Constellation Brands Inc.
10/07/2026 | Press release | Distributed by Public on 10/07/2026 12:01
Quarterly Report for Quarter Ending August 31, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
INTRODUCTION
This MD&A provides additional information on our businesses, current developments, financial condition, cash flows, and results of operations. It should be read in conjunction with our Financial Statements and with our consolidated financial statements and notes included in our 2026 Annual Report. This MD&A is organized as follows:
Overview
This section provides a general description of our business, which we believe is important in understanding the results of our operations, financial condition, and potential future trends.
Strategy
This section provides a description of our strategy, including our 2025 Restructuring Initiative, and a discussion of a recent development and certain acquisitions, divestitures, and investments.
Results of operations
This section provides an analysis of our results of operations presented on a business segment basis for the three months ended August 31, 2026, and August 31, 2025, and six months ended August 31, 2026, and August 31, 2025. In addition, a brief description of certain transactions and other items that affect the comparability of the results is provided.
Liquidity and capital resources
This section provides an analysis of our cash flows, outstanding debt, and liquidity position. Included in the analysis of outstanding debt is a discussion of the financial capacity available to fund our on-going operations and future commitments, as well as a discussion of other financing arrangements.
OVERVIEW
We are an international producer and marketer of beer, wine, and spirits with operations in the U.S., Mexico, New Zealand, and Italy with powerful, consumer-connected, high-quality brands like Modelo Especial, Corona Extra, Pacifico, Victoria, Kim Crawford, Ruffino, The Prisoner Wine Company, Robert Mondavi Winery, Mi CAMPO, and High West. In the U.S., we are one of the top dollar share gainers among beverage alcohol suppliers. We are also the second-largest beer company and have the #1 beer brand, Modelo Especial, in dollar sales in the U.S. We continued to strengthen our leadership position in the U.S. beer market as the #1 dollar share gainer in the overall U.S. beer market
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and the #2 dollar share gainer in the high-end. Within wine and spirits, we have implemented a multi-year strategy that repositioned this business to a portfolio of exclusively higher-end brands that we believe is positioned for long-term growth, aligned to our focus on consumer-led premiumization trends, and we continue to progressively expand our supply channels through DTC and international markets. The strength of our brands makes us a supplier of choice to many of our consumers and our Customers, which include wholesale distributors and retailers. We conduct our business through entities we wholly own as well as through a variety of joint ventures and other entities.
Our internal management financial reporting consists of two business divisions: (i) Beer and (ii) Wine and Spirits and we report our operating results in three segments: (i) Beer, (ii) Wine and Spirits, and (iii) Corporate Operations and Other. In the Beer segment, our portfolio consists of high-end imported beer brands and ABAs. We have an exclusive perpetual brand license to produce our beer portfolio and to import, market, and sell such portfolio in the U.S. In the Wine and Spirits segment, we sell a portfolio comprised of exclusively higher-end wine and spirits brands. Amounts included in the Corporate Operations and Other segment consist of costs of corporate communications, corporate development, corporate finance, corporate strategy, executive management, human resources, internal audit, investor relations, IT, legal, and public affairs, as well as our investments such as those made through our corporate venture capital function. All costs included in the Corporate Operations and Other segment are general costs that are applicable to the consolidated group and are, therefore, not allocated to the other reportable segments. All costs reported within the Corporate Operations and Other segment are not included in our CODM's evaluation of the operating income (loss) performance of the other reportable segments. The business segments reflect how our operations are managed, how resources are allocated, how operating performance is evaluated by senior management, and the structure of our internal financial reporting.
STRATEGY
Our overall strategic vision is to consistently deliver industry-leading total stockholder returns over the long-term through a focus on these key elements:
•continue to build strong brands people love with advantaged routes to market;
•build a culture that is consumer-obsessed and leverages robust innovation capabilities to stay on the forefront of consumer trends;
•deploy capital in line with disciplined and balanced priorities;
•empower the whole enterprise to achieve best-in-class operational efficiency; and
•deliver on impactful environmental, social, and governance initiatives that we believe are not only good business, but also good for the world.
We will continue to strive for success by ensuring consumer-led decision making drives all aspects of our business; building a strong talent pipeline with best-in-class people development; investing in infrastructure that supports and enables our business, including data systems and architecture; and exemplifying intentional and proactive fiscal management. We place focus on positioning our portfolio on higher-margin, higher-growth categories of the beverage alcohol industry to align with our strategy to address consumer-led premiumization, product, and purchasing trends, which we anticipate will continue to drive stronger growth rates relative to the industry. To capitalize on these ongoing trends and evolving consumer occasions and preferences, we will continue to employ our commercial and operational strategies, with a focus on capturing additional growth opportunities by winning with more consumers across more occasions. The strategic priorities to support our next phase of growth are organized around three distinct pillars:
Sustaining growth across our scaled brands
Reduce distribution gaps, invest in and optimize marketing and brand activation, leverage price-pack architecture and revenue growth management initiatives, and expand brand relevance across occasions
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Scaling our next wave brands
Expand distribution, make disciplined marketing investments, and build awareness by leveraging our brand-building, commercial execution, and distribution capabilities to scale our brands and capture growth opportunities
Diversifying with discipline into new growth segments
Invest behind organic growth opportunities for our existing portfolio, supplemented by targeted investments and acquisitions, including by selectively expanding into new consumer demand spaces aimed at sustainable consumer trends
Underpinning all three growth pillars are our consumer insights capabilities, which we intend to continue to strengthen through our ongoing digital acceleration initiatives aimed at driving results by enhancing our technology, data, and digital capabilities in key areas. We believe advancing these capabilities will enable us to operate with greater speed and agility, deepen our understanding of evolving consumer behaviors and occasions, and make more informed decisions across our business. Additionally, we believe our continued focus on maintaining a strong balance sheet provides a solid financial foundation to support our broader strategic initiatives.
Our business strategy for the Beer segment focuses on upholding our leadership position in the U.S. beer market, including as a leader in the high-end segment, and continuing to seek to grow our high-end imported beer brands through maintenance of leading margins, enhancements to our results of operations and operating cash flow, and exploring new avenues for growth. Additionally, we continue to invest in the next phase of modular capacity additions necessary to support our anticipated future growth with activities under our Brewery Projects. We now expect commercial production at the Veracruz Brewery to commence at the beginning of Fiscal 2028.
Our business strategy for the Wine and Spirits segment continues to focus on delivering long-term growth. With our portfolio of exclusively higher-end brands and our continued focus on operational efficiencies, we remain committed to improving margins and driving growth. We intend to expand our brands across U.S. wholesale, international markets, and DTC channels (including hospitality) to maximize our total addressable market opportunity by leveraging our global, omni-channel capabilities.
Marketing, sales, and distribution of our products are primarily managed on a geographic basis allowing us to leverage leading market positions. In addition, market dynamics and consumer trends vary across each of our markets. Within our primary market in the U.S., we offer a range of beverage alcohol products across the imported beer, ABA, and branded wine and spirits categories, with generally separate distribution networks utilized for (i) our beer portfolio and (ii) our wine and spirits portfolio. The environment for our products is competitive in each of our markets.
