticipated cost savings or efficiencies or if we do not realize such savings or efficiencies on our expected timetable our ability to fund other initiatives and achieve our financial outlook may be adversely affected The failure to implement our cost savings restructuring and efficiency initiatives in accordance with our expectations could have a material adverse effect on our business liquidity financial condition and or results of operations
Local market structures and distribution channels vary worldwide Within our primary market in the U S we offer a range of beverage alcohol products with generally separate distribution networks utilized for our beer portfolio and our wine and spirits portfolio In the U S we sell our products principally to wholesalers for resale to retail outlets and directly to government agencies We have an exclusive arrangement with one wholesaler that generates a large portion of our branded U S wine and spirits net sales and we have one wholesaler for our beer portfolio which through multiple entities represents one quarter of our consolidated net sales Wholesalers and retailers of our products offer directly competing products that vie for retail shelf space promotional support and consumer purchases and wholesalers or retailers may give higher priority to products of our competitors
Employees of wholesalers or retailers of our products have engaged and may in the future engage in labor strikes other work stoppages or other labor activities Such activities or the replacement or poor performance of our major wholesalers retailers or government agencies could result in temporary or longer term sales disruptions and could have a material adverse effect on our business liquidity financial condition and or results of operations
Contamination whether arising accidentally or through deliberate third party action or other events that harm the integrity or consumer support for our brands could adversely affect sales Various diseases pests fungi viruses drought frosts wildfires and certain other weather conditions or the effects of climate conditions such as smoke taint sustained during the 2020 U S West Coast wildfires or the late frost experienced in New Zealand in calendar 2021 could affect the quality and quantity of barley hops grapes and other agricultural raw materials available and decrease the supply and quality of our products Similarly power disruptions such as the outage at our Nava Brewery due to severe winter weather events in calendar 2021 could adversely impact our production processes and the quality of our products We or our suppliers of agricultural raw materials may not succeed in preventing contamination in existing or future vineyards fields or production facilities Future government restrictions regarding the use of certain materials used in growing grapes or other agricultural raw materials may increase vineyard costs and or reduce production of grapes or other crops It is also possible that a supplier may not provide materials or product components which meet our required standards or may falsify documentation associated with the fulfillment of those requirements
Product contamination or tampering or the failure to maintain our standards for product quality safety and integrity including with respect to raw materials naturally occurring compounds packaging materials or product components obtained from suppliers may also reduce demand for our products or cause production and delivery disruptions Contaminants or other defects in raw materials packaging materials or product components purchased from third parties and used in the production of our beer wine or spirits products or defects in the fermentation or distillation process could lead to low beverage quality as well as illness among or injury to consumers of our products and may result in reduced sales of the affected brand or all our brands
If any of our products become unsafe or unfit for consumption are misbranded or cause injury we may have to engage in additional product recalls and or be subject to liability and incur additional costs Widespread or multiple product recalls or a significant product liability judgment or regulatory action could cause our products to be unavailable for a period which could reduce consumer demand and brand equity and result in reputational harm
Communicable disease outbreaks including the COVID 19 pandemic and other widespread public health crises have resulted and in the future could result in disruptions and damage to our business caused by potential negative consumer purchasing behavior and reduced consumption as well as disruption to our supply chains production processes and operations This includes containment actions that restrict consumer purchasing occasions including from the inability to leave home or otherwise shop in a normal manner cancellations of public events venue closures or capacity restrictions as well as reductions in consumer discretionary income due to reduced or limited work and layoffs Supply disruption may result from restrictions on the ability of employees and others in the supply chain to travel and work including from quarantines individual illnesses or border closures imposed by governments to deter the spread of communicable infections or diseases determinations by us or our suppliers or distributors to temporarily suspend operations in affected areas or other actions which restrict or otherwise negatively impact our ability to produce package and ship our products our distributors ability to distribute our products or our suppliers ability to provide us with raw packaging and other materials Channels of entry may be closed or operate at reduced capacity or transportation of product or materials within a region or country may be limited Our operations and the operations of our suppliers may become less efficient or otherwise be negatively impacted if our or their executive management or other key operational personnel are unable to work or if a significant percentage of our workforce is unable to work at all or at their normal production facility A future widespread health crisis could once again negatively affect the economies and financial markets of many countries resulting in a global economic downturn which could negatively impact demand for our
If our employees were to engage in a labor strike other work stoppage or other labor activities we could experience an operational disruption incur higher ongoing labor costs and or suffer reputational harm which could have a material adverse effect on our business liquidity financial condition and or results of operations
We have incurred indebtedness to finance investments and acquisitions refinance other indebtedness fund beer operations expansion optimization and construction activities and other capital expenditures pay cash dividends repurchase shares of our common stock and fund other general corporate purposes including working capital In the future we may continue to incur additional indebtedness for any or all of these activities We are exposed to risks associated with interest rate fluctuations and while the U S Federal Reserve has recently been reducing the federal funds rate we continue to experience an elevated interest rate environment relative to recent historically low interest rates We could experience further changes in our ability to manage fluctuations in interest rates including for our variable interest rate debt outstanding or if we need to refinance indebtedness In addition our business may not generate sufficient cash flow from operations to meet all our debt service requirements return value to stockholders such as through payment of dividends or repurchases of shares of our common stock achieve or maintain our target comparable net leverage ratio and fund our general corporate and capital requirements
our funds available for operations expansions construction dividends or other distributions or share repurchases may be reduced because we dedicate a significant portion of our cash flow from operations to the payment of principal and interest on our indebtedness
Additionally any failure to meet required payments on our debt or failure to comply with any covenants in the instruments governing our debt could result in an event of default under the terms of those instruments and a downgrade to our credit ratings A downgrade to our credit ratings would increase our borrowing costs and could affect our ability to issue commercial paper or negatively impact the terms under which we refinance our debt Certain of our debt facilities also contain change of control provisions which if triggered may result in an acceleration of our obligation to repay the debt In addition certain of our debt and derivative financial instruments have or in the future could have interest rates that are tied to reference rates such as SOFR The volatility and availability of such reference rates including establishment of alternative reference rates is out of our control Changes to or the unavailability of such rates or the manner for calculation of such reference rates could result in increases to the cost of our debt In addition our 2022 Credit Agreement i restricts repayment of the loans under the credit agreement with proceeds derived directly or indirectly from Canopy prior to the Specified Time ii restricts the use of proceeds from the loans under our credit agreement directly or indirectly for any investment in transaction with or to fund the activities of or business with Canopy prior to the Specified Time and iii provides that we will not convert any of our outstanding Exchangeable Shares for Canopy common shares or own any Canopy common shares until the Specified Time
If we do not comply with the obligations contained in our senior credit facility our existing or future indentures or other loan agreements we could be in default under such debt facilities or agreements In such an event the holders of our debt could elect to declare as due and payable all amounts outstanding under those instruments An event of default could also result in events of default under other debt facilities or agreements
that contain cross acceleration or cross default provisions which could permit counterparties thereunder to exercise remedies If that occurred we might not have available funds to satisfy our repayment obligations
foreign currency exchange rate fluctuations which may reduce the U S dollar value of net sales earnings and cash flows from non U S markets or increase our supply chain costs as measured in U S dollars in those markets
a less developed and less certain legal and regulatory environment in some countries which among other things can create uncertainty regarding contract enforcement intellectual property rights privacy obligations real property rights and liability issues and
Unfavorable global or regional economic conditions including trade barriers tariffs trade wars economic slowdown or recession instability in the banking sector and the disruption volatility and tightening of credit and capital markets as well as unemployment tax increases governmental spending cuts or continuing high levels of inflation could affect consumer spending patterns and purchases of our products These could also create or exacerbate credit issues cash flow issues and other financial hardships for us and our suppliers distributors retailers and consumers The inability of suppliers distributors and retailers to access liquidity could impact our ability to produce and distribute our products
We could also be affected by nationalization of our international operations unstable governments unfamiliar or biased legal systems intergovernmental disputes or animus against the U S or Mexico including products produced in those or other countries where we produce our products Any determination that our operations or activities did not comply with applicable U S or foreign laws or regulations could result in the imposition of fines and penalties interruptions of business terminations of necessary licenses and permits and other legal and equitable sanctions
Class action or other litigation including relating to alleged securities law violations abuse or misuse of our products product liability marketing or sales practices including product labeling or other matters
We have been and may continue to be subject to litigation There has also been public attention directed at the beverage alcohol industry which we believe is due to concerns related to harmful use of alcohol including drinking and driving underage drinking and health consequences from the misuse of alcohol In addition we have been and could continue to be exposed to claims or lawsuits relating to product liability marketing or sales practices including product labeling privacy website accessibility and other matters With our international operations we have been and may continue to be subject to risk of a wide variety of other legal claims and proceedings by external parties employees and stockholders
Case No 6 25 cv 6107 W D N Y The complaint names as defendants the Company our President and Chief Executive Officer and our Executive Vice President and Chief Financial Officer and asserts claims for alleged violations of
Sections 10 b and 20 a of the Exchange Act and Rule 10b 5 promulgated thereunder arising from allegedly materially false or misleading statements or omissions of purportedly material fact concerning among other things the Company s strategies intended to improve the performance of our Wine and Spirits business The complaint seeks among other relief alleged damages in an unspecified amount attorneys fees and costs
Case No 1 25 cv 00353 W D N Y These derivative complaints each seek to assert claims arising under the Exchange Act and state common law derivatively on behalf of the Company against current and former directors and officers of the Company Neither of the plaintiffs made a pre suit demand on our Board of Directors instead each alleging that the pre suit demand requirement should be excused as purportedly futile The claims asserted in these derivative complaints arise from substantially the same allegations made in the complaint filed in
Litigation is inherently unpredictable and subject to substantial uncertainties and unfavorable developments and resolutions could occur In addition the amount of time and cost to defend ourselves could be substantial Adverse developments in lawsuits related to such matters as well as the time and costs associated with such activities or a significant decline in the social acceptability of beverage alcohol products or for our products specifically that may result from lawsuits could have a material adverse effect on our business liquidity financial condition and or results of operations
We have a significant amount of intangible assets such as goodwill and trademarks and may acquire more intangible assets in the future and we have recognized significant impairment losses such as our recent Wine and Spirits impairments Intangible assets are subject to a periodic impairment evaluation under applicable accounting standards A future significant impairment of any of our intangible assets could have a material adverse effect on our business liquidity financial condition and or results of operations
Changes to federal state provincial local or foreign tax laws could result in increased taxes on our products business customers or consumers Various proposals to increase taxes on beverage alcohol products have been made at the federal and state levels or at other governmental bodies in recent years Federal state provincial local or foreign governmental entities may consider increasing taxes upon beverage alcohol products as they explore available alternatives for raising funds including to offset budget or other deficits
In addition significant judgment is required to determine our effective tax rate and evaluate our tax positions Our provision for income taxes includes a provision for uncertain tax positions Fluctuations in federal state local and foreign taxes or a change to uncertain tax positions including related interest and penalties may impact our effective tax rate and our financial results When tax matters arise several years may elapse before such matters are audited and finally resolved Unfavorable resolution of any tax matter could increase our effective tax rate and resolution of a tax issue may require the use of cash in the year of resolution
U S tax changes or changes in how international corporations are taxed including changes in how existing tax laws are interpreted or enforced or changes to accounting standards elections or assertions as well as our accounting policies could have a material adverse effect on our business liquidity financial condition and or results of operations For example the OECD has introduced a framework to implement a global minimum tax rate of 15 referred to as Pillar Two Many jurisdictions in which we do business have started to enact laws implementing or have draft legislation proposed for adoption to implement Pillar Two We are monitoring these developments because these changes when enacted by the various jurisdictions in which we do business may significantly increase our taxes in these jurisdictions
Our capital allocation strategy contemplates quarterly cash dividends and periodic share repurchases under our share repurchase program We typically fund our cash dividends and share repurchases through a combination of cash flow from operations borrowings and or divestiture proceeds However we are not required to declare dividends or to make any share repurchases under our share repurchase program We may discontinue limit suspend delay or increase our dividends and share repurchases at any time without prior notice Even if not discontinued the amount of such dividends and repurchases may be changed and the amount timing and frequency of such dividends and repurchases may vary from historical practice or from our stated expectations Decisions with respect to dividends and share repurchases are subject to the discretion of our Board of Directors and will be based on a variety of factors Important factors that could cause us to discontinue limit suspend delay or increase our cash dividends or share repurchases include market conditions the price of our common stock the nature and timing of other investment opportunities changes in our business strategy the terms of our financing arrangements our outlook as to our ability to obtain financing at attractive rates the impact on our credit ratings changes in laws or regulations and the availability of cash The IRA imposes an excise tax of 1 on share repurchases and the ongoing impact of this excise tax will be dependent on the extent of our share repurchases in future periods along with any changes to the excise tax rate and could increase our tax liability The reduction or elimination of our cash dividend or longer suspension or elimination of our share repurchase program could adversely affect the market price of our common stock Additionally any share repurchases may not enhance stockholder value because the market price of our common stock has at times declined and may once again decline below the levels at which we repurchased shares of common stock and short term stock price fluctuations could reduce the program s effectiveness
Until November 2027 and so long as the Sands Family Stockholders collectively have beneficial or record ownership of at least 10 of the issued and outstanding shares of Class A Stock our Board of Directors will subject to the procedures and limitations set forth in the Reclassification Agreement nominate two individuals designated by WildStar for election to our Board of Directors at any annual meeting of our stockholders at which directors are to be elected or otherwise in connection with any action by written consent pursuant to which a majority of the Board of Directors will be elected So long as the Sands Family Stockholders collectively have beneficial or record ownership of less than 10 but at least 9 239 463 1 shares of Class A Stock as may be adjusted by any stock dividend stock split stock combination or similar transaction the Board of Directors will subject to the procedures and limitations set forth in the Reclassification Agreement nominate one individual designated by WildStar for election to the Board of Directors at any annual meeting of our stockholders at which directors are to be elected or otherwise in connection with any action by written consent pursuant to which a majority of the Board of Directors will be elected
The amount of Class A Stock currently held by the Sands Family Stockholders together with the foregoing Board of Directors nomination rights provide the Sands Family Stockholders with significant continued influence over our decisions The interests of the Sands Family Stockholders with respect to matters potentially or actually involving or affecting us and our other stockholders such as future acquisitions financings and other corporate opportunities and attempts to acquire us may conflict with the interests of our other stockholders
Certain Sands Family Stockholders have pledged shares of Class A Stock to secure various credit facilities In the event of noncompliance with certain covenants under the credit facilities the financial institutions to which such stock is pledged have certain remedies including the right to sell the pledged shares subject to certain protections afforded to the borrowers and pledgors The sale by such financial institutions of a substantial amount of the pledged shares could depress or result in volatility in the trading price of our Class A Stock