We remain committed to our long-term financial model of: growing sales, expanding margins, and increasing cash flow in order to continue to achieve comparable earnings per share growth as well as our target ratios for (i) comparable net leverage and (ii) dividend payout; investing to support the growth of our business; and delivering additional returns to stockholders through periodic share repurchases. Our results of operations and financial condition have been and may continue to be affected by the dynamic and evolving consumer environment largely driven by ongoing economic uncertainty and additional headwinds from other socioeconomic factors. These factors impacting consumers may include subdued spend, depressed sentiment, value-seeking behaviors, higher prices and reductions in the discretionary income available to purchase our products, including from increased fuel prices, elevated unemployment, inflation, other unfavorable global and regional economic conditions, demographic trends in the U.S., global supply chain disruptions and constraints, geopolitical events and tensions, wars, and military conflicts, including the conflict in the Middle East.
Developments in international trade relations, including significant additional changes in U.S. trade policy and actions which may include threatened, new, and increased tariffs imposed by the U.S. government on other countries, retaliatory tariffs and actions imposed on certain U.S. goods, and subsequent modifications and delays to or invalidation of various tariffs as well as associated litigation and developments have produced heightened uncertainty
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with respect to trade and tariff policies and regulations affecting trade between the U.S. and other countries, which could continue to alter the global trade environment. For example, the U.S. government has imposed tariffs on certain product imports, including on aluminum and aluminum derivatives, and certain other countries have implemented tariffs and other actions on U.S. goods, such as boycotts and tariffs on certain product imports originating from the U.S. imposed by the Canadian federal and some provincial governments and retaliatory tariffs in other international markets, although some of these tariffs were subsequently modified, delayed, suspended, or invalidated. Various tariffs and other actions negatively impacted our results of operations for Fiscal 2026 and are expected to continue to have a negative impact for Fiscal 2027. In April 2026, the U.S. government removed beer made from malt, which includes our beer products, from the scope of the Section 232 aluminum and aluminum derivative tariffs that had been in place at various rates since February 2025.
We expect some or all of these market conditions and their impacts to continue during the remainder of Fiscal 2027 which could have a material impact on our results of operations and financial condition. We intend to continue to monitor the dynamic and evolving consumer and socioeconomic environments and their impacts on our business. In addition, we have executed the majority of the work associated with the 2025 Restructuring Initiative, which is an enterprise-wide cost savings and restructuring initiative designed to help optimize the performance of our business, including through enhanced organizational efficiency and optimized expenditures across our organization. We also intend to continue our commodity and foreign exchange hedging programs. However, there can be no assurance that we will be able to adequately respond to softer consumer demand trends or fully mitigate rising costs, including as a result of new or increased tariffs, through increased selling prices, cost, productivity, efficiency, and inventory management initiatives, optimized marketing plans, and/or our commodity and foreign exchange hedging programs. Furthermore, to the extent severe weather events that impact our business, such as wildfires, droughts, floods, extreme heat, and/or late frosts, or other weather conditions that constrain purchasing occasions for our consumers, continue to occur or accelerate in future periods, it could have a material impact on our results of operations and financial condition.
2025 Restructuring Initiative
We have implemented the 2025 Restructuring Initiative which is expected to yield over $200 million in net annualized cost savings by Fiscal 2028. The majority of the work associated with the 2025 Restructuring Initiative was executed within Fiscal 2026. The 2025 Restructuring Initiative is estimated to result in nearly $130 million of cumulative pre-tax costs once all phases are fully implemented. In connection with the 2025 Restructuring Initiative, we recognized $5.5 million of pre-tax restructuring costs in Six Months 2027 and $127.4 million of cumulative pre-tax costs since the inception of this initiative. These costs were included in selling, general, and administrative costs within our consolidated results. For additional information on the 2025 Restructuring Initiative, refer to Note 2.
Recent Development
SpikedAde acquisition
In October 2026, we acquired the SpikedAde business, a spirit-based RTD beverage brand for an initial purchase price of $75 million. The agreement also provides for contingent consideration of up to $278 million payable over five years based on the future performance of the SpikedAde business. The SpikedAde results of operations will be reported in the Beer segment and will be included in our consolidated results of operations from the date of acquisition. This transaction supports our strategy to selectively expand into new demand spaces aimed at sustainable consumer trends. For additional information, refer to Note 6.
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Acquisitions, Divestitures, and Investments
Beer segment
HOPWTR
In April 2026, we purchased the remaining ownership interest in HOPWTR, a premium non-alcoholic brand crafted with hops, adaptogens, and nootropics, which has been a part of our corporate ventures portfolio since 2021. This acquisition supports our strategic focus on meeting the evolving needs of our consumers.
Wine and Spirits segment
New Zealand Wine Divestitures
In June 2026, we sold eight small-scale domestic-market New Zealand mainstream wine brands and associated inventory, equipment, a winery, and vineyards. The net cash proceeds from this transaction were used for general corporate purposes.
2025 Wine Divestitures
On June 2, 2025, we sold and, in certain instances, exclusively licensed the trademarks of a portion of our wine and spirits business, primarily centered around our then-owned mainstream wine brands and associated inventory, wineries, vineyards, offices, and facilities. We received $846.5 million of cash proceeds, which were used for the repayment of debt.
These Wine and Spirits segment divestitures support our strategic focus on consumer-led premiumization trends and meeting the evolving needs of our consumers.
Corporate Operations and Other segment
Corporate ventures investment
As of August 31, 2025, we evaluated an equity method investment, made through our corporate venture capital function, and determined there was an other-than-temporary impairment due to business underperformance.
For additional information on these acquisitions, divestitures, and investments refer to Notes 5 and 6.
RESULTS OF OPERATIONS
Financial Highlights
References to organic throughout the following discussion exclude the impact of the 2025 Wine Divestitures, where appropriate.
Second Quarter 2027 compared to Second Quarter 2026
Net sales increased 6% primarily driven by 5.5% and 15.4% shipment volume growth within the Beer and Wine and Spirits segments, respectively. While our net sales benefited from shipment volume growth, we believe they continued to be impacted by the economic uncertainty and socioeconomic factors discussed above.
Operating income decreased 8% primarily due to (i) Second Quarter 2027 asset impairment and related expenses, (ii) higher marketing spend, and (iii) unfavorable short-term incentive accruals, partially offset by (i) the shipment volume growth, (ii) lower tariff costs as compared to Second Quarter 2026, and (iii) continued successful execution of efficiency and cost optimization initiatives, including the 2025 Restructuring Initiative.
Net income attributable to CBI and diluted net income per common share attributable to CBI increased 21% and 25%, respectively, primarily due to a lower provision for income taxes, partially offset by the items discussed above.
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Six Months 2027 compared to Six Months 2026
Net sales increased 1% primarily due to 3.7% shipment volume growth within the Beer segment, partially offset by the loss of net sales as a result of the 2025 Wine Divestitures despite 11.5% organic shipment volume growth within the Wine and Spirits segment. While our net sales benefited from shipment volume growth, we believe they continued to be impacted by the economic uncertainty and socioeconomic factors discussed above.
Operating income increased 4% primarily due to (i) shipment volume growth within the Beer segment, (ii) favorable Comparable Adjustments led by higher net gains recognized on undesignated commodity derivative contracts for Six Months 2027 compared with Six Months 2026, (iii) lower tariff costs as compared to Six Months 2026, and (iv) continued successful execution of efficiency and cost optimization initiatives, including the 2025 Restructuring Initiative, partially offset by (i) higher marketing spend and (ii) the lower Wine and Spirits segment net sales as a result of the 2025 Wine Divestitures.