Our Amended and Restated By laws provide that unless we consent in writing to the selection of an alternative forum i the Court of Chancery of Delaware or if such court lacks subject matter jurisdiction the federal district court of Delaware will be to the fullest extent permitted by law the sole and exclusive forum for any derivative action or proceeding brought on our behalf any action asserting a claim of breach of a fiduciary
duty owed by any of our current or former directors officers or stockholders to us or our stockholders any action asserting a claim arising pursuant to any provision of the DGCL our Amended and Restated Charter or our Amended and Restated By laws or as to which the DGCL confers jurisdiction on the Court of Chancery of Delaware or any action asserting a claim governed by the internal affairs doctrine and ii the federal district courts of the U S will to the fullest extent permitted by law be the sole and exclusive forum for any complaint asserting a cause of action arising under the Securities Act
To the fullest extent permitted by law this choice of forum provision will apply to state and federal law claims including claims under the federal securities laws including the Securities Act and the Exchange Act although our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder This choice of forum provision may increase costs for a stockholder pursuing any such claim discourage claims or limit a stockholder s ability to bring a claim in a judicial forum that such stockholder finds favorable for disputes with us or our directors officers other stockholders or other employees which may discourage such lawsuits even though an action if successful might benefit our stockholders In addition the courts located in Delaware may reach different judgments or results than would other courts including courts where a stockholder would otherwise choose to bring the action and such judgments or results may be more favorable to us than to our stockholders If a court were to find this choice of forum provision inapplicable or unenforceable in an action we may incur additional costs associated with resolving such action in other jurisdictions which could adversely affect our business liquidity financial condition and or results of operations Any person or entity purchasing or otherwise acquiring or holding any interest in shares of our capital stock will be deemed to have notice of and consented to the choice of forum provision described above
We have developed and implemented an enterprise wide cybersecurity program designed to provide structured and thorough cybersecurity risk management and governance Our cybersecurity program prioritizes among other things prevention of unauthorized access protection of confidential personal or sensitive information cyber threat detection assessment and response and continuous improvement of our cybersecurity measures We seek to achieve our cybersecurity program priorities through a multi pronged approach to address cyber threats and incidents that includes implementation of various industry best practices proactive monitoring of our IT systems ongoing employee training and regular risk assessments We also maintain cyber insurance coverage to help mitigate a portion of the potential costs in the event of covered events
Our cybersecurity program is aligned with various frameworks for managing cybersecurity risks such as the National Institute of Standards and Technology Cyber Security Framework for IT systems and International Electrotechnical Commission 62443 which governs cybersecurity for Industrial Control Systems This program is integrated into our ERM processes Our ERM function manages enterprise wide risk and has established a governance structure in charge of continuous risk management It has defined risk management processes related specifically to cybersecurity which include targeted cyber risk reviews annual cyber risk assessments over our IT and operations and integration with our information security function We also have a Cyber and Privacy Risk Committee led by our CISO which provides strategic and actionable recommendations on cybersecurity topics issues and controls to our executive management team and a Crisis Management Committee led by our head of ERM which manages significant cybersecurity events
We rely upon both internal and external resources for evaluating and enhancing our cyber posture At least annually our information security and internal audit teams conduct extensive internal and external penetration testing supplemented by more frequent Purple team Tests that are designed to identify critical areas of our technical environment and potential vulnerabilities that may need to be addressed Our information security team also retains external cybersecurity firms to review and provide feedback on improving our cybersecurity program including in the areas of data protection threat and vulnerability management and end point protection We conduct a range of activities to assess our cybersecurity preparedness and processes and to prepare for potential cyber incidents including tabletop exercises simulations and practical application drills with internal teams and external entities We also require annual cybersecurity training by our employees conduct regular exercises to help our employees recognize phishing attempts and other social engineering tactics and provide various methods for employees to report suspicious activity that may give rise to a cyber incident or threat Significant results of such testing and reviews are communicated to our executive management team and our Audit Committee as applicable and are utilized in our cybersecurity program s continuous improvement process
In response to the growing risks associated with third party service providers we have established review processes for assessing the technological and information security controls of our third party suppliers to attempt to identify material cybersecurity risks associated with such providers their IT systems and their access to our IT systems that could significantly disrupt our operations These processes encompass a range of measures such as pre engagement cybersecurity due diligence for providers who access our IT systems or information before their engagement ongoing monitoring and evaluation of our providers detailed examination of available System and Organization Controls attestation reports and inclusion of relevant contractual provisions in our agreements with third party service providers with respect to areas including cyber protections notifications auditing and risk allocation
We maintain an IRP which provides a set of core practices and procedures when responding to certain high risk information security threats and incidents and a CMP which is designed to ensure appropriate resources are utilized to provide an effective timely and coordinated response in managing crises including significant cyber threats and incidents Among other things the IRP sets forth roles and responsibilities in connection with detecting assessing and mitigating cybersecurity incidents and outlines applicable communication and escalation
protocols Under the CMP our Crisis Management Committee will assume overall responsibility in an effort to ensure that the appropriate functions and work streams are mobilized and coordinated to effectively manage any significant cyber events
As with all large IT systems we have been a target of cyberattackers and other hacking activities as have certain of our third party service providers While our cybersecurity program is designed to prevent unauthorized access and protect sensitive information including through continuous improvement of our cybersecurity measures and we have not experienced any material cyber threats or incidents to date we can give no assurance that we will be able to prevent identify respond to or mitigate the impacts of all cyber threats or incidents To the extent future cyber threats or incidents result in significant disruptions and costs to our operations reduce the effectiveness of our internal control over financial reporting or otherwise substantially impact our business it could have a material adverse effect on our business liquidity financial condition and or results of operations For additional discussion on our cybersecurity risks refer to Item 1A Risk Factors of this Form 10 K
Our Board of Directors oversees the management of risks inherent in the operation of our business with a focus on the most significant risks that we face including those related to cybersecurity The Board of Directors has delegated oversight of cybersecurity including privacy and information security as well as enterprise risk management to the Audit Committee In connection with that oversight responsibility our CIO and CISO meet with the Audit Committee on a quarterly basis and provide information and updates on a range of cybersecurity topics which may include our cybersecurity program and governance processes cyber risk monitoring and management the status of projects to strengthen our cybersecurity and privacy capabilities recent significant incidents or threats impacting our operations industry or third party suppliers and the emerging threat landscape Our head of ERM also meets with our executive management team and the Audit Committee on a quarterly basis and with the Board of Directors on an annual basis and reports on applicable cyber risk management processes and activities pertinent to the ERM function The Audit Committee has also periodically participated in certain of our cyber tabletop exercises
Our enterprise wide cybersecurity program is managed by a dedicated information security team including our Cyber and Privacy Risk Committee described above led by our CISO Our CISO has more than 25 years of technology experience across various disciplines including 15 years of experience as a CISO in the financial manufacturing and CPG industries He has led our global information security organization for more than five years In addition to his employment experience in the cybersecurity field our CISO has a Master of Business Administration in management and operations and a Bachelor s Degree in technology management and he has served on corporate and industry advisory boards related to cybersecurity all of which have provided him with skills and experience to manage our global information security function Our CISO reports to our CIO who meets regularly with other members of our executive team and provides relevant updates on our cybersecurity program
We operate breweries wineries distilleries and bottling plants many of which include warehousing and distribution facilities on the premises as well as standalone warehouses and through a joint venture we operate a glass production plant In addition to our principal physical properties described below certain of our businesses maintain office space for sales and similar activities and offsite warehouse and distribution facilities in a variety of geographic locations
We believe that our facilities taken as a whole are in good condition and working order Within the Beer segment we believe we have adequate capacity to meet our current needs and we have undertaken activities to increase our production capacity to address our anticipated future demand Within the Wine and Spirits segment we believe we have adequate capacity to meet our needs for the foreseeable future As of February 28 2025 our principal physical properties by segment all of which are owned unless otherwise noted consist of
In April 2025 we entered into the 2025 Wine Divestitures Transaction which includes two of our principal physical properties for the Wine and Spirits segment the Gonzales Winery and the Woodbridge Winery as well as approximately 6 600 acres of vineyards in the U S For further information about this transaction refer to Recent Development in MD A and Note 2
Within our Wine and Spirits segment as of February 28 2025 we owned leased or had interests in approximately 9 900 acres of vineyards in the U S 6 600 acres of vineyards in New Zealand and 1 500 acres of vineyards in Italy
Our Class A Stock trades on the New York Stock Exchange under the symbol STZ There is no public trading market for our Class 1 Stock At April 16 2025 the number of holders of record of our Class A Stock and Class 1 Stock were 459 and 19 respectively
For information on securities authorized for issuance under our equity compensation plans see Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters under Item 12 of this Form 10 K
In November 2023 we announced that our Board of Directors authorized the repurchase of up to 2 0 billion of our publicly traded common stock under the 2023 Authorization The Board of Directors did not specify a date upon which the 2023 Authorization would expire Share repurchases for the periods included herein pursuant to the 2023 Authorization were effected through open market transactions and exclude the impact of Federal excise tax owed pursuant to the IRA In April 2025 we announced that our Board of Directors authorized the repurchase of up to 4 0 billion of our publicly traded common stock under the 2025 Authorization The 2025 Authorization replaced the 2023 Authorization in its entirety and no further repurchases will be made pursuant to the 2023 Authorization The 2025 Authorization expires on February 29 2028 Subsequent to February 28 2025 we repurchased 494 094 shares of Class A Stock pursuant to the 2025 Authorization at an average cost of 185 53 per share through open market transactions
We have elected to omit discussion on the earliest of the three years covered by the consolidated financial statements presented Refer to Item 7 Management s Discussion and Analysis of Financial Condition and Results of Operations and Liquidity and Capital Resources located in our Form 10 K for the fiscal year ended February 29 2024 filed on April 23 2024 for reference to discussion of the fiscal year ended February 28 2023 the earliest of the three fiscal years presented This MD A which should be read in conjunction with our Financial Statements is organized as follows
This section provides a general description of our business and brief descriptions of recent goodwill and trademarks impairments which we believe is important in understanding the results of our operations financial condition and potential future trends
This section provides an analysis of our results of operations presented on a business segment basis In addition a brief description of significant transactions and other items that affect the comparability of the results is provided
This section provides an analysis of our cash flows outstanding debt liquidity position and commitments Included in the analysis of outstanding debt is a discussion of the financial capacity available to fund our on going operations and future commitments as well as a discussion of other financing arrangements
This section identifies accounting policies that are considered important to our results of operations and financial condition require significant judgment and involve significant management estimates Our significant accounting policies including those considered to be critical accounting policies are summarized in Note 1
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
complemented by certain higher end spirits brands Amounts included in the Corporate Operations and Other segment consist of costs of corporate communications corporate development corporate finance corporate strategy
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
In connection with continued negative trends within our Wine and Spirits business 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 management updated its Fiscal 2025 outlook and latest financial projections for this reporting unit Based on the aforementioned factors we performed an interim quantitative assessment as of August 31 2024 and an annual quantitative assessment for goodwill impairment which resulted in a 2 740 7
million total goodwill impairment and the carrying value being written down to zero This loss from impairment was included in goodwill and intangible assets impairment within our consolidated results for Fiscal 2025 See Notes 7 8 and 13 for further discussion
In connection with the assessment of the same events and circumstances that resulted in the wine and spirits goodwill carrying value being written down to zero we completed a quantitative assessment of our wine trademarks As a result we recognized a 57 0 million trademark impairment on certain held for sale wine brands This loss was included in goodwill and intangible assets impairment within our consolidated results of operations for Fiscal 2025 See Note 7 for further discussion
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 and we expect to spend approximately 2 billion over Fiscal 2026 through Fiscal 2028 largely on these activities See Capital Expenditures below 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
Our business strategy for the Wine and Spirits segment continues to focus on delivering growth and improving margins beyond Fiscal 2026 by driving our higher end brands and operating efficiencies We are repositioning this business to a portfolio of exclusively higher end wine and spirits brands that we believe will generate higher growth and higher margins including through the recently announced 2025 Wine Divestitures Transaction We remain a key supplier in U S 3 tier brick and mortar distribution In addition we are advancing our aim to become a global omni channel competitor in line with evolving consumer preferences as we continue our efforts to progressively expand into international markets DTC channels including hospitality and 3 tier eCommerce We have a contractual arrangement with Southern Glazer s Wine and Spirits which consolidated our U S distribution and currently represents approximately 60 of our U S branded wine and spirits volume
Marketing sales and distribution of our products are primarily managed on a geographic basis allowing us to leverage leading market positions In addition market dynamics and consumer trends vary across each of our markets Within our primary market in the U S we offer a range of beverage alcohol products across the imported beer ABA and branded wine and spirits categories with generally separate distribution networks utilized for i
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 as well as retailer destocking impacting our Wine and Spirits segment
Recent developments in international trade relations including significant changes in U S trade policy and actions which include threatened new and increased tariffs on other countries and retaliatory tariffs and actions
imposed on certain U S goods 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 product imports from certain countries such as Mexico the European Union including Italy and New Zealand and certain other countries have implemented tariffs on U S goods such as the tariffs on certain product imports originating from the U S imposed by the Canadian government although some of these tariffs were subsequently modified or delayed
We expect some or all of these market conditions and their impacts to continue into 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 economic 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 savings 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
In April 2025 we entered into a definitive agreement to fully divest and in certain instances exclusively license the trademarks of a portion of our wine and spirits business primarily centered around our remaining mainstream wine brands and associated inventory wineries vineyards offices and facilities for 900 million subject to certain adjustments The 2025 Wine Divestitures Transaction is subject to the satisfaction of certain closing conditions including receipt of required regulatory approval and is expected to close immediately following the end of our first quarter of Fiscal 2026 We expect to use the net cash proceeds from the 2025 Wine Divestitures Transaction for general corporate purposes This transaction supports our strategic focus on consumer led premiumization trends and meeting the evolving needs of our consumers
The 2025 Wine Divestitures Transaction largely resulted in both i 879 8 million of wine and spirits net assets being reclassified to held for sale as of February 28 2025 and ii a 478 0 million assets held for sale impairment The impairment loss was included in assets held for sale impairment within our consolidated results of operations for Fiscal 2025
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 46 9 million of pre tax employee termination costs and 2 8 million of pre tax consulting services costs in Fiscal 2025 and we anticipate incurring an additional approximately 40 million of pre tax consulting services employee termination and other costs during Fiscal 2026 The Fiscal 2025 costs were included in selling general and administrative costs within our consolidated results For additional information on the 2025 Restructuring Initiative see Note 2
In June 2023 we completed the Craft Beer Divestitures Accordingly our consolidated results of operations include the results of operations of such craft beer brands through the dates of these divestitures The Craft Beer Divestitures are consistent with our strategic focus on continuing to grow our high end imported beer brands through maintenance of leading margins and enhancements to our results of operations
On January 6 2025 we sold the SVEDKA brand and related assets primarily including inventory and equipment We received 409 2 million of cash proceeds subject to certain post closing adjustments which were used for general corporate purposes including funding share repurchases capital expenditures and repayment of debt Prior to the completion of the SVEDKA Divestiture we recorded the results of operations of the SVEDKA brand in the Wine and Spirits segment For Fiscal 2025 we recognized a 266 0 million net gain in connection with this divestiture which was included in gain loss on sale of business within our consolidated results
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
As of February 28 2025 August 31 2024 November 30 2023 and August 31 2023 we evaluated certain equity method investments and other securities measured at fair value made through our corporate venture capital function and determined there were other than temporary impairments due to business underperformance for the respective periods These losses from impairment and on securities measured at fair value were included in income loss from unconsolidated investments within our consolidated results for the respective periods In October 2023 we exited one of these equity method investments in exchange for a note receivable
We have an investment in Canopy a North American cannabis and CPG company providing medical and adult use cannabis products which provides us an investment interest in a business in adjacent categories
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 for Fiscal 2025
Additionally as of November 30 2024 we evaluated the Exchangeable Shares for impairment primarily due to the business and industry factors that led to the decline in Canopy s common share price since the date of conversion and exchange We concluded that an impairment did exist and wrote down the Exchangeable Shares to their estimated fair value Due to the continued decline in Canopy s common share price as of February 28 2025 we evaluated the Exchangeable Shares for an additional impairment We concluded an impairment did exist and accordingly the Exchangeable Shares were written down to their estimated fair value resulting in a 76 1 million total impairment for Fiscal 2025
We evaluated our then existing 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 Fiscal 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
In April 2023 we extended the maturity of the remaining C 100 0 million principal amount of our then existing Canopy Debt Securities by exchanging them for the 2023 Canopy Promissory Note The fair value of the Canopy Debt Securities was 69 6 million as of February 28 2023 As of May 31 2023 we determined that the 2023 Canopy Promissory Note did not have future economic value and accordingly the fair value was reduced to zero
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 organic Wine and Spirits net sales driven primarily by a decrease in branded shipment volume
largely due to i the Fiscal 2025 wine and spirits goodwill and wine trademark assets impairments and ii an impairment of assets held for sale largely in connection with the 2025 Wine Divestitures Transaction partially offset by i improvements within the Beer segment as the net sales growth and successful execution of cost savings initiatives outpaced higher marketing spend and ii a net gain related to the SVEDKA Divestiture
items discussed above partially offset by i a benefit from income taxes as compared to a provision for income taxes for Fiscal 2024 ii no longer recognizing equity losses from Canopy s results following the conversion of our Canopy common shares to Exchangeable Shares and iii a Fiscal 2024 impairment of our then existing Canopy Equity Method Investment
Management excludes items that affect comparability from its evaluation of the results of each operating segment as these Comparable Adjustments are not reflective of core operations of the segments Segment operating performance and the incentive compensation of segment management are evaluated based on core segment operating income loss which does not include the impact of these Comparable Adjustments
Net gain loss on undesignated commodity derivative contracts represents a net gain loss from the changes in fair value of undesignated commodity derivative contracts The net gain loss is reported outside of segment operating results until such time that the underlying exposure is recognized in the segment operating results At settlement the net gain loss from the changes in fair value of the undesignated commodity derivative contracts is reported in the appropriate operating segment allowing the results of our operating segments to reflect the economic effects of the commodity derivative contracts without the resulting unrealized mark to fair value volatility
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
In connection with acquisitions the allocation of purchase price in excess of book value for certain inventories on hand at the date of acquisition is referred to as inventory step up Inventory step up represents an assumed manufacturing profit attributable to the acquired business prior to acquisition
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 as well as those associated with the 2025 Restructuring Initiative
We recognized goodwill and intangible assets impairments in connection with continued negative trends within our Wine and Spirits business 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 additional information refer to Notes 7 8 and 13
We recognized a net gain loss from the i SVEDKA Divestiture Fiscal 2025 ii Craft Beer Divestitures Fiscal 2024 and iii sale of the Daleville Facility Fiscal 2024 For additional information refer to Note 2
We recognized income loss primarily from i unrealized net losses from the changes in fair value of our securities measured at fair value ii impairments of certain other equity method investments iii a net gain in connection with Exchangeable Shares Fiscal 2025 iv comparable adjustments to equity in losses from Canopy s results Fiscal 2024 and v an impairment of our then existing Canopy Equity Method Investment Fiscal 2024 For additional information refer to Notes 7 and 10
The increase in Beer net sales is due to i 264 2 million of shipment volume growth and ii 168 1 million of favorable impact from pricing in select markets partially offset by 55 1 million of unfavorable product mix primarily from a shift in package types
While our shipment volume growth benefited from continued consumer demand we believe it was suppressed due to the non structural socioeconomic factors discussed above We expect shipment volume to generally align with depletion volume for Fiscal 2026
The decrease in Wine and Spirits net sales is due to a 107 7 million decrease in organic net sales and 22 6 million from the SVEDKA Divestiture that are no longer part of our business The decrease in organic net sales is driven by i a 93 5 million decrease in branded wine and spirits shipment volume ii a 30 1 million decrease in non branded net sales led by a decline in bulk wine sales and iii a 16 1 million decrease from pricing actions in certain markets
partially offset by 29 9 million of higher contractual distributor payments as compared to Fiscal 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 Fiscal 2026 we expect depletion volume to outpace shipment volume most notably during the first quarter
The increase in Beer gross profit is primarily due to i the 168 1 million of favorable impact from pricing ii 141 5 million of shipment volume growth and iii 75 8 million of reduced cost of product sold partially offset by 33 5 million of unfavorable product mix The reduced cost of product sold is primarily due to i
Fiscal 2024 ii 38 8 million of decreased transportation costs iii 21 6 million of costs related to the Fiscal 2024 write off of an indirect tax receivable iv 16 3 million of lower material costs including cartons wooden pallets aluminum lumber and glass each driven by efficiency initiatives tempered by higher malt costs and v 13 7 million of costs related to a Fiscal 2024 voluntary product recall of select kegs partially offset by i a 33 0 million increase in brewery costs including compensation and benefits and ii 26 8 million of higher depreciation expense resulting from the Mexico Beer Projects To partially offset the expected increases in cost of product sold we executed initiatives focused largely on logistics and procurement that resulted in over 200 million of cost savings for
The decrease in Wine and Spirits gross profit is due to a 83 1 million decrease in organic gross profit and 10 7 million from the SVEDKA Divestiture that are no longer part of the business The decrease in organic gross profit is attributable to i a 58 7 million decrease in branded wine and spirits shipment volume ii 28 7 million of unfavorable product mix from lower margin net sales iii the 16 1 million of unfavorable pricing and iv 12 2 million of increased cost of product sold partially offset by the 29 9 million 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 Fiscal 2024 and increased materials costs including grapes partially offset by lower transportation and warehousing costs
Gross profit as a percent of net sales increased to 52 1 for Fiscal 2025 compared with 50 4 for Fiscal 2024 This increase was largely due to i approximately 80 basis points of favorable impact from Beer pricing ii 75 basis points of rate growth from lower cost of product sold within the Beer segment iii a favorable change in Comparable Adjustments contributing approximately 40 basis points and iv 15 basis points of rate growth from the decline in bulk wine net sales partially offset by approximately 30 basis points of rate decline resulting from unfavorable product mix within the Wine and Spirits segment
The increase in Beer selling general and administrative expenses is largely driven by 80 5 million of additional marketing spend primarily led by increased media investment to support our high end imported beer brands
partially offset by 27 6 million of decreased general and administrative expenses The decrease in general and administrative expenses is primarily due to i lower short term incentive accruals ii decreased legal expenses and iii favorable foreign currency impact partially offset by higher other compensation and benefits including stock based compensation expense
The decrease in Wine and Spirits selling general and administrative expenses is largely driven by 17 5 million and 2 8 million of decreased general and administrative expenses and marketing spend respectively The decrease in general and administrative expenses is primarily due to lower i
Corporate Operations and Other selling general and administrative expenses remained relatively flat as lower short term incentive accruals and a tax credit resulting from our June 2024 corporate headquarters relocation were offset by higher i stock based compensation ii consulting services iii other payroll expenses and iv depreciation expense driven by the headquarters relocation
Fiscal 2025 as compared with 18 4 for Fiscal 2024 The increase is largely driven by an unfavorable change in Comparable Adjustments contributing approximately 85 basis points of rate growth partially offset by approximately 15 basis points of rate decline as the increase in Beer net sales exceeded the increase in selling general and administrative expenses
The increase in Beer operating income is largely attributable to the favorable impact from pricing shipment volume growth and reduced cost of product sold led by cost savings initiatives partially offset by the increased marketing spend and unfavorable product mix as described above
The decrease in Wine and Spirits operating income is largely attributable to the decline in organic branded wine and spirits shipment volume unfavorable product mix and pricing and the SVEDKA Divestiture partially offset by the higher contractual distributor payments and decreased general and administrative expenses as described above
As previously discussed the Corporate Operations and Other operating loss remained relatively flat as lower net compensation and benefits impacts and the tax credit were offset by higher consulting services and depreciation expense
Interest expense net decreased to 411 4 million for Fiscal 2025 as compared to 436 1 million for Fiscal 2024 This decrease of 24 7 million or 6 is largely due to i approximately 275 million of lower average borrowings and ii an increase in capitalized interest in connection with the Mexico Beer Projects as compared to Fiscal 2024 For additional information refer to Note 12
The provision for benefit from income taxes increased to 51 7 million for Fiscal 2025 from 456 6 million for Fiscal 2024 Our effective tax rate for Fiscal 2025 was 62 4 as compared with 20 6 for Fiscal 2024 In comparison to prior year our effective tax rate was impacted primarily by
The OECD introduced a framework under Pillar Two which includes a 15 global minimum tax rate The current legislation did not have a material impact on our consolidated financial statements We continue to monitor developments for potential future impacts Additionally we provide for taxes that may be payable if undistributed earnings of foreign subsidiaries were to be remitted to the U S except for those earnings that we consider to be indefinitely reinvested
Net income loss attributable to CBI decreased to 81 4 million for Fiscal 2025 from 1 727 4 million for Fiscal 2024 This decrease of 1 808 8 million or 105 is largely attributable to Fiscal 2025 Wine and Spirits related impairments including i wine and spirits goodwill ii wine trademarks and iii assets held for sale partially offset by the i benefit from income taxes as compared to a provision for income taxes for Fiscal 2024 ii favorable impact from income loss from unconsolidated investments driven by Fiscal 2024 Canopy related activities iii Fiscal 2025 improvements within the Beer segment and iv the net gain related to the SVEDKA Divestiture
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
We seek to maintain adequate liquidity to meet working capital requirements fund capital expenditures and repay scheduled principal and interest payments on debt Absent deterioration of market conditions we believe that cash flows from operating and financing activities will provide adequate resources to satisfy our working capital scheduled principal and interest payments on debt anticipated dividend payments periodic share repurchases and planned capital expenditure requirements for both our short term and long term capital needs
We have an agreement with a financial institution for payment services and 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 For additional information refer to Note 16
The 153 6 million net change in operating assets and liabilities was largely driven by lower accounts payable resulting from beer cost savings initiatives and the timing of payments as well as higher inventory levels for both the beer and the wine and spirits segments Certain of our inventory was reclassified to assets held for sale largely in connection with the 2025 Wine Divestitures Transaction as of February 28 2025 Additionally net cash provided by operating activities was positively impacted by lower Fiscal 2025 income tax payments as compared to Fiscal 2024
Net cash used in investing activities decreased to 974 8 million for Fiscal 2025 from 1 285 9 million for Fiscal 2024 This decrease of 311 1 million or 24 was primarily due to i 403 8 million of increased proceeds from the sale of business driven by the SVEDKA Divestiture and ii 55 0 million of reduced capital expenditures for Fiscal 2025 as compared to Fiscal 2024 The decrease in net cash used in investing activities was partially offset by a 151 2 million increase in business acquisitions driven by the Sea Smoke acquisition Business acquisitions and divestitures consist primarily of the following
The Company CB International the Administrative Agent and certain other lenders are parties to the 2022 Credit Agreement The October 2022 Credit Agreement Amendment revised certain defined terms and covenants in the 2022 Credit Agreement and became effective in April 2024 following the i amendment by Canopy of its Articles of Incorporation ii conversion of our Canopy common shares into Exchangeable Shares and iii resignation of our nominees from the board of directors of Canopy
Additionally we have a commercial paper program which provides for the issuance of up to an aggregate principal amount of 2 25 billion of commercial paper Our commercial paper program is backed by unused commitments under our revolving credit facility under our 2022 Credit Agreement Accordingly outstanding borrowings under our commercial paper program reduce the amount available under our revolving credit facility
We do not have purchase commitments from buyers for our commercial paper and therefore our ability to issue commercial paper is subject to market demand If the commercial paper market is not available to us for any reason when commercial paper borrowings mature we expect to utilize unused commitments under our revolving credit facility under our 2022 Credit Agreement to repay commercial paper borrowings We do not expect that fluctuations in demand for commercial paper will affect our liquidity given our borrowing capacity available under our revolving credit facility
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 808 0 million and 707 7 million as of February 28 2025
The financial institutions participating in our 2022 Credit Agreement have complied with prior funding requests and we believe they will comply with any future funding requests However there can be no assurances that any particular financial institution will continue to do so
As of February 28 2025 we and our subsidiaries were subject to covenants that are contained in our 2022 Credit Agreement including those restricting the incurrence of additional subsidiary indebtedness additional liens mergers and consolidations transactions with affiliates and sale and leaseback transactions in each case subject to numerous conditions exceptions and thresholds The financial covenants are limited to a minimum interest coverage ratio and a maximum net leverage ratio both as defined in our 2022 Credit Agreement As of
Our indentures relating to our outstanding senior notes contain certain covenants including but not limited to i a limitation on liens on certain assets ii a limitation on certain sale and leaseback transactions and iii restrictions on mergers consolidations and the transfer of all or substantially all of our assets to another person
On April 9 2025 our Board of Directors declared a quarterly cash dividend of 1 02 per share of Class A Stock and 0 92 per share of Class 1 Stock payable on May 15 2025 to stockholders of record of each class as of the close of business on April 29 2025 We expect to return approximately 720 million to stockholders in Fiscal 2026 through cash dividends
While we currently expect to continue to pay a regular quarterly cash dividend to stockholders of our common stock in the future 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 this Form 10 K
In each of January 2021 and November 2023 our Board of Directors authorized the repurchase of up to 2 0 billion of our publicly traded common stock The 2021 Authorization was fully utilized during Fiscal 2025 and the 2023 Authorization of which approximately 1 5 billion remained unused was canceled during Fiscal 2026 In April 2025 our Board of Directors authorized a repurchase of up to 4 0 billion of our publicly traded common stock under the 2025 Authorization which expires in February 2028 and replaced the 2023 Authorization in its entirety
During Fiscal 2025 we repurchased 5 252 003 shares of Class A Stock pursuant to the 2021 Authorization and the 2023 Authorization through open market transactions at an aggregate cost of 1 123 8 million excluding the impact of Federal excise tax owed pursuant to the IRA or an average cost of 213 98 per share We used cash on hand primarily generated by cash flow from operations and proceeds from the SVEDKA Divestiture to fund our Fiscal 2025 share repurchases Subsequent to February 28 2025 we repurchased 494 094 shares of Class A Stock pursuant to the 2025 Authorization at an aggregate cost of 91 7 million excluding the impact of Federal excise tax owed pursuant to the IRA through open market transactions We primarily used cash on hand to pay the purchase price for the repurchased shares
2025 Authorization may be accomplished at management s discretion from time to time based on market conditions our cash and debt position and other factors as determined by management Shares may be repurchased through open market or privately negotiated transactions We may fund future share repurchases with cash generated from operations proceeds from borrowings and or divestiture proceeds Any repurchased shares will become treasury shares including shares previously repurchased under the 2021 Authorization the 2023 Authorization and the 2025 Authorization
We currently expect to return 4 0 billion in share repurchases to stockholders over the next three fiscal years 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 this Form 10 K
We have maintained adequate liquidity to meet working capital requirements fund capital expenditures and repay scheduled principal and interest payments on debt Absent deterioration of market conditions we believe that cash flows from operating and financing activities will provide adequate resources to satisfy our working capital scheduled principal and interest payments on debt anticipated dividend payments periodic share repurchases and planned capital expenditure requirements for both our short term and long term capital needs
Other long term liabilities do not include payments for unrecognized tax benefit liabilities of 264 0 million due to the uncertainty of the timing of future cash flows associated with these unrecognized tax benefit liabilities In addition other long term liabilities do not include expected payments for interest and penalties associated with unrecognized tax benefit liabilities as amounts are not material For a detailed discussion of these items refer to Note 13