Net income attributable to CBI and diluted net income per common share attributable to CBI increased 24% and 28%, respectively, primarily due to a lower provision for income taxes and the items discussed above.
Comparable Adjustments
Management excludes items that affect comparability from its evaluation of the results of each operating segment as these Comparable Adjustments are not reflective of core operations of the segments. Segment operating performance and the incentive compensation of segment management are evaluated based on core segment operating income (loss) which does not include the impact of these Comparable Adjustments.
As more fully described herein and in the related Notes, the Comparable Adjustments that impacted comparability in our segment results for each period are as follows:
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Second Quarter 2027 |
Second Quarter 2026 |
Six Months 2027 |
Six Months 2026 |
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| Cost of product sold | |||||||||||||||||||||||
| Settlements of undesignated commodity derivative contracts | $ | (14.8) | $ | 4.2 | $ | (24.2) | $ | 6.7 | |||||||||||||||
| Strategic business reconfiguration costs | (3.7) | (1.2) | (4.3) | (1.6) | |||||||||||||||||||
| Flow through of inventory step-up | (0.1) | (0.8) | (1.1) | (1.7) | |||||||||||||||||||
| Net gain (loss) on undesignated commodity derivative contracts | 3.4 | 13.0 | 52.7 | (4.7) | |||||||||||||||||||
| Comparable Adjustments, Cost of product sold | (15.2) | 15.2 | 23.1 | (1.3) | |||||||||||||||||||
| Selling, general, and administrative expenses | |||||||||||||||||||||||
| Strategic business reconfiguration costs | (14.2) | - | (13.9) | (5.2) | |||||||||||||||||||
| 2025 Restructuring Initiative | (4.9) | (8.3) | (5.5) | (21.6) | |||||||||||||||||||
| Transition services agreements activity | (4.6) | (10.0) | (9.7) | (15.5) | |||||||||||||||||||
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Gain (loss) on sale of business
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(1.8) | (14.9) | (4.3) | (16.3) | |||||||||||||||||||
| Other gains (losses) | (1.1) | 5.8 | (2.1) | 3.7 | |||||||||||||||||||
| Comparable Adjustments, Selling, general, and administrative expenses | (26.6) | (27.4) | (35.5) | (54.9) | |||||||||||||||||||
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Asset impairment and related expenses
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(49.8) | - | (68.1) | (52.1) | |||||||||||||||||||
| Comparable Adjustments, Operating income (loss) | $ | (91.6) | $ | (12.2) | $ | (80.5) | $ | (108.3) | |||||||||||||||
| Comparable Adjustments, Income (loss) from unconsolidated investments | $ | - | $ | (10.1) | $ | - | $ | (10.1) | |||||||||||||||
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Cost of product sold
Undesignated commodity derivative contracts
Net gain (loss) on undesignated commodity derivative contracts represents a net gain (loss) from the changes in fair value of undesignated commodity derivative contracts. The net gain (loss) is reported outside of segment operating results until such time that the underlying exposure is recognized in the segment operating results. At settlement, the net gain (loss) from the changes in fair value of the undesignated commodity derivative contracts is reported in the appropriate operating segment, allowing the results of our operating segments to reflect the economic effects of the commodity derivative contracts without the resulting unrealized mark to fair value volatility.
Strategic business reconfiguration costs
We recognized costs primarily in connection with losses on write-downs of excess inventory resulting from our initiatives to streamline operations, improve efficiencies, and reduce our cost structure primarily within our Wine and Spirits segment.
Flow through of inventory step-up
In connection with acquisitions, the allocation of purchase price in excess of book value for certain inventories on hand at the date of acquisition is referred to as inventory step-up. Inventory step-up represents an assumed manufacturing profit attributable to the acquired business prior to acquisition.
Selling, general, and administrative expenses
Strategic business reconfiguration costs
We recognized (i) costs in connection with activities intended to streamline operations, improve efficiencies, and reduce our cost structure and (ii) a loss on settlement of a receivable related to the sale of a previously-owned facility (Second Quarter 2027, Six Months 2027).
2025 Restructuring Initiative
We recognized costs in connection with an enterprise-wide cost savings and restructuring initiative designed to help optimize the performance of our business.
Transition services agreements activity
We recognized costs in connection with transition services agreements related to the previous sales of portions of our wine and spirits business.
Gain (loss) on sale of business
We recognized a net gain (loss) largely in connection with the 2025 Wine Divestitures (Second Quarter 2026, Six Months 2027, Six Months 2026).
Other gains (losses)
We recognized other gains (losses) largely due to a net gain from the sales of assets (Second Quarter 2026, Six Months 2026).
Asset impairment and related expenses
We recognized (i) impairments on assets held for sale associated with management's plan to divest the Nelson's Green Brier business (Second Quarter 2027, Six Months 2027) and on then-existing net assets held for sale in connection with the New Zealand Wine Divestitures (Six Months 2027) and (ii) contract liabilities and inventory obsolescence expenses associated with the 2025 Wine Divestitures, partially offset by changes in the carrying value of those then-existing net assets held for sale (Six Months 2026). For additional information, refer to Note 5.
Income (loss) from unconsolidated investments
We recognized (i) unrealized net losses from the changes in fair value of our securities measured at fair value (Second Quarter 2026, Six Months 2026), (ii) other losses related to an investment made through our corporate venture capital
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function (Second Quarter 2026, Six Months 2026), and (iii) an impairment of an equity method investment (Second Quarter 2026, Six Months 2026).
Business Segments
Second Quarter 2027 compared to Second Quarter 2026
Net sales
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Second Quarter 2027 |
Second Quarter 2026 |
Dollar Change |
Percent Change |
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| Beer | $ | 2,473.6 | $ | 2,345.0 | $ | 128.6 | 5 | % | |||||||||||||||
| Wine and Spirits | 159.4 | 136.0 | 23.4 | 17 | % | ||||||||||||||||||
| Consolidated net sales | $ | 2,633.0 | $ | 2,481.0 | $ | 152.0 | 6 | % | |||||||||||||||
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Beer segment
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Second Quarter 2027 |
Second Quarter 2026 |
Dollar Change |
Percent Change |
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| (in millions, branded product, 24-pack, 12-ounce case equivalents) | ||||||||||||||||||||||||||
| Net sales | $ | 2,473.6 | $ | 2,345.0 | $ | 128.6 | 5 | % | ||||||||||||||||||
| Shipments | 123.9 | 117.4 | 5.5 | % | ||||||||||||||||||||||
| Depletions | (0.6 | %) | ||||||||||||||||||||||||
The increase in Beer net sales is due to (i) $130.2 million of shipment volume growth, as distributors sought to rebuild inventory days-on-hand and (ii) $12.8 million of favorable impact from pricing in select markets, partially offset by $14.4 million of unfavorable product mix primarily from a shift in package types.
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Wine and Spirits segment
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Second Quarter 2027 |
Second Quarter 2026 |
Dollar Change |
Percent Change |
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| (in millions, branded product, 9-liter case equivalents) | ||||||||||||||||||||||||||
| Net sales | $ | 159.4 | $ | 136.0 | $ | 23.4 | 17 | % | ||||||||||||||||||
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Shipments
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1.5 | 1.3 | 15.4 | % | ||||||||||||||||||||||
| Depletions | 10.2 | % | ||||||||||||||||||||||||
The increase in Wine and Spirits net sales is primarily due to $21.4 million of branded wine and spirits shipment volume growth and favorable product mix. The shipment volume growth benefited from strategic pricing actions taken on select brands in our U.S. wholesale channel.
Gross profit
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Second Quarter 2027 |
Second Quarter 2026 |
Dollar Change |
Percent Change |
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| (in millions) | |||||||||||||||||||||||
| Beer | $ | 1,337.7 | $ | 1,240.0 | $ | 97.7 | 8 | % | |||||||||||||||
| Wine and Spirits | 70.5 | 54.8 | 15.7 | 29 | % | ||||||||||||||||||
| Comparable Adjustments | (15.2) | 15.2 | (30.4) | NM | |||||||||||||||||||
| Consolidated gross profit | $ | 1,393.0 | $ | 1,310.0 | $ | 83.0 | 6 | % | |||||||||||||||
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The increase in Beer gross profit is due to (i) $68.8 million of shipment volume growth, (ii) $33.9 million of decreased cost of product sold, and (iii) the $12.8 million favorable impact from pricing, partially offset by $17.8 million of unfavorable product mix. The decrease in cost of product sold is primarily due to (i) $24.1 million of lower tariffs as compared to Second Quarter 2026, largely on aluminum imports under Section 232, (ii) $23.3 million of favorable fixed cost absorption related to increased production levels as compared to Second Quarter 2026, and (iii) $9.4 million of lower depreciation, partially offset by the following increases (i) $10.3 million of warehousing and obsolescence costs and (ii) $10.2 million of materials costs, including glass, aluminum, and paper.
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The increase in Wine and Spirits gross profit is primarily due to (i) $11.1 million of branded wine and spirits shipment volume growth and (ii) $7.7 million of decreased cost of product sold. The decrease in cost of product sold is largely driven by U.S. tariff claims recoveries and cost savings measures as a result of the 2025 Restructuring Initiative, partially offset by higher transportation and warehousing costs as compared to Second Quarter 2026.
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Gross profit as a percent of net sales increased to 52.9% for Second Quarter 2027 compared with 52.8% for Second Quarter 2026. This increase was led by rate growth from lower cost of product sold within the Beer and Wine and Spirits segments, contributing approximately 130 basis points and approximately 30 basis points, respectively. These increases were partially offset by (i) an unfavorable change in Comparable Adjustments of 115 basis points and (ii) approximately 40 basis points of unfavorable product mix shift within the Beer segment.
Selling, general, and administrative expenses
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Second Quarter 2027 |
Second Quarter 2026 |
Dollar Change |
Percent Change |
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| (in millions) | |||||||||||||||||||||||
| Beer | $ | 373.5 | $ | 288.4 | $ | 85.1 | 30 | % | |||||||||||||||
| Wine and Spirits | 64.4 | 74.6 | (10.2) | (14 | %) | ||||||||||||||||||
| Corporate Operations and Other | 73.7 | 45.6 | 28.1 | 62 | % | ||||||||||||||||||
| Comparable Adjustments | 26.6 | 27.4 | (0.8) | NM | |||||||||||||||||||
| Consolidated selling, general, and administrative expenses | $ | 538.2 | $ | 436.0 | $ | 102.2 | 23 | % | |||||||||||||||
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The increase in Beer selling, general, and administrative expenses is primarily due to $54.5 million and $30.7 million of increased marketing spend and general and administrative expenses, respectively. Marketing as a percentage of net sales increased year-over-year in continued support of our high-end imported beer brands. The increase in general and administrative expenses is primarily due to higher compensation and benefits, led by unfavorable short-term incentive accruals as compared to Second Quarter 2026.
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The decrease in Wine and Spirits selling, general, and administrative expenses is primarily due to $5.7 million and $5.0 million of decreased marketing spend and general and administrative expenses, respectively. The decrease in marketing spend is driven by investment optimization for our smaller portfolio of exclusively higher-end wine and spirits brands. The decrease in general and administrative expenses was largely driven by cost savings measures as a result of the 2025 Restructuring Initiative.
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The increase in Corporate Operations and Other selling, general, and administrative expenses is largely driven by higher compensation and benefits, led by unfavorable short-term incentive accruals, as compared to Second Quarter 2026.
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Selling, general, and administrative expenses as a percent of net sales increased to 20.4% for Second Quarter 2027 as compared to 17.6% for Second Quarter 2026. This increase was driven by rate growth from higher selling, general,
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and administrative expenses within the Beer and Corporate Operations and Other segments, contributing approximately 240 basis points and 105 basis points, respectively. These increases were partially offset by lower selling, general, and administrative expenses within the Wine and Spirits segment, contributing approximately 55 basis points of rate decline.
Operating income (loss)
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Second Quarter 2027 |
Second Quarter 2026 |
Dollar Change |
Percent Change |
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| (in millions) | |||||||||||||||||||||||
| Beer | $ | 964.2 | $ | 951.6 | $ | 12.6 | 1 | % | |||||||||||||||
| Wine and Spirits | 6.1 | (19.8) | 25.9 | 131 | % | ||||||||||||||||||
| Corporate Operations and Other | (73.7) | (45.6) | (28.1) | (62 | %) | ||||||||||||||||||
| Comparable Adjustments | (91.6) | (12.2) | (79.4) | NM | |||||||||||||||||||
| Consolidated operating income (loss) | $ | 805.0 | $ | 874.0 | $ | (69.0) | (8 | %) | |||||||||||||||
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The increase in Beer operating income is primarily attributable to the shipment volume growth, lower cost of product sold, and favorable impact from pricing, partially offset by the higher marketing spend and compensation and benefits, led by unfavorable short-term incentive accruals, as described above.
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The increase in Wine and Spirits operating income is primarily attributable to the shipment volume growth, U.S. tariff claims recoveries, and cost savings measures as a result of the 2025 Restructuring Initiative, as described above.
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As previously discussed, the increase in Corporate Operations and Other operating loss is largely attributable to the higher compensation and benefits as compared to Second Quarter 2026.
|
|||||
Income (loss) from unconsolidated investments
|
Second Quarter 2027 |
Second Quarter 2026 |
Dollar Change |
Percent Change |
||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
|
Equity in earnings (losses) from equity method investees
|
$ | 7.0 | $ | 3.0 | $ | 4.0 | 133 | % | |||||||||||||||
| Impairment of equity method investments | - | (1.5) | 1.5 | NM | |||||||||||||||||||
| Unrealized net gain (loss) on securities measured at fair value | 0.8 | (5.0) | 5.8 | 116 | % | ||||||||||||||||||
|
Income (loss) from unconsolidated investments
|
$ | 7.8 | $ | (3.5) | $ | 11.3 | NM | ||||||||||||||||
Interest expense, net
Interest expense, net decreased to $83.4 million for Second Quarter 2027 as compared to $87.6 million for Second Quarter 2026. This decrease of $4.2 million, or 5%, is due to approximately $235 million of lower average borrowings, partially offset by approximately five basis points of higher weighted average interest rates. For additional information, refer to Note 8.