During Fiscal 2025 we incurred 1 214 1 million for capital expenditures including 991 5 million for the Beer segment primarily for the Mexico Beer Projects We plan to spend approximately 1 2 billion for capital expenditures in Fiscal 2026 including approximately 1 0 billion for the Beer segment associated primarily with the Mexico Beer Projects The remaining planned Fiscal 2026 capital expenditures consist of improvements to existing operating facilities and replacements of existing equipment and or buildings Management reviews the capital expenditure program periodically and modifies it as required to meet current and projected future business needs
The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect amounts reported in our consolidated financial statements Estimates are based on historical experience observance of trends in the industry information provided by our customers and information available from other outside sources as appropriate We review estimates to ensure that they appropriately reflect changes in our business on an ongoing basis Certain policies are particularly important to the portrayal of our financial position and results of operations and require the application of significant judgment by management to determine appropriate assumptions to be used in certain estimates as a result they are subject to an inherent degree of uncertainty See Note 1 for a description of our significant accounting policies Our critical accounting estimates include
Goodwill and other intangible assets are classified into three categories i goodwill ii intangible assets with definite lives subject to amortization and iii intangible assets with indefinite lives not subject to amortization For intangible assets with definite lives impairment testing is required if conditions exist that indicate the carrying value may not be recoverable For intangible assets with indefinite lives and for goodwill impairment testing is required at least annually or more frequently if events or changes in circumstances indicate that these assets might be impaired We may perform a qualitative evaluation prior to a quantitative test to determine if an impairment exists However if the results of the qualitative evaluation are inconclusive or suggest an impairment may exist we must proceed to the quantitative test The qualitative evaluation is an assessment of factors including market conditions industry changes actual results as compared to forecasted results or the timing of recent acquisitions and or
divestitures The quantitative test estimates the fair value utilizing assumptions and projections regarding items such as future cash flows revenues earnings and other factors The factors and assumptions used reflect our estimates and are based on historical trends projections and assumptions including expectations of future economic and competitive conditions that are used in current strategic operating plans however these are subject to change as a result of changing market conditions If these estimates or their related assumptions change in the future we may be required to recognize an impairment loss for these assets The recognition of any resulting impairment loss could have a material adverse impact on our financial statements
We perform annual impairment tests and re evaluate the useful lives of other intangible assets with indefinite lives at the annual impairment test measurement date of January 1 or when circumstances arise that indicate a possible impairment or change in useful life might exist
Goodwill Our reporting units with goodwill include the Beer segment and the Wine and Spirits segment In the fourth quarter of Fiscal 2025 we performed our annual goodwill impairment analysis using both the qualitative and quantitative assessments No indication of impairment was noted for our Beer reporting unit utilizing the qualitative assessment as the estimated fair value of goodwill exceeded its carrying value
During the second quarter of fiscal 2025 in connection with continued negative trends within our Wine and Spirits business 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 management updated its Fiscal 2025 outlook for this reporting unit The updated forecast indicated it was more likely than not the fair value of the Wine and Spirits reporting unit might be below its carrying value Accordingly we performed an interim quantitative assessment for goodwill impairment This assessment indicated the carrying value of the Wine and Spirits reporting unit exceeded its estimated fair value resulting in a 2 250 0 million goodwill impairment During the fourth quarter of fiscal 2025 we performed our annual impairment analysis and updated our estimate of the Wine and Spirits reporting unit fair value to reflect the latest financial projections and an increase in the discount rate As a result we recognized an additional 490 7 million goodwill impairment to write off the remaining goodwill balance for the Wine and Spirits reporting unit as of February 28 2025
When performing a quantitative assessment for impairment of goodwill we measure the amount of impairment by calculating the amount by which the carrying value exceeds its estimated fair value The estimated fair value of our reporting units are determined based on the discounted cash flow model The most significant assumptions used in the discounted cash flow model for the Wine and Spirits reporting unit were i a 9 discount rate for the interim assessment and a 10 discount rate for the annual assessment ii a 1 5 expected long term growth rate and iii the annual cash flow projections
For Fiscal 2024 and Fiscal 2023 as a result of our annual goodwill impairment analyses we concluded that there were no indications of impairment for either of our reporting units however we closely monitored broader industry and market conditions and our expectations for future performance as it related to our wine and spirits goodwill
Other intangible assets Our intangible assets consist primarily of customer relationships and trademarks obtained through business acquisitions Customer relationships are amortized over their estimated useful lives The trademarks that were determined to have indefinite useful lives are not amortized Using the quantitative assessment our trademarks are evaluated for impairment by comparing the carrying value of the trademarks to their estimated fair value The estimated fair value of trademarks is calculated based on an income approach using the relief from royalty method
In connection with our annual trademark analysis we performed a qualitative assessment for the imported beer and spirits trademarks and concluded that there were no indications of impairment for these trademark units We re evaluated the wine units of account in contemplation of the 2025 Wine Divestitures Transaction and determined it was appropriate to have two reporting
units i held for sale brands and ii remaining brands We performed a quantitative impairment test for the held for sale brands and remaining brands trademark units as certain continued negative trends indicated the fair value may not exceed its carrying value When using the quantitative assessment the estimated fair value of the trademarks is calculated based on an income approach using the relief from royalty method
The most significant assumptions used in the relief from royalty method to determine the estimated fair value of intangible assets with indefinite lives in connection with this impairment testing were i a 3 royalty rate held for sale brands trademark unit and a 7 royalty rate remaining brands trademark unit ii an 11 discount rate iii a 1 5 expected long term growth rate and iv the annual revenue projections This assessment indicated i the carrying value of the held for sale brands trademark unit exceeded its estimated fair value resulting in a 57 0 million trademark impairment as of February 28 2025 and ii the estimated fair value of the remaining brands trademark unit exceeded its carrying value We proceeded to perform sensitivities in our impairment testing of the remaining brands trademarks by i decreasing the royalty rate 50 basis points ii increasing the discount rate 50 basis points iii decreasing the expected long term growth rate 50 basis points and iv decreasing the annual revenue projections 100 basis points None of these sensitivities individually would have resulted in a conclusion that the trademarks in our remaining brands reporting unit were impaired
We performed quantitative assessments in both Fiscal 2024 and Fiscal 2023 for the imported beer wine and spirits trademarks There were no indications of impairment for any of our trademarks for Fiscal 2024 In the fourth quarter of Fiscal 2023 certain continued negative trends within our Funky Buddha and Four Corners craft beer portfolios including ongoing negative cash flows resulted in our decision to revise our long term financial forecasts for these portfolios Accordingly the Beer segment s Funky Buddha and Four Corners craft beer businesses recognized 9 0 million and 4 0 million impairment losses respectively in connection with the write off of their trademark assets In Fiscal 2024 we completed the Craft Beer Divestitures
Divestitures When some but not all of a reporting unit that constitutes a business is disposed of some of the goodwill of the reporting unit should be allocated to the portion of the reporting unit being disposed of The allocation of goodwill is based on the relative fair values of the portion of the reporting unit being disposed of and the portion of the reporting unit remaining This approach requires a determination of the fair value of both the business being disposed and the businesses retained within the reporting unit
ur estimate of fair value for the SVEDKA Divestiture and the 2022 Wine Divestiture respectively were determined based on the expected proceeds from the applicable transaction The components sold were a part of the Wine and Spirits segment and were included in that reporting unit through the date of divestiture Goodwill was allocated to the assets based on the relative fair value of the business being sold compared to the relative fair value of the reporting unit Goodwill not allocated to assets associated with the divestiture remained in the wine and spirits reporting unit
We estimate our deferred tax assets and liabilities income taxes payable provision for income taxes and unrecognized tax benefit liabilities based upon various factors including but not limited to historical pretax operating income future estimates of pretax operating income differences between book and tax treatment of various items of income and expense interpretation of tax laws and tax planning strategies We are subject to income taxes in Italy Mexico New Zealand Switzerland the U S and other jurisdictions We are regularly audited by federal state and foreign tax authorities but a number of years may elapse before an uncertain tax position is audited and finally resolved
We believe all tax positions are fully supported We recognize tax assets and liabilities in accordance with the FASB guidance for income tax accounting Accordingly we recognize a tax benefit from an uncertain tax position when it is more likely than not the position will be sustained upon examination
based on the largest benefit that has a greater than 50 likelihood of being realized upon ultimate settlement Due to the complexity of some of these uncertainties the ultimate resolution may result in a payment that is materially different from our current estimate of the unrecognized tax benefit liabilities In addition changes in existing tax laws or rates could significantly change our current estimate of our unrecognized tax benefit liabilities These differences will be reflected as increases or decreases to income tax expense in the period in which they are determined Changes in current estimates if significant could have a material adverse impact on our financial statements
We recognize our deferred tax assets and liabilities based upon the expected future tax outcome of amounts recognized in our results of operations If necessary we recognize a valuation allowance on deferred tax assets when it is more likely than not they will not be realized We evaluate our ability to realize the tax benefits associated with deferred tax assets by assessing the adequacy of future expected taxable income historical and projected operating results and the availability of prudent and feasible tax planning strategies The realization of deferred tax assets is evaluated by jurisdiction and the realizability of these assets can vary based on the character of the tax attribute and the carryforward periods specific to each jurisdiction We believe it is more likely than not the results of future operations will generate sufficient taxable income to realize our existing deferred tax assets net of valuation allowances Changes in the realizability of our deferred tax assets will be reflected in our effective tax rate in the period in which they are determined
Accounting guidance adopted for Fiscal 2025 did not have a material impact on our consolidated financial statements For information on recently adopted accounting guidance and accounting guidance not yet adopted see Note 1
As a result of our global operating investment acquisition divestiture and financing activities we are exposed to market risk associated with changes in foreign currency exchange rates commodity prices and interest rates To manage the volatility relating to these risks we periodically purchase and or sell derivative instruments including foreign currency forward and option contracts commodity swap contracts interest rate swap contracts and Pre issuance hedge contracts We use derivative instruments to reduce earnings and cash flow volatility resulting from shifts in market rates as well as to hedge economic exposures We do not enter into derivative instruments for trading or speculative purposes
Foreign currency derivative instruments are or may be used to hedge existing foreign currency denominated assets and liabilities forecasted foreign currency denominated sales purchases to from third parties as well as intercompany sales purchases intercompany principal and interest payments and in connection with investments acquisitions or divestitures outside the U S As of February 28 2025 we had exposures to foreign currency risk primarily related to the Mexican peso Canadian dollar New Zealand dollar and euro Approximately 100 of our balance sheet exposures and 72 of our forecasted transactional exposures for the year ending February 28 2026 were hedged as of February 28 2025
Commodity derivative instruments are or may be used to hedge forecasted commodity purchases from third parties as either economic hedges or accounting hedges As of February 28 2025 exposures to commodity price risk which we are currently hedging include aluminum corn diesel fuel and natural gas prices Approximately 63 of our forecasted transactional exposures for the year ending February 28 2026 were hedged as of February 28 2025
We have performed a sensitivity analysis to estimate our exposure to market risk of foreign exchange rates and commodity prices reflecting the impact of a hypothetical 10 adverse change in the applicable market The volatility of the applicable rates and prices is dependent on many factors which cannot be forecasted with reliable accuracy Gains or losses from the revaluation or settlement of the related underlying positions would substantially offset such gains or losses on the derivative instruments The aggregate notional value estimated fair value and sensitivity analysis for our open foreign currency and commodity derivative instruments are summarized as follows
The estimated fair value of our fixed interest rate debt is subject to interest rate risk credit risk and foreign currency risk In addition we also have variable interest rate debt outstanding primarily SOFR based certain of which includes a fixed margin subject to the same risks identified for our fixed interest rate debt
As of February 28 2025 we had 275 0 million of outstanding cash flow designated Pre issuance hedge contracts designed to minimize interest rate volatility on our future debt issuances There were no other cash flow designated or undesignated interest rate swap contracts or Pre issuance hedge contracts outstanding as of February 28 2025 or February 29 2024
We have performed a sensitivity analysis to estimate our exposure to market risk of interest rates reflecting the impact of a hypothetical 1 increase in the prevailing interest rates The volatility of the applicable rates is dependent on many factors which cannot be forecasted with reliable accuracy
A 1 hypothetical change in the prevailing interest rates would have increased interest expense on our variable interest rate debt by 5 3 million and 7 1 million for the years ended February 28 2025 and February 29 2024 respectively
Management of Constellation Brands Inc and subsidiaries the Company is responsible for establishing and maintaining an adequate system of internal control over financial reporting This system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U S generally accepted accounting principles
The Company s internal control over financial reporting includes those policies and procedures that i pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company ii provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company and iii provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of the Company s assets that could have a material effect on the financial statements
Because of its inherent limitations a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements Further because of changes in conditions effectiveness of internal controls over financial reporting may vary over time
issued by the Committee of Sponsoring Organizations COSO of the Treadway Commission Based on that evaluation management concluded that the Company s internal control over financial reporting was effective as of February 28 2025
The effectiveness of the Company s internal control over financial reporting has been audited by KPMG LLP an independent registered public accounting firm as stated in their report which is included herein
issued by the Committee of Sponsoring Organizations of the Treadway Commission In our opinion the Company maintained in all material respects effective internal control over financial reporting as of February 28 2025 based on criteria established in
We also have audited in accordance with the standards of the Public Company Accounting Oversight Board United States PCAOB the consolidated balance sheets of the Company as of February 28 2025 and February 29 2024 the related consolidated statements of comprehensive income loss changes in stockholders equity and cash flows for each of the fiscal years in the three year period ended February 28 2025 and the related notes collectively the consolidated financial statements and our report dated April 23 2025 expressed an unqualified opinion on those consolidated financial statements
The Company s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management s Annual Report on Internal Control over Financial Reporting Our responsibility is to express an opinion on the Company s internal control over financial reporting based on our audit We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audit in accordance with the standards of the PCAOB Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk Our audit also included performing such other procedures as we considered necessary in the circumstances We believe that our audit provides a reasonable basis for our opinion
A company s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles A company s internal control over financial reporting includes those policies and procedures that 1 pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company 2 provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company and 3 provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of the company s assets that could have a material effect on the financial statements
Because of its inherent limitations internal control over financial reporting may not prevent or detect misstatements Also projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate
We have audited the accompanying consolidated balance sheets of Constellation Brands Inc and subsidiaries the Company as of February 28 2025 and February 29 2024 the related consolidated statements of comprehensive income loss changes in stockholders equity and cash flows for each of the fiscal years in the three year period ended February 28 2025 and the related notes collectively the consolidated financial statements In our opinion the consolidated financial statements present fairly in all material respects the financial position of the Company as of February 28 2025 and February 29 2024 and the results of its operations and its cash flows for each of the fiscal years in the three year period ended February 28 2025 in conformity with U S generally accepted accounting principles
We also have audited in accordance with the standards of the Public Company Accounting Oversight Board United States PCAOB the Company s internal control over financial reporting as of February 28 2025 based on criteria established in
issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 23 2025 expressed an unqualified opinion on the effectiveness of the Company s internal control over financial reporting