(Provision for) benefit from income taxes
The provision for income taxes decreased to $147.1 million for Second Quarter 2027 from $296.8 million for Second Quarter 2026. Our effective tax rate for Second Quarter 2027 was 20.2% as compared with 37.9% for Second Quarter
| Constellation Brands, Inc. Q2 FY 2027 Form 10-Q |
#WORTHREACHINGFOR I 37
|
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| MD&A | |||||
2026. In comparison to prior year, our effective tax rate was primarily impacted by a net income tax benefit resulting from changes to valuation allowances; partially offset by the resolution of various tax examinations and assessments related to prior periods. For additional information, refer to Note 9.
Net income (loss) attributable to CBI
Net income attributable to CBI increased to $565.8 million for Second Quarter 2027 from $466.0 million for Second Quarter 2026. This increase of $99.8 million, or 21%, is primarily attributable to the (i) lower provision for income taxes and (ii) shipment volume growth, partially offset by (i) Second Quarter 2027 asset impairment and related expenses, (ii) higher marketing spend, and (iii) unfavorable short-term incentive accruals. Additionally, Second Quarter 2027 benefited from the continued successful execution of efficiency and cost optimization initiatives, including the 2025 Restructuring Initiative.
Six Months 2027 compared to Six Months 2026
Net sales
|
Six Months 2027 |
Six Months 2026 |
Dollar Change |
Percent Change |
||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Beer | $ | 4,757.1 | $ | 4,579.5 | $ | 177.6 | 4 | % | |||||||||||||||
| Wine and Spirits | 308.6 | 416.5 | (107.9) | (26 | %) | ||||||||||||||||||
| Consolidated net sales | $ | 5,065.7 | $ | 4,996.0 | $ | 69.7 | 1 | % | |||||||||||||||
|
Beer segment
|
Six Months 2027 |
Six Months 2026 |
Dollar Change |
Percent Change |
||||||||||||||||||||||
| (in millions, branded product, 24-pack, 12-ounce case equivalents) | ||||||||||||||||||||||||||
| Net sales | $ | 4,757.1 | $ | 4,579.5 | $ | 177.6 | 4% | |||||||||||||||||||
| Shipments | 237.2 | 228.7 | 3.7% | |||||||||||||||||||||||
|
Depletions
|
(0.5%) | |||||||||||||||||||||||||
The increase in Beer net sales is due to (i) $170.9 million of shipment volume growth, as distributors sought to rebuild inventory days-on-hand, and (ii) $30.7 million of favorable impact from pricing in select markets, partially offset by $24.0 million of unfavorable product mix primarily from a shift in package types. Additionally, we expect shipment volume to generally align with depletion volume for Fiscal 2027.
|
Wine and Spirits segment
|
Six Months 2027 |
Six Months 2026 |
Dollar Change |
Percent Change |
||||||||||||||||||||||
| (in millions, branded product, 9-liter case equivalents) | ||||||||||||||||||||||||||
| Net sales | $ | 308.6 | $ | 416.5 | $ | (107.9) | (26 | %) | ||||||||||||||||||
| Shipments | 2.9 | 5.2 | (44.2 | %) | ||||||||||||||||||||||
|
Organic shipments (1)
|
2.9 | 2.6 | 11.5 | % | ||||||||||||||||||||||
|
Depletions (1)
|
8.7 | % | ||||||||||||||||||||||||
(1)Includes adjustments to remove volumes associated with the 2025 Wine Divestitures for the period March 1, 2025, through May 31, 2025.
| Constellation Brands, Inc. Q2 FY 2027 Form 10-Q |
#WORTHREACHINGFOR I 38
|
||||
| MD&A | |||||
The decrease in Wine and Spirits net sales is due to $142.0 million from the 2025 Wine Divestitures that are no longer part of our business, partially offset by a $34.1 million increase in organic net sales. The increase in organic net sales is primarily driven by $38.0 million of branded wine and spirits shipment volume growth, which benefited from strategic pricing actions on select brands in our U.S. wholesale channel, partially offset by a decline in non-branded bulk sales. Additionally, we expect shipment volume to decline during the second half of Fiscal 2027 as we continue to progress against mutually agreed-upon finished goods inventory reductions with key distributors.
Gross profit
|
Six Months 2027 |
Six Months 2026 |
Dollar Change |
Percent Change |
||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Beer | $ | 2,555.9 | $ | 2,427.0 | $ | 128.9 | 5 | % | |||||||||||||||
| Wine and Spirits | 134.6 | 150.9 | (16.3) | (11 | %) | ||||||||||||||||||
| Comparable Adjustments | 23.1 | (1.3) | 24.4 | NM | |||||||||||||||||||
| Consolidated gross profit | $ | 2,713.6 | $ | 2,576.6 | $ | 137.0 | 5 | % | |||||||||||||||
|
The increase in Beer gross profit is primarily due to (i) a $90.7 million increase in shipment volume, (ii) $35.7 million of reduced cost of product sold, and (iii) the $30.7 million of favorable impact from pricing, partially offset by $28.2 million of unfavorable product mix. The reduced cost of product sold is primarily due to (i) $56.4 million of favorable fixed cost absorption related to increased production levels as compared to Six Months 2026, (ii) $14.4 million of lower depreciation, and (iii) $8.2 million of lower tariffs as compared to Six Months 2026, largely on aluminum imports under Section 232, partially offset by (i) $22.6 million of higher material costs, including glass, aluminum, paper, and starch, and (ii) $18.0 million of higher warehousing and obsolescence costs.
|
|||||
|
The decrease in Wine and Spirits gross profit is due to $34.1 million from the 2025 Wine Divestitures that is no longer part of our business, partially offset by a $17.8 million increase in organic gross profit. The increase in organic gross profit is primarily attributable to (i) a $25.3 million increase in branded wine and spirits shipment volume and (ii) a $10.0 million decrease in cost of product sold, partially offset by (i) $11.9 million of unfavorable product mix and (ii) a $5.7 million decrease from strategic pricing actions. The decrease in cost of product sold is largely driven by U.S. tariff claims recoveries and cost savings measures as a result of the 2025 Restructuring Initiative, partially offset by higher transportation and warehousing costs as compared to Six Months 2026.
|
|||||
Gross profit as a percent of net sales increased to 53.6% for Six Months 2027 compared with 51.6% for Six Months 2026. This increase was primarily due to rate growth from (i) divestitures of lower-margin brands, contributing approximately 80 basis points, (ii) 70 basis points and 20 basis points from lower cost of product sold within the Beer and Wine and Spirits segments, respectively, (iii) a favorable change in Comparable Adjustments, contributing approximately 50 basis points, and (iv) approximately 30 basis points of favorable impact from beer pricing. These increases were partially offset by approximately 30 basis points of rate decline from unfavorable product mix shift within both the Beer and Wine and Spirits segments, respectively.
| Constellation Brands, Inc. Q2 FY 2027 Form 10-Q |
#WORTHREACHINGFOR I 39
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||||
| MD&A | |||||
Selling, general, and administrative expenses
|
Six Months 2027 |
Six Months 2026 |
Dollar Change |
Percent Change |
||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Beer | $ | 700.3 | $ | 602.0 | $ | 98.3 | 16 | % | |||||||||||||||
| Wine and Spirits | 129.6 | 176.7 | (47.1) | (27 | %) | ||||||||||||||||||
| Corporate Operations and Other | 129.8 | 103.1 | 26.7 | 26 | % | ||||||||||||||||||
| Comparable Adjustments | 35.5 | 54.9 | (19.4) | NM | |||||||||||||||||||
| Consolidated selling, general, and administrative expenses | $ | 995.2 | $ | 936.7 | $ | 58.5 | 6 | % | |||||||||||||||
|
The increase in Beer selling, general, and administrative expenses is primarily driven by $59.7 million and $38.8 million of increased marketing spend and general and administrative expenses, respectively. Marketing as a percentage of net sales increased year-over-year in continued support of our high-end imported beer brands. The increase in general and administrative expenses is primarily due to higher compensation and benefits, led by unfavorable short-term incentive accruals as compared to Six Months 2026.