These consolidated financial statements are the responsibility of the Company s management Our responsibility is to express an opinion on these consolidated financial statements based on our audits We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audits in accordance with the standards of the PCAOB Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement whether due to error or fraud Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements whether due to error or fraud and performing procedures that respond to those risks Such procedures included examining on a test basis evidence regarding the amounts and disclosures in the consolidated financial statements Our audits also included evaluating the accounting principles used and significant estimates made by management as well as evaluating the overall presentation of the consolidated financial statements We believe that our audits provide a reasonable basis for our opinion
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that 1 relate to accounts or disclosures that are material to the consolidated financial statements and 2 involved our especially challenging subjective or complex judgments The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements taken as a whole and we are not by communicating the critical audit matters below providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate
As discussed in Notes 1 and 13 to the consolidated financial statements the Company recognizes a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination The Company has recorded unrecognized tax benefits of 318 9 million as of February 28 2025
The following are the primary procedures we performed to address this critical audit matter We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company s process to evaluate uncertain tax positions This included controls related to the interpretation of tax law its application in the liability estimation process and the review of activity that could result in changes to the Company s unrecognized tax benefits We involved tax professionals with specialized skills and knowledge who assisted in evaluating the Company s interpretation of tax law and tax authority rulings and in performing an independent assessment of certain of the Company s tax positions and the amount of unrecognized tax benefit if any and comparing the results to the Company s assessment We also involved valuation professionals with specialized skills and knowledge who assisted in assessing certain transfer pricing studies for compliance with applicable laws and regulations
As discussed in Notes 1 7 and 8 to the consolidated financial statements the Company performs goodwill impairment testing on an annual basis or more frequently if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable During the three months ended August 31 2024 in connection with negative trends within the Wine and Spirits business the Company updated its outlook for the Wine and Spirits reporting unit The updated forecast indicated it was more likely than not that the fair value of the reporting unit might be below its carrying value Accordingly the Company performed an interim quantitative assessment for goodwill impairment using a discounted cash flow model to estimate the fair value of this reporting unit The assessment indicated that the carrying value of this reporting unit exceeded its estimated fair value resulting in a 2 250 0 million goodwill impairment During the three months ended February 28 2025 the Company performed its annual impairment analysis and updated its estimate of the fair value of the Wine and Spirits reporting unit using a discounted cash flow model to reflect the latest financial projections and an increase in the discount rate As a result the Company recognized an additional 490 7 million goodwill impairment charge to write off the remaining goodwill balance for the Wine and Spirits reporting unit as of February 28 2025
We identified the evaluation of the fair value of the Wine and Spirits reporting unit as a critical audit matter A high degree of subjective auditor judgment was required to evaluate the key assumptions used in the discounted cash flow model including the discount rate projected revenue growth rates and operating margins and long term growth rate Changes to these key assumptions could have a significant impact on the fair value of the reporting unit Additionally specialized skills and knowledge were required to assess the discount rate and long term growth rate assumptions used in determining the fair value
The following are the primary procedures we performed to address this critical audit matter We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company s goodwill impairment assessment process including controls related to the determination of the key assumptions used to estimate the fair value of the reporting unit We evaluated the Company s projected revenue growth rates and operating margins by comparing them to the Company s historical performance and to relevant market data In addition we involved valuation professionals with specialized skills and knowledge who assisted in
We operate primarily in the beverage alcohol industry with operations in the U S Mexico New Zealand and Italy producing a powerful portfolio of consumer connected high end imported beer brands and higher end wine and spirits brands
Our consolidated financial statements include our accounts and our majority owned and controlled domestic and foreign subsidiaries In addition we have an equally owned joint venture with Owens Illinois The joint venture owns and operates a state of the art glass production plant which provides bottles exclusively for the Nava Brewery We have determined that we are the primary beneficiary of this variable interest entity and accordingly the results of operations of the joint venture are reported in the Beer segment and are included in our consolidated results of operations All intercompany accounts and transactions are eliminated in consolidation
If we are not required to consolidate our investment in another entity we use the equity method when we i can exercise significant influence over the other entity and ii hold common stock and or in substance common stock of the other entity Under the equity method investments are carried at cost plus or minus our equity in the increases and decreases in the investee s net assets after the date of acquisition We monitor our equity method investments for factors indicating other than temporary impairment Dividends received from the investee reduce the carrying amount of the investment
The preparation of financial statements in conformity with U S GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period Actual results could differ from those estimates
Our revenue referred to in our financial statements as sales consists primarily of the sale of beer wine and spirits domestically in the U S Sales of products are for cash or otherwise agreed upon credit terms Our payment terms vary by location and customer however the time period between when revenue is recognized and when payment is due is not significant Our customers consist primarily of wholesale distributors Our revenue generating activities have a single performance obligation and are recognized at the point in time when control transfers and our obligation has been fulfilled which is when the related goods are shipped or delivered to the customer depending upon the method of distribution and shipping terms We have elected to treat shipping as a fulfillment activity Revenue is measured as the amount of consideration we expect to receive in exchange for the sale of our product Our sales terms do not allow for a right of return except for matters related to any manufacturing defects on our part Amounts billed to customers for shipping and handling are included in sales
As noted the majority of our revenues are generated from the domestic sale of beer wine and spirits to wholesale distributors in the U S Our other revenue generating activities include the export of certain of our
products to select international markets as well as the sale of our products through state alcohol beverage control agencies on premise retail locations in certain markets and 3 tier eCommerce and DTC channels We have evaluated these other revenue generating activities under the disaggregation disclosure criteria and concluded that they are immaterial for separate disclosure See Note 22 for disclosure of net sales by product type
Sales reflect reductions attributable to consideration given to customers in various customer incentive programs including pricing discounts on single transactions volume discounts promotional and advertising allowances coupons and rebates This variable consideration is recognized as a reduction of the transaction price based upon expected amounts at the time revenue for the corresponding product sale is recognized For example customer promotional discount programs are entered into with certain distributors for certain periods of time The amount ultimately reimbursed to distributors is determined based upon agreed upon promotional discounts which are applied to distributors sales to retailers Other common forms of variable consideration include volume rebates for meeting established sales targets and coupons and mail in rebates offered to the consumer The determination of the reduction of the transaction price for variable consideration requires that we make certain estimates and assumptions that affect the timing and amounts of revenue and liabilities recognized We estimate this variable consideration by taking into account factors such as the nature of the promotional activity historical information and current trends availability of actual results and expectations of customer and consumer behavior
Excise taxes remitted to tax authorities are government imposed excise taxes primarily on our beverage alcohol products Excise taxes are shown on a separate line item as a reduction of sales and are recognized in our results of operations when the related product sale is recognized Excise taxes are recognized as a current liability in other accrued expenses and liabilities with the liability subsequently reduced when the taxes are remitted to the tax authority
The types of costs included in cost of product sold are raw materials packaging materials manufacturing costs plant administrative support and overheads and freight and warehouse costs including distribution network costs Distribution network costs include inbound freight charges and outbound shipping and handling costs purchasing and receiving costs inspection costs and warehousing and internal transfer costs
The types of costs included in selling general and administrative expenses consist predominately of advertising and non manufacturing administrative and overhead costs We expense advertising hereafter referred to as marketing costs as incurred shown or distributed Marketing expense for the years ended February 28 2025 February 29 2024 and February 28 2023 was 931 2 million 853 5 million and 860 8 million respectively
The functional currency of our foreign subsidiaries is generally the respective local currency The translation from the applicable foreign currencies to U S dollars is performed for balance sheet accounts using exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted average exchange rate for the period The resulting translation adjustments are recognized as a component of AOCI Gains or losses resulting from foreign currency denominated transactions are included in selling general and administrative expenses
Bulk wine inventories are included as in process inventories within current assets in accordance with the general practices of the wine industry although a portion of such inventories may be aged for periods greater than one year A substantial portion of barreled whiskey and brandy will not be sold within one year because of the duration of the aging process All barreled spirits are classified as in process inventories and are included in current assets in accordance with industry practice Warehousing insurance value added taxes and other carrying charges applicable to barreled spirits held for aging are included in inventory costs
We assess the valuation of our inventories and reduce the carrying value of those inventories that are obsolete or in excess of our forecasted usage to their estimated net realizable value based on analyses and assumptions including but not limited to historical usage future demand and market requirements
Property plant and equipment is stated at cost Major additions and improvements are recognized as an increase to the property accounts while maintenance and repairs are expensed as incurred The cost of properties sold or otherwise disposed of and the related accumulated depreciation are eliminated from the balance sheet accounts at the time of disposal and resulting gains and losses are included as a component of operating income loss
Interest incurred relating to expansion optimization and construction of facilities is capitalized to construction in progress We cease the capitalization of interest when construction activities are substantially completed and the facility and related assets are available for their intended use At this point construction in progress is transferred to the appropriate asset class
We enter into derivative instruments to manage our exposure to fluctuations in foreign currency exchange rates commodity prices and interest rates We enter into derivatives for risk management purposes only including derivatives designated in hedge accounting relationships as well as those derivatives utilized as economic hedges We do not enter into derivatives for trading or speculative purposes We recognize all derivatives as either assets or liabilities and measure those instruments at estimated fair value see Notes 6 and 7 We present our derivative positions gross on our balance sheets
The change in the fair value of outstanding cash flow hedges is deferred in stockholders equity as a component of AOCI For all periods presented herein gains or losses deferred in stockholders equity as a component of AOCI are recognized in our results of operations in the same period in which the hedged items are recognized and on the same financial statement line item as the hedged items
Changes in fair values for derivative instruments not designated in a hedge accounting relationship are recognized directly in our results of operations each period and on the same financial statement line item as the hedged item For purposes of measuring segment operating performance the net gain loss from the changes in fair value of our undesignated commodity derivative contracts prior to settlement is reported outside of segment operating results until such time that the underlying exposure is recognized in the segment operating results Upon settlement the net gain loss from the changes in fair value of the undesignated commodity derivative contracts is reported in the appropriate operating segment allowing our operating segment results to reflect the
Cash flows from the settlement of derivatives including both economic hedges and those designated in hedge accounting relationships appear on our statements of cash flows in the same categories as the cash flows of the hedged items
We calculate the estimated fair value of financial instruments using quoted market prices whenever available When quoted market prices are not available we use standard pricing models for various types of financial instruments such as forwards options swaps and convertible debt which take into account the present value of estimated future cash flows see Note 7
Goodwill is allocated to the reporting unit in which the business that created the goodwill resides A reporting unit is an operating segment or a business unit one level below that operating segment for which discrete financial information is prepared and regularly reviewed by segment management We review our goodwill and indefinite lived intangible assets annually for impairment or sooner if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable We use January 1 as our annual impairment test measurement date Indefinite lived intangible assets consist principally of trademarks Intangible assets determined to have a finite life primarily customer relationships are amortized over their estimated useful lives and are subject to review for impairment when events or circumstances indicate that the carrying amount of an asset may not be recoverable Note 9 provides a summary of intangible assets segregated between amortizable and nonamortizable amounts
We use the asset and liability method of accounting for income taxes This method accounts for deferred income taxes by applying statutory rates in effect at the balance sheet date to the difference between the financial reporting and tax bases of assets and liabilities Certain income earned by foreign subsidiaries is subject to GILTI a U S tax on foreign earnings We treat the tax effect of GILTI as a current period tax expense when incurred We provide deferred income taxes consisting primarily of foreign withholding and state taxes on all applicable unremitted earnings of our foreign subsidiaries Interest and penalties are recognized as a component of provision for benefit from income taxes
We recognize a tax benefit from an uncertain tax position when it is more likely than not the position will be sustained upon examination We measure and recognize the tax benefit from such a position based on the largest benefit that has a greater than 50 likelihood of being realized upon ultimate settlement Due to the complexity of some of these uncertainties the ultimate resolution may result in a payment that is materially different from our current estimate of the unrecognized tax benefit liabilities In addition changes in existing tax laws or rates could significantly change our current estimate of our unrecognized tax benefit liabilities These differences will be reflected as increases or decreases to income tax expense in the period in which they are determined Changes in current estimates if significant could have a material adverse impact on our financial statements
We recognize right of use assets and lease liabilities on our balance sheet We assess service arrangements to determine if an asset is explicitly or implicitly specified in the agreement and if we have the right to control the use of the identified asset
The right of use asset and lease liability are initially measured at the present value of future lease payments discounted using the interest rate implicit in the lease or if that rate cannot be readily determined our secured incremental borrowing rate The incremental borrowing rates are determined using a portfolio approach based on publicly available information in connection with our unsecured borrowing rates We elected to recognize expenses for leases with a term of 12 months or less on a straight line basis over the lease term and not to recognize these short term leases on the balance sheet
The right of use asset and lease liability are calculated including options to extend or to terminate the lease when we determine that it is reasonably certain that we will exercise those options In making that determination we consider various existing economic and market factors business strategies as well as the nature length and terms of the agreement Based on our evaluation using these factors we concluded that the exercise of renewal options or early termination options would not be reasonably certain in determining the lease term at commencement for leases we currently have in place Assumptions made at the commencement date are re evaluated upon occurrence of certain events such as a lease modification
Certain of our contractual arrangements may contain both lease and non lease components We elected to measure the lease liability by combining the lease and non lease components as a single lease component for all asset classes
Certain of our leases include variable lease payments including payments that depend on an index or rate as well as variable payments for items such as raw materials labor property taxes insurance maintenance and other operating expenses associated with leased assets Certain grape purchasing arrangements include variable payments based on actual tonnage and price of grapes In addition certain third party logistics arrangements include variable payments that vary depending on throughput Such variable lease payments are excluded from the calculation of the right of use asset and the lease liability and are recognized in the period in which the obligation is incurred
We have indemnified respective parties against certain liabilities that may arise in connection with certain acquisitions and divestitures Indemnification liabilities are recognized when probable and estimable and included in deferred income taxes and other liabilities see Note 16
We have two stock based employee compensation plans see Note 18 We apply grant date fair value based measurement methods in accounting for our stock based payment arrangements and recognize all costs resulting from stock based payment transactions net of expected forfeitures ratably over the requisite service period Stock based awards are subject to specific vesting conditions generally time vesting or upon retirement disability or death of the employee as defined by the plan if earlier For awards granted to retirement eligible employees we recognize compensation expense ratably over the period from the date of grant to the date of retirement eligibility
We have one class of common stock with a material number of shares outstanding Class A Stock In addition we have another class of common stock with an immaterial number of shares outstanding Class 1 Stock Prior to November 10 2022 we had an additional class of common stock with a material number of shares outstanding Class B Stock For additional information on the classes of common stock and the Reclassification see Note 17
For the years ended February 28 2025 and February 29 2024 net income loss per common share attributable to CBI hereafter referred to as net income loss per common share basic for Class A Stock has been computed based on the weighted average shares of common stock outstanding during the period Net income loss per common share diluted for Class A Stock reflects the weighted average shares of common stock plus the effect of dilutive securities outstanding during the period using the treasury stock method The effect of dilutive securities includes the impact of outstanding stock based awards The dilutive computation does not assume conversion exercise or contingent issuance of securities that would have an anti dilutive effect on the net income loss per common share
For the year ended February 28 2023 we used the two class method for the computation and presentation of net income loss per common share The two class method is an earnings allocation formula that calculates basic and diluted net income loss per common share for each class of common stock separately based on dividends declared and participation rights in undistributed earnings as if all such earnings had been distributed during the period Under the two class method Class A Stock was assumed to receive a 10 greater participation
Net income loss per common share basic excluded the effect of common stock equivalents and was computed using the two class method Net income loss per common share diluted for Class A Stock reflected the potential dilution that could result if securities or other contracts to issue common stock were exercised or converted into common stock Net income loss per common share diluted for Class A Stock was computed using the more dilutive of the if converted or two class method For the year ended February 28 2023 net income loss per common share diluted for Class A Stock was computed using the two class method until such conversion took place pursuant to the Reclassification Net income loss per common share diluted for Class B Stock was computed using the two class method and did not assume conversion of Class B Stock into shares of Class A Stock
In November 2023 the FASB issued a standard requiring disclosures on an annual and interim basis of significant segment expenses and other segment items that are regularly provided to the CODM as well as the title and position of the CODM We adopted these disclosures for our annual period ending February 28 2025 The amendments in this standard were applied retrospectively to all prior periods presented in the financial statements see Note 22
In December 2023 the FASB issued a standard to enhance the transparency and decision usefulness of income tax disclosures This standard requires public companies to disclose i specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold ii the amount of income taxes paid disaggregated by federal state and foreign taxes and disaggregated by material individual jurisdictions and iii income from continuing operations before income tax expense disaggregated between domestic and foreign and income tax expense from continuing operations disaggregated by federal state and foreign We are required to adopt these disclosures for our annual period ending February 28 2026 with early adoption permitted and this standard may be applied retrospectively We expect this standard to impact our disclosures with no material impacts to our results of operations cash flows or financial condition
In November 2024 the FASB issued a standard requiring disaggregated information about certain income statement expense line items to be disclosed on an annual and interim basis We are required to adopt these disclosures for our annual period ending February 29 2028 with early adoption permitted and this standard may be applied retrospectively We expect this standard to impact our disclosures with no material impacts to our results of operations cash flows or financial condition
In June 2024 we acquired the Sea Smoke business including a California based luxury wine brand vineyards and a production facility for 158 7 million net of closing and post closing adjustments 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
In April 2022 we acquired the remaining 73 ownership interest in Austin Cocktails which included a portfolio of small batch ready to drink cocktails This transaction primarily included the acquisition of goodwill and a trademark In addition the purchase price for Austin Cocktails includes an earn out over five years based on performance The results of operations of Austin Cocktails are reported in the Wine and Spirits segment and have been included in our consolidated results of operations from the date of acquisition
In March 2022 we acquired the Lingua Franca business including a collection of Oregon based luxury wines a vineyard and a production facility This transaction also included the acquisition of a trademark and inventory In addition the purchase price for Lingua Franca includes an earn out over seven years based on performance The results of operations of Lingua Franca are reported in the Wine and Spirits segment and have been included in our consolidated results of operations from the date of acquisition
On January 6 2025 we sold the SVEDKA brand and related assets primarily including inventory and equipment The net cash proceeds from the SVEDKA Divestiture were used for general corporate purposes including funding share repurchases capital expenditures and repayment of debt Prior to the SVEDKA Divestiture we recorded the results of operations of the SVEDKA brand in the Wine and Spirits segment The following table summarizes the net gain recognized in connection with this divestiture for the year ended February 28 2025
On October 6 2022 we sold certain of our mainstream and premium wine brands and related inventory The net cash proceeds from the 2022 Wine Divestiture were utilized primarily to reduce outstanding borrowings Prior to the 2022 Wine Divestiture we recorded the results of operations of these brands in the Wine and Spirits segment The following table summarizes the net gain recognized in connection with this divestiture for the year ended February 28 2023
The 2025 Wine Divestitures Transaction largely resulted in both i 879 8 million of wine and spirits net assets being reclassified to held for sale as of February 28 2025 and ii a 478 0 million assets held for sale
impairment The impairment loss was included in assets held for sale impairment within our consolidated results of operations for the year ended February 28 2025 The carrying value of assets held for sale as of February 28 2025 consisted of the following
The 2025 Restructuring Initiative 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 The majority of the work associated with the 2025 Restructuring Initiative is expected to be completed within the year ending February 28 2026 and is estimated to result in 80 million to 100 million of cumulative pre tax costs once all phases are fully implemented This range is estimated to be comprised of i employee termination costs 60 and ii consulting services as well as other costs which primarily include contract termination
costs 40 We recognized 49 7 million of pre tax restructuring costs during the year ended February 28 2025 comprised of i 46 9 million of employee termination costs and ii 2 8 million of consulting services costs that were included in selling general and administrative costs within our consolidated results As of February 28 2025 the 49 7 million of pre tax restructuring costs were captured in accrued restructuring within other accrued expenses and liabilities in the Consolidated Balance Sheet see Note 11 We anticipate incurring approximately 40 million of additional pre tax consulting services employee termination and other costs during the year ending February 28 2026
In April 2025 we entered into a definitive agreement to fully divest and in certain instances exclusively license the trademarks of a portion of our wine and spirits business primarily centered around our remaining mainstream wine brands and associated inventory wineries vineyards offices and facilities for 900 million subject to certain adjustments The 2025 Wine Divestitures Transaction is subject to the satisfaction of certain closing conditions including receipt of required regulatory approval and is expected to close immediately following the end of our first quarter of Fiscal 2026 We expect to use the net cash proceeds from the 2025 Wine Divestitures Transaction for general corporate purposes
We capitalized 74 2 million 63 7 million and 36 5 million of interest costs for the years ended February 28 2025 February 29 2024 and February 28 2023 respectively primarily due to the Mexico Beer Projects
The property plant and equipment balance at February 28 2025 and February 29 2024 excludes amounts reclassified to assets held for sale In July 2024 we sold the remaining assets classified as held for sale at the Mexicali Brewery
We are exposed to market risk from changes in foreign currency exchange rates commodity prices and interest rates that could affect our results of operations and financial condition The impact on our results and financial position and the amounts reported in our financial statements will vary based upon the currency commodity and interest rate movements during the period the effectiveness and level of derivative instruments outstanding and whether they are designated and qualify for hedge accounting
The estimated fair values of our derivative instruments change with fluctuations in currency rates commodity prices and or interest rates and are expected to offset changes in the values of the underlying exposures Our derivative instruments are held solely to manage our exposures to the aforementioned market risks as part of our normal business operations We follow strict policies to manage these risks and do not enter into derivative instruments for trading or speculative purposes
Our derivative instruments designated in hedge accounting relationships are designated as cash flow hedges We are exposed to foreign denominated cash flow fluctuations primarily in connection with third party and intercompany sales and purchases We primarily use foreign currency forward contracts to hedge certain of these risks In addition we utilize interest rate swap treasury lock and swap lock contracts periodically to manage our exposure to changes in interest rates Derivatives managing our cash flow exposures generally mature within three years or less with a maximum maturity of five years
To qualify for hedge accounting treatment the details of the hedging relationship must be formally documented at inception of the arrangement including the risk management objective hedging strategy hedged item specific risk that is being hedged the derivative instrument how effectiveness is being assessed and how ineffectiveness will be measured The derivative must be highly effective in offsetting changes in the cash flows of the risk being hedged Throughout the term of the designated cash flow hedge relationship on at least a quarterly basis a retrospective evaluation and prospective assessment of hedge effectiveness is performed based on quantitative and qualitative measures All components of our derivative instruments gains or losses are included in the assessment of hedge effectiveness
When we determine that a derivative instrument which qualified for hedge accounting treatment has ceased to be highly effective as a hedge we discontinue hedge accounting prospectively In the event the relationship is no longer effective we recognize the change in the fair value of the hedging derivative instrument from the date the hedging derivative instrument became no longer effective immediately in our results of operations We also discontinue hedge accounting prospectively when i a derivative expires or is sold
terminated or exercised ii it is no longer probable that the forecasted transaction will occur or iii we determine that designating the derivative as a hedging instrument is no longer appropriate When we discontinue hedge accounting prospectively but the original forecasted transaction continues to be probable of occurring the existing gain or loss of the derivative instrument remains in AOCI and is reclassified into earnings losses when the forecasted transaction occurs When it becomes probable that the forecasted transaction will not occur any remaining gain or loss in AOCI is recognized immediately in our results of operations
Certain of our derivative instruments do not qualify for hedge accounting treatment for others we choose not to maintain the required documentation to apply hedge accounting treatment These undesignated instruments are primarily used to economically hedge our exposure to fluctuations in the value of foreign currency denominated receivables and payables foreign currency investments primarily consisting of loans to subsidiaries and foreign denominated investments and cash flows related primarily to the repatriation of those loans or investments and commodity prices including aluminum corn diesel fuel and natural gas prices We primarily use foreign currency forward and option contracts generally less than 12 months in duration and commodity swap contracts generally less than 36 months in duration with a maximum maturity of four years to hedge some of these risks In addition from time to time we utilize interest rate swap contracts generally less than six months in duration to economically hedge our exposure to changes in interest rates associated with the financing of significant investments and acquisitions Our derivative policy permits the use of undesignated derivatives as approved by senior management
We are exposed to credit related losses if the counterparties to our derivative contracts default This credit risk is limited to the fair value of the derivative contracts To manage this risk we contract only with major financial institutions that have earned investment grade credit ratings and with whom we have standard International Swaps and Derivatives Association agreements which allow for net settlement of the derivative contracts We have also established counterparty credit guidelines that are regularly monitored Because of these safeguards we believe the risk of loss from counterparty default to be immaterial
In addition our derivative instruments are not subject to credit rating contingencies or collateral requirements As of February 28 2025 the estimated fair value of derivative instruments in a net liability position due to counterparties was 20 5 million If we were required to settle the net liability position under these derivative instruments on February 28 2025 we would have had sufficient available liquidity on hand to satisfy this obligation
Authoritative guidance establishes a framework for measuring fair value including a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available The hierarchy includes three levels
Level 2 inputs include data points that are observable such as quoted prices for similar assets or liabilities in active markets quoted prices for identical assets or similar assets or liabilities in markets that are not active and inputs other than quoted prices such as volatility interest rates and yield curves that are observable for the asset or liability either directly or indirectly and
The fair value is estimated using market based inputs obtained from independent pricing services entered into valuation models These valuation models require various inputs including contractual terms market foreign exchange prices market commodity prices interest rate yield curves and currency volatilities as applicable Level 2 fair value measurement
The fair value is estimated based on quoted market prices from respective counterparties Quotes are corroborated by using discounted cash flow models based upon forward interest rate yield curves which are obtained from independent pricing services Level 2 fair value measurement
Our short term borrowings consist of our commercial paper program and the revolving credit facility under our senior credit facility The revolving credit facility is a variable interest rate bearing note with a fixed margin adjustable based upon our debt rating as defined in our senior credit facility For these short term borrowings the carrying value approximates the fair value
The fair value of our fixed interest rate long term debt is estimated by discounting cash flows using interest rates currently available for debt with similar terms and maturities Level 2 fair value measurement As of February 28 2025 the carrying amount of long term debt including the current portion was 10 691 0 million compared with an estimated fair value of 9 990 0 million As of February 29 2024 the carrying amount of long term debt including the current portion was 11 637 9 million compared with an estimated fair value of 10 775 8 million
The carrying amounts of certain of our financial instruments including cash and cash equivalents accounts receivable and accounts payable approximate fair value as of February 28 2025 and February 29 2024 due to the relatively short maturity of these instruments
During the three months ended August 31 2024 in connection with continued negative trends within our Wine and Spirits business 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 management updated its Fiscal 2025 outlook for this reporting unit The updated forecast indicated it was more likely than not the fair value of the Wine and Spirits reporting unit might be below its carrying value Accordingly we performed an interim quantitative assessment for goodwill impairment This assessment indicated that the carrying value of the Wine and Spirits reporting unit exceeded its estimated fair value resulting in a 2 250 0 million goodwill impairment During the three months ended February 28 2025 we performed our annual impairment analysis and updated our estimate of the fair value of the Wine and Spirits reporting unit to reflect the latest financial projections and an increase in the discount rate As a result we recognized an additional 490 7 million goodwill impairment to write off the remaining goodwill balance for the Wine and Spirits reporting unit as of February 28 2025 The 2 740 7 million total loss from impairment was included in goodwill and intangible assets impairment within our consolidated results for the year ended February 28 2025 See Notes 8 9 and 13 for further discussion
When performing a quantitative assessment for impairment of goodwill we measure the amount of impairment by calculating the amount by which the carrying value exceeds its estimated fair value The estimated fair value is determined based on the discounted cash flow model The most significant assumptions used in the discounted cash flow model were i a 9 discount rate for the interim assessment and a 10 discount rate for the annual assessment ii a 1 5 expected long term growth rate and iii the annual cash flow projections
For the three months ended February 28 2025 largely in connection with the 2025 Wine Divestitures Transaction assets held for sale with a 1 357 8 million carrying value were written down to their current estimated fair value of 879 8 million less costs to sell resulting in a 478 0 million loss This loss from impairment was included within assets held for sale impairment within our consolidated results for the year ended February
28 2025 These assets consisted primarily of inventory production facilities and intangible assets which had satisfied the conditions necessary to be classified as held for sale Our estimated fair value was largely based on the expected proceeds from the 2025 Wine Divestitures Transaction as of February 28 2025
For the year ended February 28 2025 in connection with the assessment of the same events and circumstances that resulted in the wine and spirits goodwill carrying value being written down to zero we completed a quantitative assessment of our wine trademarks We re evaluated the wine units of account in contemplation of the 2025 Wine Divestitures Transaction and determined it was appropriate to have two reporting units i held for sale brands and ii remaining brands As a result the held for sale brands trademark unit with a 182 8 million carrying value was written down to its estimated fair value of 125 8 million resulting in a 57 0 million impairment This loss was included in goodwill and intangible assets impairment within our consolidated results of operations for the year ended February 28 2025
When performing the quantitative assessment the estimated fair value of the trademarks is calculated based on an income approach using the relief from royalty method The most significant assumptions used in the relief from royalty method to determine the estimated fair value of intangible assets with indefinite lives in connection with this impairment testing were i a 3 royalty rate held for sale brands trademark unit and a 7 royalty rate remaining brands trademark unit ii an 11 discount rate iii a 1 5 expected long term growth rate and iv the annual revenue projections
For the year ended February 28 2023 in connection with certain continued negative trends within our Beer segment s Funky Buddha and Four Corners craft beer portfolios we updated our long term financial forecasts for these portfolios As a result the Funky Buddha and Four Corners craft beer trademark assets with a carrying value of 13 0 million were written off resulting in an impairment of 13 0 million This loss was included in goodwill and intangible assets impairment within our consolidated results of operations for the year ended February 28 2023 The estimated fair value of these trademark assets was determined based on our updated cash flow projections Additionally in June 2023 we completed the Funky Buddha Divestiture and the Four Corners Divestiture