|
|||||
|
The decrease in Wine and Spirits selling, general, and administrative expenses is primarily driven by $24.2 million and $22.2 million of decreased marketing spend and general and administrative expenses, respectively. The decrease in marketing spend is primarily driven by our smaller portfolio of exclusively higher-end wine and spirits brands. The decrease in general and administrative expenses is largely driven by cost savings measures as a result of the 2025 Restructuring Initiative.
|
|||||
|
The increase in Corporate Operations and Other selling, general, and administrative expenses is largely due to higher compensation and benefits, led by unfavorable short-term incentive accruals compared to Six Months 2026.
|
|||||
Selling, general, and administrative expenses as a percent of net sales increased to 19.6% for Six Months 2027 as compared with 18.7% for Six Months 2026. The increase is primarily driven by (i) 125 basis points and approximately 50 basis points of rate growth from higher selling, general, and administrative expenses within the Beer and Corporate Operations and Other segments, respectively, and (ii) approximately 50 basis points of unfavorable impact from the 2025 Wine Divestitures. These increases were partially offset by (i) approximately 100 basis points of rate decline from decreases in selling, general, and administrative expenses within the Wine and Spirits segment and (ii) an unfavorable change in Comparable Adjustments, contributing approximately 40 basis points of rate decline.
Operating income (loss)
|
Six Months 2027 |
Six Months 2026 |
Dollar Change |
Percent Change |
||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Beer | $ | 1,855.6 | $ | 1,825.0 | $ | 30.6 | 2 | % | |||||||||||||||
| Wine and Spirits | 5.0 | (25.8) | 30.8 | 119 | % | ||||||||||||||||||
| Corporate Operations and Other | (129.8) | (103.1) | (26.7) | (26 | %) | ||||||||||||||||||
| Comparable Adjustments | (80.5) | (108.3) | 27.8 | NM | |||||||||||||||||||
| Consolidated operating income (loss) | $ | 1,650.3 | $ | 1,587.8 | $ | 62.5 | 4 | % | |||||||||||||||
| Constellation Brands, Inc. Q2 FY 2027 Form 10-Q |
#WORTHREACHINGFOR I 40
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||||
| MD&A | |||||
|
The increase in Beer operating income is primarily attributable to the shipment volume growth and lower cost of product sold, partially offset by the higher marketing spend and compensation and benefits, led by unfavorable short-term incentive accruals, as described above.
|
|||||
|
The increase in Wine and Spirits operating income is primarily attributable to (i) the organic branded wine and spirits shipment volume growth, (ii) lower marketing spend, (iii) cost savings measures as a result of the 2025 Restructuring Initiative, and (iv) U.S. tariff claims recoveries, partially offset by the loss of net sales as a result of the 2025 Wine Divestitures, as described above.
|
|||||
|
As previously discussed, the increase in Corporate Operations and Other operating loss is largely due to the higher compensation and benefits as compared to Six Months 2026.
|
|||||
Income (loss) from unconsolidated investments
|
Six Months 2027 |
Six Months 2026 |
Dollar Change |
Percent Change |
||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
|
Equity in earnings (losses) from equity method investees
|
$ | 7.5 | $ | (0.5) | $ | 8.0 | NM | ||||||||||||||||
| Impairment of equity method investments | - | (1.5) | 1.5 | NM | |||||||||||||||||||
| Unrealized net gain (loss) on securities measured at fair value | 0.8 | (5.0) | 5.8 | 116 | % | ||||||||||||||||||
|
Income (loss) from unconsolidated investments
|
$ | 8.3 | $ | (7.0) | $ | 15.3 | 219 | % | |||||||||||||||
Interest expense, net
Interest expense, net decreased to $169.2 million for Six Months 2027 as compared to $186.5 million for Six Months 2026. This decrease of $17.3 million, or 9%, is primarily due to approximately $570 million of lower average borrowings. For additional information, refer to Note 8.
(Provision for) benefit from income taxes
The provision for income taxes decreased to $235.2 million for Six Months 2027 from $384.4 million for Six Months 2026. Our effective tax rate for Six Months 2027 was 15.8% as compared with 27.6% for Six Months 2026. In comparison to prior year, our effective tax rate was primarily impacted by a net income tax benefit resulting from changes to valuation allowances; partially offset by the resolution of various tax examinations and assessments related to prior periods.
We now expect our reported effective tax rate for Fiscal 2027 to be in the range of 11% to 13%. This range includes an estimated income tax benefit of approximately $100 million to $150 million to be recognized during the three months ending November 30, 2026, as a result of certain foreign tax reform enacted in September 2026.
For additional information, refer to Note 9.
Net income (loss) attributable to CBI
Net income attributable to CBI increased to $1,219.6 million for Six Months 2027 from $982.1 million for Six Months 2026. This increase of $237.5 million, or 24%, is primarily attributable to the (i) lower provision for income taxes, (ii) shipment volume growth within the Beer segment, (iii) organic shipment volume growth within the Wine and Spirits segment, and (iv) lower cost of product sold, partially offset by (i) higher marketing spend, (ii) the loss of net sales as a result of the 2025 Wine Divestitures, and (iii) unfavorable short-term incentive accruals. Additionally, Six Months 2027
| Constellation Brands, Inc. Q2 FY 2027 Form 10-Q |
#WORTHREACHINGFOR I 41
|
||||
| MD&A | |||||
benefited from the continued successful execution of efficiency and cost optimization initiatives, including the 2025 Restructuring Initiative.
LIQUIDITY AND CAPITAL RESOURCES
General
Our primary source of liquidity has been cash flow from operating activities. Our ability to consistently generate robust cash flow from our operations is one of our most significant financial strengths. It enables us to invest in our people and our brands, make capital investments and strategic acquisitions, provide a cash dividend program, and repurchase shares of our common stock. Our largest use of cash in our operations is for purchasing and carrying inventories and carrying seasonal accounts receivable. Historically, we have used this cash flow to repay our short-term borrowings and fund capital expenditures. Additionally, we use our short-term borrowings, including borrowings under our commercial paper program, to support our working capital requirements, capital expenditures, and other general corporate purposes, as well as to maintain our access to the capital markets.
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. As of August 31, 2026, and February 28, 2026, the amount payable to this participating financial institution for suppliers who voluntarily participate in the supply chain finance program was $61.7 million and $50.7 million, respectively, and was included with accounts payable on our consolidated balance sheets. We account for payments made under the supply chain finance program the same as our other accounts payable, as a reduction to our cash flow from operating activities.
Cash Flows
|
Six Months 2027 |
Six Months 2026 |
Dollar Change |
|||||||||||||||
| (in millions) | |||||||||||||||||
| Net cash provided by (used in): | |||||||||||||||||
| Operating activities | $ | 1,478.6 | $ | 1,489.3 | $ | (10.7) | |||||||||||
| Investing activities | (350.4) | 464.8 | (815.2) | ||||||||||||||
| Financing activities | (1,131.5) | (1,953.1) | 821.6 | ||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | (0.6) | 2.9 | (3.5) | ||||||||||||||
| Net increase (decrease) in cash and cash equivalents | $ | (3.9) | $ | 3.9 | $ | (7.8) | |||||||||||
| Constellation Brands, Inc. Q2 FY 2027 Form 10-Q |
#WORTHREACHINGFOR I 42
|
||||
| MD&A | |||||
Operating activities
The decrease in net cash provided by (used in) operating activities consists of:
|
Six Months 2027 |
Six Months 2026 |
Dollar Change |
|||||||||||||||
| (in millions) | |||||||||||||||||
| Net income (loss) | $ | 1,254.2 | $ | 1,009.9 | $ | 244.3 | |||||||||||
| Deferred tax provision (benefit) | 26.8 | 277.6 | (250.8) | ||||||||||||||
|
Depreciation
|
194.4 | 207.9 | (13.5) | ||||||||||||||
| Stock-based compensation | 34.9 | 32.1 | 2.8 | ||||||||||||||
| Noncash lease expense | 67.0 | 62.6 | 4.4 | ||||||||||||||
|
Asset impairment and related expenses
|
68.1 | 52.1 | 16.0 | ||||||||||||||
| Other non-cash adjustments | 12.4 | (65.6) | 78.0 | ||||||||||||||
| Change in operating assets and liabilities, net of effects from purchase and sale of business | (179.2) | (87.3) | (91.9) | ||||||||||||||
| Net cash provided by (used in) operating activities | $ | 1,478.6 | $ | 1,489.3 | $ | (10.7) | |||||||||||
The $91.9 million net change in operating assets and liabilities was largely driven by lower accounts receivable for the Wine and Spirits segment due to lower net sales, reflecting the impact of the 2025 Wine Divestitures, partially offset by (i) higher accounts receivable for the Beer segment as a result of timing of sales and collections and (ii) favorable changes in contract liabilities in connection with distribution arrangements for our U.S. wine and spirits brand portfolio. Additionally, net cash provided by operating activities was negatively impacted by higher Six Months 2027 income tax payments as compared to Six Months 2026.
Investing activities
Net cash provided by (used in) investing activities decreased to $(350.4) million for Six Months 2027 from $464.8 million for Six Months 2026. This decrease of $815.2 million, or 175%, was primarily due to $837.2 million lower proceeds from sale of business, driven by the 2025 Wine Divestitures, partially offset by $56.0 million of reduced capital expenditures for Six Months 2027 as compared to Six Months 2026.
Financing activities
The decrease in net cash used in financing activities consisted of:
|
Six Months 2027 |
Six Months 2026 |
Dollar Change |
|||||||||||||||
| (in millions) | |||||||||||||||||
| Net proceeds from (payments of) debt, current and long-term, and related activities | $ | (261.0) | $ | (962.6) | $ | 701.6 | |||||||||||
| Dividends paid | (353.8) | (361.1) | 7.3 | ||||||||||||||
| Purchases of treasury stock and payment of related excise tax | (463.5) | (613.9) | 150.4 | ||||||||||||||
|
Net cash provided by (used in) stock-based compensation activities
|
(2.9) | 3.5 | (6.4) | ||||||||||||||
| Distributions to noncontrolling interests | (50.0) | (17.5) | (32.5) | ||||||||||||||
| Payment of contingent consideration | (0.3) | (1.5) | 1.2 | ||||||||||||||
| Net cash provided by (used in) financing activities | $ | (1,131.5) | $ | (1,953.1) | $ | 821.6 | |||||||||||
| Constellation Brands, Inc. Q2 FY 2027 Form 10-Q |
#WORTHREACHINGFOR I 43
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||||
| MD&A | |||||
Debt
Total debt outstanding as of August 31, 2026, amounted to $10,315.7 million, a decrease of $252.8 million, or 2%, from February 28, 2026. This decrease consisted of:
| Debt issuance |
Debt repayment and redemption
|
||||||||||||||||
Bank facilities
In September 2026, we entered into the 2026 Term Credit Agreement, which provides for a nine-month delayed draw $300.0 million term loan facility, available in up to two draws. The balance is due and payable two years after the initial funding date, if any, occurs. There are no borrowings outstanding under the 2026 Term Credit Agreement.
Senior notes
Issuance
In May 2026, we issued the 4.85% May 2026 Senior Notes. Proceeds from this offering, net of discount and debt issuance costs, were $496.7 million.
Redemption
On September 18, 2026, we redeemed the 4.35% May 2022 Senior Notes prior to maturity using commercial paper borrowings at a redemption price equal to 100% of the outstanding principal amount plus accrued and unpaid interest.
On May 18, 2026, we redeemed the 3.70% December 2016 Senior Notes prior to maturity using proceeds from the 4.85% May 2026 Senior Notes and commercial paper borrowings at a redemption price equal to 100% of the outstanding principal amount plus accrued and unpaid interest.
General
The majority of our outstanding borrowings as of August 31, 2026, consisted of fixed-rate senior unsecured notes, with maturities ranging from calendar 2027 to calendar 2050.
Additionally, we have a commercial paper program which provides for the issuance of up to an aggregate principal amount of $2.25 billion of commercial paper. Our commercial paper program is backed by unused commitments under our revolving credit facility under our 2025 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
| Constellation Brands, Inc. Q2 FY 2027 Form 10-Q |
#WORTHREACHINGFOR I 44
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| MD&A | |||||
facility under our 2025 Credit Agreement to repay commercial paper borrowings. We do not expect that fluctuations in demand for commercial paper will affect our liquidity given our borrowing capacity available under our revolving credit facility.
We had the following remaining borrowing capacity available under our 2025 Credit Agreement:
|
August 31, 2026 |
September 30, 2026 |
||||||||||
| (in millions) | |||||||||||
|
Revolving credit facility (1)
|
$ | 2,122.6 | $ | 1,632.1 | |||||||
(1)Net of outstanding revolving credit facility borrowings and outstanding letters of credit under our 2025 Credit Agreement and outstanding borrowings under our commercial paper program (excluding unamortized discount) of $116.5 million and $607.0 million as of August 31, 2026, and September 30, 2026, respectively.
The financial institutions participating in our 2025 Credit Agreement have complied with prior funding requests and we believe they will comply with any future funding requests. However, there can be no assurances that any particular financial institution will continue to do so.
As of August 31, 2026, we and our subsidiaries were subject to covenants that are contained in our 2025 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 2025 Credit Agreement. As of August 31, 2026, under our 2025 Credit Agreement, the minimum interest coverage ratio was 2.5x and the maximum net leverage ratio was 4.0x.
Our indentures relating to our outstanding senior notes contain certain covenants, including, but not limited to: (i) a limitation on liens on certain assets, (ii) a limitation on certain sale and leaseback transactions, and (iii) restrictions on mergers, consolidations, and the transfer of all or substantially all of our assets to another person.
As of August 31, 2026, we were in compliance with our covenants under our 2025 Credit Agreement and our indentures, and have met all debt payment obligations.