As of February 28 2025 August 31 2024 November 30 2023 and August 31 2023 we evaluated certain equity method investments made through our corporate venture capital function within the Corporate Operations and Other segment and determined there were
other than temporary impairments due to business underperformance These losses from impairment were included in income loss from unconsolidated investments within our consolidated results for the respective periods The estimated fair values for the equity method investments evaluated as of February 28 2025 August 31 2024 and November 30 2023 were based largely on the cash flows expected to be generated by the investment using unobservable data points The estimated fair value for the equity method investments evaluated as of August 31 2023 was based largely on observable prices for similar assets In October 2023 we exited one of these equity method investments in exchange for a note receivable
We evaluated our then existing 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 C
anopy 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 the year ended February 29 2024 The estimated fair value was determined based on the closing price of the underlying equity security as of May 31
2023 Additionally 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 For additional information refer to Note 10
As of August 31 2022 we evaluated our then existing Canopy Equity Method Investment and determined there was an other than temporary impairment based on several contributing factors including i the period of time for which the fair value had been less than the carrying value and the uncertainty surrounding Canopy s stock price recovering in the near term ii Canopy recording a significant impairment of goodwill related to its cannabis operations during its first quarter of fiscal 2023 and iii the uncertainty of U S federal cannabis permissibility As a result the Canopy Equity Method Investment with a carrying value of 1 695 1 million was written down to its estimated fair value of 634 8 million resulting in an impairment of 1 060 3 million This loss from impairment was included in income loss from unconsolidated investments within our consolidated results for the year ended February 28 2023 The estimated fair value was determined based on the closing price of the underlying equity security as of August 31 2022
For the year ended February 28 2023 in connection with certain continued negative trends within our Beer segment s craft beer business management updated its long term financial forecasts for this business and determined it was no longer part of the beer asset group This change in financial forecasts indicated it was more likely than not the fair value of our long lived assets associated with the craft beer business might be below its carrying value Accordingly we performed a quantitative assessment for impairment As a result certain long lived assets with a carrying value of 59 8 million were written down to their estimated fair value of 6 3 million resulting in a loss of 53 5 million This loss was included in selling general and administrative expenses
within our consolidated results of operations for the year ended February 28 2023 These assets consisted primarily of property plant and equipment including the Daleville Facility Our estimated fair value was primarily based on the cash flows expected to be generated by the assets Additionally in May 2023 we sold the Daleville Facility in connection with our decision to exit the craft beer business
Allocation was based on the relative fair value of the portion of the business sold and the remaining wine and spirits portfolio The relative fair values were determined using the transaction price and the income approach based on assumptions including projected revenue growth terminal growth and discount rates and other projected financial information
We did not incur costs to renew or extend the term of acquired intangible assets for the years ended February 28 2025 February 29 2024 and February 28 2023 Net carrying amount represents the gross carrying value net of accumulated amortization Amortization expense for intangible assets was 1 3 million 1 3 million and 3 2 million for the years ended February 28 2025 February 29 2024 and February 28 2023 respectively
We have multiple investments through our corporate venture capital function in debt and equity securities As of February 28 2025 we evaluated certain investments primarily driven by business underperformance and solvency concerns and concluded they should be written down to zero resulting in a loss of 47 9 million This loss on securities measured at fair value was included in income loss from unconsolidated investments within our consolidated results for the year ended February 28 2025
As of November 30 2024 we evaluated the Exchangeable Shares for impairment primarily due to the business and industry factors that led to the decline in Canopy s common share price since the date of conversion and exchange We concluded that an impairment did exist and wrote down the Exchangeable Shares to their estimated fair value Due to the continued decline in Canopy s common share price as of February 28 2025 we evaluated the Exchangeable Shares for an additional impairment We concluded an impairment did exist and accordingly the Exchangeable Shares with a 97 3 million carrying value at the April 2024 date of conversion and exchange were written down to 21 2 million their estimated fair value as of February 28 2025 resulting in a 76 1 million total impairment The estimated fair values were determined using the same valuation model as of the date of conversion and exchange as noted below This total loss from impairment was included in income loss from unconsolidated investments within our consolidated results for the year ended February 28 2025 Future impairments if any will also be reported in income loss from unconsolidated investments within our consolidated results
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 the C 100 0 million 4 25 promissory note issued to us by Canopy 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 in income loss from unconsolidated investments within our consolidated results for the year ended February 28 2025 The fair value of Exchangeable Shares on the date of the conversion and exchange was estimated using a valuation model based primarily on the following inputs i Canopy s common share price ii the expected volatility of Canopy s common shares and iii the probability and timing of U S federal legalization of recreational cannabis As the Exchangeable Shares are an equity security without a readily determinable fair value we elected to account for the Exchangeable Shares under the measurement alternative method
In October 2022 the Company CB International the Administrative Agent and certain other lenders agreed to amend the 2022 Credit Agreement The October 2022 Credit Agreement Amendment revised certain defined terms and covenants and became effective in April 2024 following the i amendment by Canopy of its Articles of Incorporation ii conversion of our Canopy common shares into Exchangeable Shares and iii resignation of our nominees from the board of directors of Canopy
In April 2022 the Company CB International the Administrative Agent and certain other lenders entered into the 2022 Restatement Agreement that amended and restated our then existing senior credit facility as
In April 2022 the Company the Administrative Agent and the Lender amended our then existing credit agreement as amended the April 2022 Term Credit Agreement The April 2022 Term Credit Agreement provided for a 491 3 million five year term loan facility The principal changes effected by the amendment were the refinement of certain negative covenants and replacement of LIBOR rates with rates based on term SOFR In August 2023 we repaid the outstanding five year term loan facility borrowings under the April 2022 Term Credit Agreement with proceeds from commercial paper borrowings
In August 2022 the Company the Administrative Agent and certain other lenders entered into the August 2022 Term Credit Agreement The August 2022 Term Credit Agreement provided for a 1 0 billion term loan facility and was not subject to amortization payments with the balance due and payable three years after the November 10 2022 funding date The proceeds from the August 2022 Term Credit Agreement were used to partially fund the aggregate cash payment to holders of Class B Stock in connection with the Reclassification and to pay related fees as well as fees related to closing the August 2022 Term Credit Agreement In February 2023 we repaid a portion of our indebtedness under the August 2022 Term Credit Agreement with proceeds from senior notes issued in February 2023 In May 2023 we repaid the remaining outstanding borrowings under the August 2022 Term Credit Agreement with proceeds from senior notes issued in May 2023 For additional information refer to Senior notes below
We and our subsidiaries are subject to covenants that are contained in the 2022 Credit Agreement including those restricting the incurrence of additional subsidiary indebtedness additional liens mergers and consolidations transactions with affiliates and sale and leaseback transactions in each case subject to numerous conditions exceptions and thresholds The financial covenants are limited to a minimum interest coverage ratio and a maximum net leverage ratio
Our senior credit facility permits us to elect subject to the willingness of existing or new lenders to fund such increase and other customary conditions to increase the revolving credit commitments The increased commitments may be an unlimited amount so long as our net leverage ratio as defined and computed pursuant to our senior credit facility is no greater than 4 00 to 1 00 subject to certain limitations for the period defined pursuant to our senior credit facility
Net of outstanding revolving credit facility borrowings and outstanding letters of credit under the 2022 Credit Agreement and outstanding borrowings under our commercial paper program of 808 0 million and
Contractual interest rate varies based on our debt rating as defined in the agreement and is a function of SOFR plus a margin and a credit spread adjustment or the base rate plus a margin or in certain circumstances where SOFR cannot be adequately ascertained or available an alternative benchmark rate plus a margin
We and or CB International are the borrower under the 2 250 0 million revolving credit facility with a maturity date of April 14 2027 Includes a sub facility for letters of credit of up to 200 0 million
We have a commercial paper program which provides for the issuance of up to an aggregate principal amount of 2 25 billion of commercial paper Our commercial paper program is backed by unused commitments under our revolving credit facility under our 2022 Credit Agreement Accordingly outstanding borrowings under our commercial paper program reduce the amount available under our revolving credit facility Information with respect to our outstanding commercial paper borrowings is as follows
We entered into Pre issuance hedge contracts which were designated as cash flow hedges As a result we have hedged the treasury rate on 300 0 million of future debt issuances of which 275 0 million was outstanding as of February 28 2025 Upon the termination and settlement of these contracts the unrealized gain loss is recognized in AOCI within our consolidated balance sheets and amortized to interest expense net within our consolidated results of operations
Redeemable in whole or in part at our option at any time at a redemption price equal to 100 of the outstanding principal amount plus accrued and unpaid interest and a make whole payment based on the present value of the future payments at the applicable treasury rate plus 50 basis points
Redeemable in whole or in part at our option at any time prior to the stated redemption date as defined in the indenture at a redemption price equal to 100 of the outstanding principal amount plus accrued and unpaid interest and a make whole payment based on the present value of the future payments at the applicable treasury rate plus the stated basis points as defined in the indenture On or after the stated redemption date redeemable in whole or in part at our option at any time at a redemption price equal to 100 of the outstanding principal amount plus accrued and unpaid interest
Our indentures relating to our outstanding senior notes contain certain covenants including but not limited to i a limitation on liens on certain assets ii a limitation on certain sale and leaseback transactions and iii restrictions on mergers consolidations and the transfer of all or substantially all of our assets to another person
We have additional credit arrangements totaling 46 7 million and 67 7 million as of February 28 2025 and February 29 2024 respectively As of February 28 2025 and February 29 2024 amounts outstanding under these arrangements were 8 7 million and 17 8 million respectively the majority of which is classified as long term as of the respective date These arrangements primarily support the financing needs of our domestic and foreign subsidiary operations Interest rates and other terms of these borrowings vary from country to country depending on local market conditions
As of February 28 2025 the required principal repayments under long term debt obligations excluding unamortized debt issuance costs and unamortized discounts of 47 0 million and 20 7 million respectively for each of the five succeeding fiscal years and thereafter are as follows
Consists of the following i difference between the U S statutory rate and local jurisdiction tax rates ii the provision for incremental U S taxes on earnings of certain foreign subsidiaries offset by foreign tax credits
iii the non U S portion of tax provision benefit recorded on the unrealized net gain loss from the changes in fair value of our investment in Canopy and iv the non U S portion of tax benefits recorded on the Canopy equity in earnings losses and related activities
The years ended February 29 2024 and February 28 2023 represent a net income tax provision resulting from the remeasurement of our deferred tax assets in connection with a legislative update in Switzerland
The year ended February 28 2025 consists primarily of valuation allowances related to net operating losses and the years ended February 29 2024 and February 28 2023 consists primarily of valuation allowances related to our investment in Canopy
Deferred tax assets and liabilities reflect the future income tax effects of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates that apply to taxable income Additionally we have provided deferred income taxes consisting primarily of foreign withholding and state taxes on all applicable unremitted earnings of our foreign subsidiaries except for those earnings that we consider to be indefinitely reinvested
In assessing the realizability of deferred tax assets we consider whether it is more likely than not that some or all of the deferred tax assets will not be realized In making this assessment we consider the projected reversal of deferred tax liabilities and projected future taxable income as well as tax planning strategies Based upon this assessment we believe it is more likely than not that we will realize the benefits of these deductible differences net of any valuation allowances
As of February 28 2025 operating loss carryforwards which are primarily state and foreign totaling 3 2 billion are being carried forward in a number of jurisdictions where we are permitted to use tax operating losses from prior periods to reduce future taxable income Of these operating loss carryforwards 1 7 billion will expire by fiscal 2032 850 0 million will expire between fiscal 2033 and fiscal 2045 and 650 0 million may be carried forward indefinitely in certain jurisdictions Additionally as of February 28 2025 federal capital losses totaling 1 4 billion are being carried forward in multiple jurisdictions and will expire if unused between Fiscal 2029 and fiscal 2034
We have recognized valuation allowances for operating loss carryforwards and other deferred tax assets when we believe it is more likely than not that these items will not be fully realized The increase in our valuation allowances as of February 28 2025 primarily related to operating loss carryforwards
The liability for income taxes associated with uncertain tax positions excluding interest and penalties and a reconciliation of the beginning and ending unrecognized tax benefit liabilities is as follows
As of February 28 2025 and February 29 2024 we had 438 4 million and 488 5 million respectively of unrecognized tax benefit liabilities including interest and penalties recognized on our balance sheets These liabilities are primarily recorded as non current as of the balance sheet date
As of February 28 2025 we had 318 9 million of unrecognized tax benefit liabilities of which 183 4 million if recognized would decrease the effective tax rate in the year of resolution As of February 29 2024 we had 416 1 million of unrecognized tax benefit liabilities that if recognized would decrease the effective tax rate in the year of resolution
We file U S federal income tax returns and various state local and foreign income tax returns Major tax jurisdictions where we are subject to examination by tax authorities include Italy Mexico New Zealand Switzerland and the U S Various U S state and foreign income tax examinations are currently in progress It is reasonably possible that the liability associated with our unrecognized tax benefit liabilities will increase or decrease within the next 12 months as a result of these examinations or the expiration of statutes of limitation As of February 28 2025 we estimate that unrecognized tax benefit liabilities could change by a range of 100 million to 250 million With few exceptions we are no longer subject to U S federal state local or foreign income tax examinations for fiscal years prior to February 28 2022
We provide for additional tax expense based on probable outcomes of ongoing tax examinations and assessments in various jurisdictions While it is often difficult to predict the outcome or the timing of resolution of any tax matter we believe the reserves reflect the probable outcome of known tax contingencies Unfavorable settlement of any particular issue would require the use of cash
We primarily lease certain vineyards office and production facilities warehouses production equipment and vehicles We have concluded that certain grape purchasing arrangements associated with the purchase of grape production yielded from a specified block of a vineyard and certain third party logistics arrangements contain a lease
We have entered into various long term contracts in the normal course of business As of February 28 2025 the estimated aggregate minimum purchase commitments under these contracts through the date of the last contractual commitment are as follows
Certain grape purchasing arrangements include the purchase of grape production yielded from specified blocks of a vineyard The actual tonnage and price of grapes that we purchase will vary each year depending on certain factors including weather time of harvest overall market conditions and the agricultural practices and location of the vineyard Amounts included herein for the estimated aggregate minimum grape purchase commitments consist of estimates for the purchase of the grapes and the implicit leases of the land Certain grape purchasing arrangements classified as leases have not resulted in the recognition of right of use assets and lease liabilities on our balance sheet due to their variable nature
In connection with prior divestitures we have indemnified respective parties against certain liabilities that may arise subsequent to the divestiture As of February 28 2025 and February 29 2024 these liabilities consist primarily of indemnifications related to certain income tax matters and lease contracts As of February 28 2025 and February 29 2024 the carrying amount of our indemnification liabilities was 18 4 million and 32 9 million respectively and are included in other accrued expenses and liabilities and deferred income taxes and other
liabilities We do not expect to be required to make material payments under the indemnifications and we believe that the likelihood is remote that the indemnifications could have a material adverse effect on our business liquidity financial condition and or results of operations
We have an agreement with a financial institution for payment services and 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 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
Reflects amount payable to the participating financial institution for suppliers who voluntarily participated in the supply chain finance program and was included in accounts payable within our consolidated balance sheets
In the ordinary course of our business we are subject to lawsuits arbitration claims and other legal proceedings in connection with our business Some of the legal actions include claims for substantial or unspecified compensatory and or punitive damages and or injunctive relief A substantial adverse judgment or other unfavorable resolution of these matters could have a material adverse effect on our financial condition results of operations or cash flows Management believes that we have adequate legal defenses with respect to the legal proceedings to which it is a defendant or respondent and that the outcome of these pending proceedings is not likely to have a material adverse effect on our financial condition results of operations and or cash flows However we are unable to predict the outcome of these matters