For further discussion and presentation of our borrowings and available sources of borrowing, refer to Note 13 of our consolidated financial statements included in our 2026 Annual Report and Note 8.
Common Stock Dividends
On October 6, 2026, our Board of Directors declared a quarterly cash dividend of $1.03 per share of Class A Stock and $0.93 per share of Class 1 Stock payable on November 13, 2026, to stockholders of record of each class as of the close of business on October 30, 2026.
We currently expect to continue to pay a regular quarterly cash dividend to stockholders of our common stock in the future, but such payments are subject to approval of our Board of Directors and are dependent upon our financial condition, results of operations, capital requirements, and other factors, including those set forth under Item 1A. "Risk Factors" of our 2026 Annual Report.
| Constellation Brands, Inc. Q2 FY 2027 Form 10-Q |
#WORTHREACHINGFOR I 45
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| MD&A | |||||
Share Repurchase Program
Our Board of Directors authorized the repurchase of our publicly traded common stock of up to $4.0 billion under the 2025 Authorization which expires in February 2028. As of September 30, 2026, total shares repurchased are as follows:
| Class A Stock | |||||||||||||||||
| Repurchase Authorization | Dollar Value of Shares Repurchased | Number of Shares Repurchased | |||||||||||||||
| (in millions, except share data) | |||||||||||||||||
|
2025 Authorization (1)
|
$ | 4,000.0 | $ | 1,453.8 | 9,429,144 | ||||||||||||
(1)As of September 30, 2026, $2,546.2 million remains available for future share repurchases, excluding the impact of Federal excise tax owed pursuant to the IRA.
Share repurchases under the 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 2025 Authorization. Additionally, share repurchases are dependent upon our financial condition, results of operations, capital requirements, and other factors, including those set forth under Item 1A. "Risk Factors" of our 2026 Annual Report.
For additional information, refer to Note 18 of our consolidated financial statements included in our 2026 Annual Report and Note 10.
Accounting Guidance
Accounting guidance adopted for Six Months 2027 did not have a material impact on our Financial Statements.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those set forth in, or implied by, such forward-looking statements. All statements other than statements of historical fact included in this Form 10-Q are forward-looking statements, including without limitation:
•The statements under MD&A regarding:
◦our business strategy, including our strategic vision, growth plans, priorities, and pillars, consumer insight capabilities, digital acceleration initiatives, and focus on maintaining a strong balance sheet;
◦our focus on upholding our leadership position in the U.S. beer market, growing our high-end imported beer brands through maintenance of leading margins, enhancing our results of operations and operating cash flow, and exploring new avenues for growth;
◦our repositioned wine and spirits portfolio that we believe is positioned for long-term growth, focus on operational efficiencies and tactical measures, and commitment to improving margins, increasing distribution for key brands, and optimizing growth, as well as expanding our supply channels to maximize our total addressable market opportunity;
◦our beer modular capacity addition activities, including anticipated scope, capacity, costs, capital expenditures, and timeframes for completion, and associated opportunities, including expected timing for commencing commercial production at the Veracruz Brewery;
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◦our innovation, marketing, sales, production, and distribution plans, activities, and strategies, access to and availability of resources and production materials, impacts of government regulations, environmental sustainability, CSR, and human capital strategies, commitments, and aspirations;
◦our long-term financial model, target comparable net leverage and target dividend payout ratios, future operations, financial condition and position, net sales, expenses, 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 dynamic and evolving consumer environment and trends, ongoing economic uncertainty and other socioeconomic factors, including subdued spend, depressed sentiment, value-seeking behaviors, higher prices and reductions in discretionary income, including from increased fuel prices, elevated unemployment, inflation, rising costs, other unfavorable global and regional economic conditions, demographic trends in the U.S., global supply chain disruptions and constraints, geopolitical events and tensions, wars, and military conflicts, including the conflict in the Middle East, and our responses thereto;
◦developments in international trade relations, including changes to trade and tariff policies and regulations, including our expectations related to aluminum and other tariffs and related actions, and alterations of the global trade environment;
◦expected or potential actions of third parties, including possible changes to laws, rules, and regulations;
◦the potential impact of severe weather events or other weather conditions;
◦the manner, timing, and duration of the share repurchase program and source of funds for share repurchases; and
◦the amount and timing of future dividends.
•The statements regarding the future reclassification of net gains from AOCI, potential continued impacts from the OB3 Act on our effective tax rate and potential impacts from Pillar Two, and our aim to hedge 100% of our balance sheet exposures.
When used in this Form 10-Q, 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-Q. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. In addition to the risks and uncertainties of ordinary business operations and conditions in the general economy and markets in which we compete, our forward-looking statements contained in this Form 10-Q are also subject to the risk, uncertainty, and possible variance from our current expectations regarding:
•potential declines in the consumption of products we sell and our dependence on sales of our beer brands;
•our President and Chief Executive Officer transition;
•impacts of our acquisition, divestiture, investment, and new product development strategies and activities, including from the SpikedAde acquisition and the amount of contingent consideration, if any, that may be paid;
•dependence upon our trademarks and proprietary rights, including the failure to protect our intellectual property rights;
•potential damage to our reputation;
•competition in our industry and for talent;
•economic and other uncertainties associated with our international operations, including tariffs;
•supply of quality water, agricultural and other raw materials, certain raw and packaging materials purchased under supply contracts, supply chain disruptions and other factors, and limited groups of certain suppliers;
•reliance on complex information systems and third‐party global networks as well as risks associated with cybersecurity and artificial intelligence;
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•dependence on limited facilities for production of our beer brands and impacts from our Brewery Projects;
•operational disruptions or catastrophic loss to our breweries, wineries, other facilities, or distribution systems;
•severe weather, natural and man-made disasters, climate change, environmental sustainability and CSR-related regulatory compliance, and failure to meet environmental sustainability and CSR commitments and aspirations;
•the success of our cost savings, restructuring, and efficiency initiatives;
•reliance on wholesale distributors, major retailers, and government agencies;
•food safety and quality, including contamination and product degradation from diseases, pests, weather, and other conditions;
•communicable infection or disease outbreaks, pandemics, or other widespread public health crises impacting our consumers, Customers, employees, and/or suppliers;
•effects of employee labor activities that could increase our costs;
•our indebtedness and credit ratings, interest rate fluctuations, and credit market disruptions or volatility;
•our international operations, worldwide and regional economic trends and financial market conditions, geopolitical uncertainty, including as a result of the conflict in the Middle East, or other governmental rules and regulations;
•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, or other matters;
•potential impairments of our intangible assets, such as goodwill and trademarks;
•changes to tax laws, fluctuations in our effective tax rate, accounting for tax positions, including our expected release of a portion of our valuation allowance related to deferred tax assets and the associated income tax benefit, resolution of tax disputes, changes to accounting standards, elections, assertions, or policies, and the potential impact of a global minimum tax rate;
•uncertainties related to future cash dividends and share repurchases, which may affect the price of our common stock;
•ownership of our Class A Stock by certain individuals and entities affiliated with the Sands family and their Board of Director nomination rights; and
•the choice-of-forum provision in our amended and restated by-laws regarding certain stockholder litigation.
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 the Form 10-Q, please refer to Item 1A. "Risk Factors" of our 2026 Annual Report.
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Constellation Brands Inc. published this content on October 07, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on October 07, 2026 at 18:01 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]