We are in discussions with various governmental agencies concerning matters raised during regulatory examinations or otherwise subject to such agencies inquiry These matters could result in censures fines or other sanctions Management believes the outcome of any pending regulatory matters will not have a material adverse effect on our financial condition results of operations and or cash flows However we are unable to predict the outcome of these matters
During the year ended February 29 2024 we recorded 56 3 million of business interruption and other recoveries from our insurance carriers These recoveries related to an outage at our Nava Brewery due to severe winter weather events in early 2021 These proceeds are included in our consolidated results of operations for the year ended February 29 2024
We have one class of common stock with a material number of shares outstanding Class A Stock Holders of Class A Stock are entitled to one vote per share In addition we have a class of common stock with an immaterial number of shares outstanding Class 1 Stock Shares of Class 1 Stock generally have no voting rights Class 1 Stock shares are convertible into shares of Class A Stock on a one to one basis at any time at the option of the holder provided that the holder immediately sells the Class A Stock acquired upon conversion Because shares of Class 1 Stock are convertible into shares of Class A Stock for each share of Class 1 Stock issued we must reserve one share of Class A Stock for issuance upon the conversion of the share of Class 1 Stock Holders of Class 1 Stock do not have any preference as to dividends but may participate in any dividend if and when declared by the Board of Directors If we pay a cash dividend on Class 1 Stock each share of Class A Stock will receive an amount at least 10 greater than the amount of cash dividend per share paid on Class 1 Stock In addition the Board of Directors may declare and pay a dividend on Class A Stock without paying a dividend on Class 1 Stock
Prior to the Reclassification we had an additional class of common stock with a material number of shares outstanding Class B Stock Shares of Class B Stock were convertible into shares of Class A Stock on a one to one basis at any time at the option of the holder Holders of Class B Stock were entitled to 10 votes per share See Reclassification below for additional information
Includes shares of Class B Stock issued and outstanding immediately prior to the Effective Time that were reclassified exchanged and converted into one share of Class A Stock and the right to receive 64 64 in cash without interest see Reclassification below
In January 2018 our Board of Directors authorized the repurchase of up to 3 0 billion of our publicly traded common stock which was fully utilized as of May 31 2022 Additionally in each of January 2021 and November 2023 our Board of Directors authorized the repurchase of up to 2 0 billion of our publicly traded common stock The 2021 Authorization was fully utilized as of November 30 2024 The Board of Directors did not specify a date upon which these authorizations would expire Shares repurchased under these authorizations become treasury shares
Subsequent to February 28 2025 we repurchased 494 094 shares of Class A Stock pursuant to the 2025 Authorization at an aggregate cost of 91 7 million through open market transactions As of April 23 2025 total shares repurchased under our board authorizations are as follows
In April 2025 we announced that our Board of Directors authorized the repurchase of up to 4 0 billion of our publicly traded common stock expiring in February 2028 The 2025 Authorization replaced the 2023 Authorization in its entirety and no further repurchases will be made pursuant to the 2023 Authorization Shares repurchased under the 2025 Authorization have become treasury shares
In November 2022 we completed the Reclassification at the Effective Time as contemplated by the Reclassification Agreement Pursuant to the Reclassification each share of Class B Stock issued and outstanding immediately prior to the Effective Time was reclassified exchanged and converted into one share of Class A Stock and the right to receive 64 64 in cash without interest The aggregate cash payment to holders of Class B Stock at the Effective Time was 1 5 billion We utilized our 1 0 billion delayed draw three year term loan facility under the August 2022 Term Credit Agreement and borrowings under our commercial paper program to fund the aggregate cash payment to holders of Class B Stock
Under our Long Term Stock Incentive Plan nonqualified stock options restricted stock units performance share units and other stock based awards may be granted to our employees officers and directors The aggregate number of shares of our Class A Stock and Class 1 Stock available for awards under our Long Term Stock Incentive Plan is 108 000 000 shares
The exercise price vesting period and term of nonqualified stock options granted are established by the committee administering the plan the Committee The exercise price of any nonqualified stock option may not be less than the fair market value of our Class A Stock on the date of grant Nonqualified stock options generally vest and become exercisable over a three year period from the date of grant and expire as established by the Committee but not later than 10 years after the grant date
Grants of restricted stock units performance share units and other stock based awards may contain such vesting periods terms conditions and other requirements as the Committee may establish Restricted stock unit awards are based on service and generally vest over one to three years from the date of grant Performance share unit awards are based on service and the satisfaction of certain performance conditions and vest over a required employee service period generally from one to three years from the date of grant which closely matches the performance period The performance conditions include the achievement of specified financial or operational performance metrics or market conditions which require the achievement of specified levels of stockholder return relative to other companies as defined in the applicable performance share unit agreement The actual number of shares to be awarded upon vesting of a performance share unit award will range between 0 and 200 of the target award based upon the measure of performance as certified by the Committee
As of February 28 2025 the aggregate intrinsic value of our options outstanding and exercisable was 12 6 million and 12 6 million respectively In addition the weighted average remaining contractual life for our options outstanding and exercisable was 5 5 years and 4 9 years respectively
The weighted average grant date fair value of stock options granted and the weighted average inputs used to estimate the fair value on the date of grant using the Black Scholes option pricing model are as follows
The weighted average grant date fair value of performance share units granted with a market condition and the weighted average inputs used to estimate the fair value on the date of grant using the Monte Carlo Simulation model are as follows
We have an Employee Stock Purchase Plan under which 9 000 000 shares of Class A Stock may be issued Under the terms of the plan eligible employees may purchase shares of our Class A Stock through payroll deductions The purchase price is the lower of 85 of the fair market value of the stock on the first or last day of the purchase period For the years ended February 28 2025 February 29 2024 and February 28 2023 employees purchased 67 405 shares 59 408 shares and 57 284 shares respectively under this plan
As of February 28 2025 there was 57 6 million of total unrecognized compensation cost related to nonvested stock based compensation arrangements granted under our stock based employee compensation plans This cost is expected to be recognized in our results of operations over a weighted average period of 1 6 years With respect to the issuance of shares under any of our stock based compensation plans we have the option to issue authorized but unissued shares or treasury shares
We have excluded the following weighted average common shares outstanding from the calculation of diluted net income loss per common share as the effect of including these would have been anti dilutive in millions
Net sales to our 10 largest customers represented approximately 59 58 and 55 of our net sales for the years ended February 28 2025 February 29 2024 and February 28 2023 respectively and are expected to continue to represent a significant portion of our revenues Net sales to customers which individually amount to
Net sales for the above customers are primarily reported within the Beer and Wine and Spirits segments respectively Our arrangements with certain of our customers may generally be terminated by either party with prior notice The majority of our accounts receivable balance is generated from sales to independent distributors with whom we have a predetermined collection date arranged through electronic funds transfer We perform ongoing credit evaluations of our customers financial position and management is of the opinion that any risk of significant loss is reduced due to the diversity of our customers and geographic sales area
gment 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 a portfolio that includes higher end wine brands complemented by certain higher end spirits brands Amounts included in the Corporate Operations and Other segment consist of costs of corporate communications corporate development corporate finance corporate strategy
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 Our CODM is our President and Chief Executive Officer
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 Long lived tangible assets and total asset information by segment is not provided to or reviewed by our
as it is not used to make strategic decisions allocate resources or assess performance Our CODM utilizes segment comparable operating income loss performance in deciding how to deploy capital in line with disciplined and balanced priorities These priorities largely include investing in our people and our brands making capital investments and strategic acquisitions providing a cash dividend program and from time time time repurchasing shares of our common stock Our CODM also monitors budgeted versus actual results in assessing segment operating performance and understanding underlying business trends
Management excludes Comparable Adjustments from its evaluation of the results of each operating segment as these Comparable Adjustments are not reflective of core operations of the segments Segment operating performance and the incentive compensation of segment management are evaluated based on core segment operating income loss which does not include the impact of these Comparable Adjustments collectively referred to as comparable operating income loss We evaluate segment operating performance based on comparable operating income loss of the respective business units
Effective as of May 31 2023 we determined that the 2023 Canopy Promissory Note did not have future economic value given the substantial doubt about Canopy s ability to continue as a going concern as disclosed by Canopy prior to the maturity of the note Accordingly the fair value of the remaining balance for this instrument was determined to be zero In April 2024 we exchanged the 2023 Canopy Promissory Note for Exchangeable Shares Additionally as of November 30 2024 and February 28 2025 we impaired our Exchangeable Shares
Our principal area of operation is in the U S Current operations outside the U S are in Mexico for the Beer segment and primarily in New Zealand and Italy for the Wine and Spirits segment Revenues are attributed to countries based on the location of the customer
Our Chief Executive Officer and our Chief Financial Officer have concluded based on their evaluation as of the end of the period covered by this report that the Company s disclosure controls and procedures as defined in the Exchange Act Rules 13a 15 e and 15d 15 e are effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act i is recorded processed summarized and reported within the time periods specified in the SEC s rules and forms and ii is accumulated and communicated to our management including our Chief Executive Officer and our Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure
In connection with management s quarterly evaluation of internal control over financial reporting as defined in the Exchange Act Rules 13a 15 f and 15d 15 f no changes were identified in our internal control over financial reporting during our fiscal quarter ended February 28 2025 our fourth fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting
During the three months ended February 28 2025 none of our directors or officers as defined in Exchange Act Rule 16a 1 f adopted or terminated a Rule 10b5 1 trading arrangement or non Rule 10b5 1 trading arrangement as each term is defined in Item 408 of Regulation S K
The information required by this Item except for the information regarding executive officers required by Item 401 of Regulation S K which is included in Part I hereof is incorporated herein by reference to the Proxy Statement including under those sections of the Proxy Statement to be titled Proposal 1 Election of Directors and Our Board Committees The Proxy Statement will be filed within 120 days after the end of our fiscal year
Our Chief Executive Officer and Senior Financial Executive Code of Ethics applies to our chief executive officer and our senior financial officers The Chief Executive Officer and Senior Financial Executive Code of Ethics is located on our investor relations website at https ir cbrands com Amendments to and waivers granted under our Chief Executive Officer and Senior Financial Executive Code of Ethics if any will be posted to our investor relations website as well We will provide to anyone without charge upon request a copy of such Code of Ethics Such requests should be directed in writing to Investor Relations Department Constellation Brands Inc 50 East Broad Street Rochester New York 14614 or by telephoning our Investor Center at 1 888 922 2150
Our Board of Directors has adopted an insider trading policy governing purchases sales and other transactions in our securities by employees officers directors and other designated individuals which is reasonably designed to promote compliance with applicable securities laws and regulations A copy of this policy is filed as Exhibit 19 1 to this Form 10 K In addition with regard to the Company s trading in its own securities it is the Company s policy to comply with applicable securities laws regulations and New York Stock Exchange listing standards
The information required by this Item is incorporated herein by reference to the Proxy Statement including under those sections of the Proxy Statement to be titled Executive Compensation except for the information under the subheadings Pay versus Performance and Proposal 3 Advisory Vote on Executive Compensation Compensation Committee Interlocks and Insider Participation and Director Compensation The Proxy Statement will be filed within 120 days after the end of our fiscal year Notwithstanding the foregoing the Compensation Committee Report included within the section of the Proxy Statement to be titled Executive Compensation is only being furnished hereunder and shall not be deemed filed with the SEC or subject to the liabilities of Section 18 of the Exchange Act
The information required by this Item is incorporated herein by reference to the Proxy Statement including under that section of the Proxy Statement to be titled Beneficial Ownership The Proxy Statement will be filed within 120 days after the end of our fiscal year
The following table sets forth information with respect to our compensation plans under which our equity securities may be issued as of February 28 2025 The equity compensation plans approved by security holders include our Long Term Stock Incentive Plan and our 1989 Employee Stock Purchase Plan
Includes 253 141 shares of unvested performance share units and 333 985 shares of unvested restricted stock units under our Long Term Stock Incentive Plan The unvested performance share units represent the maximum number of shares to be awarded or up to 200 of the target shares granted We currently estimate that 113 069 of the target shares granted will be awarded at approximately 50 and 27 003 of the target shares granted will not be awarded based upon our expectations as of February 28 2025 regarding the achievement of specified performance targets
Includes 1 044 053 shares of Class A Stock under our Employee Stock Purchase Plan remaining available for purchase of which approximately 40 500 shares are subject to purchase during the current offering period
The information required by this Item is incorporated herein by reference to the Proxy Statement including under those sections of the Proxy Statement to be titled Proposal 1 Election of Directors Board Leadership Structure Our Board Committees and Certain Relationships and Related Transactions The Proxy Statement will be filed within 120 days after the end of our fiscal year
The information required by this Item is incorporated herein by reference to the Proxy Statement including under that section of the Proxy Statement to be titled Audit Matters The Proxy Statement will be filed within 120 days after the end of our fiscal year
Restatement Agreement dated as of April 14 2022 by and among the Company CB International Finance S à r l Bank of America N A as Administrative Agent and the Lenders party thereto including the Tenth Amended and Restated Credit Agreement dated as of April 14 2022 by and among the Company CB International Finance S à r l Bank of America N A as Administrative Agent and the Lenders party thereto
Amendment No 1 dated as of October 18 2022 to Tenth Amended and Restated Credit Agreement dated as of April 14 2022 by and among the Company CB International Finance S à r l Bank of America N A as Administrative Agent and the Lenders party thereto
Form of Terms and Conditions Memorandum for Employees with respect to grants of options to purchase Class 1 Stock pursuant to the Company s Long Term Stock Incentive Plan grants on or after April 28 2014 and before April 25 2016
Form of Terms and Conditions Memorandum for Employees with respect to grants of options to purchase Class 1 Stock pursuant to the Company s Long Term Stock Incentive Plan grants on or after April 25 2016 and before April 21 2017
Form of Terms and Conditions Memorandum for Employees with respect to grants of options to purchase Class 1 Stock pursuant to the Company s Long Term Stock Incentive Plan grants on or after April 21 2017 and before April 23 2018
Form of Terms and Conditions Memorandum for Employees with respect to grants of options to purchase Class 1 Stock pursuant to the Company s Long Term Stock Incentive Plan grants on or after April 23 2018 and before April 23 2019
Form of Terms and Conditions Memorandum for Employees with respect to grants of options to purchase Class 1 Stock pursuant to the Company s Long Term Stock Incentive Plan grants on or after April 23 2019 and before April 21 2020
Form of Terms and Conditions Memorandum for Employees with respect to grants of options to purchase Class 1 Stock pursuant to the Company s Long Term Stock Incentive Plan grants on or after April 21 2020
Form of Terms and Conditions Memorandum for Directors with respect to grants of options to purchase Class 1 Stock pursuant to the Company s Long Term Stock Incentive Plan grants on or after July 23 2014 and before July 20 2016
Form of Terms and Conditions Memorandum for Directors with respect to options to purchase Class 1 Stock pursuant to the Company s Long Term Stock Incentive Plan grants on or after July 20 2016 and before July 18 2017
Form of Terms and Conditions Memorandum for Directors with respect to options to purchase Class 1 Stock pursuant to the Company s Long Term Stock Incentive Plan grants on or after July 18 2017 and before July 16 2019
Form of Executive Employment Agreement between the Company and certain of its Executive Officers including James O Bourdeau Garth Hankinson Michael McGrew Mallika Monteiro and James A Sabia Jr and a former Executive Officer
Form of Waiver to Reclassification Agreement with respect to offices in the Company s Florida location by the Company s former Executive Chairman of the Board and its former Executive Vice Chairman of the Board
Registration Rights Agreement dated as of November 10 2022 by and among the Company and the stockholders party thereto including form of Joinder by and among the Company and the entities party thereto including AJB Business Holdings LP and ZMSS Business Holdings LP
The exhibits disclosure schedules and other schedules as applicable have been omitted pursuant to Item 601 a 5 of Regulation S K The Company agrees to furnish supplementally a copy of such exhibits disclosure schedules and other schedules as applicable or any section thereof to the SEC upon request
The Company agrees upon request of the SEC to furnish copies of each instrument that defines the rights of holders of long term debt of the Company or its subsidiaries that is not filed herewith pursuant to Item 601 b 4 iii A because the total amount of long term debt authorized under such instrument does not exceed 10 of the total assets of the Company and its subsidiaries on a consolidated basis
Pursuant to the requirements of Section 13 or 15 d of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized
Pursuant to the requirements of the Securities Exchange Act of 1934 this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated

Company Name	CONSTELLATION BRANDS, INC. Vist SEC web-site
Category	BEVERAGES
Trading Symbol	STZ