Constellation Brands : Second Quarter Fiscal 2022 Earnings Release and Financial Tables

Updates Fiscal 2022 EPS Guidance driven by Strong Core Beer Business Results

and Ongoing Share Repurchase Activity

					Diluted Net Income
				Earnings Before	(Loss) Per Share
	Net		Operating	Interest & Taxes	Attributable to CBI	Diluted EPS
	Sales		Income	(EBIT)	(EPS)	Excluding Canopy
Second Quarter Fiscal Year 2022 Financial Highlights (1)	| In millions, except per share data
Reported	$2,371		$739	NA	$0.01	NA
% Change	5%		(12%)	NA	(100%)	NA
Comparable	$2,371		$730	$699	$2.38	$2.52
% Change	5%		(8%)	(8%)	(14%)	(13%)

1. Definitions of reported, comparable, and organic, as well as reconciliations of non-GAAP financial measures, are contained elsewhere in this news release. NA=Not Applicable

HIGHLIGHTS

• Generates reported basis EPS of $0.01 and comparable basis EPS of $2.38, including Canopy equity losses of $0.13; excluding Canopy equity losses, achieved comparable basis EPS of $2.52
• Beer Business delivers double-digit net sales growth driven by the continued strength of Modelo Especial and Corona Extra
• Wine and Spirits Business delivers strong, organic net sales growth driven by solid performance from The Prisoner Brand Family, Kim Crawford, and Meiomi
• Generates $1.5 billion of operating cash flow, an increase of 6%, and $1.2 billion of free cash flow
• Fully redeems outstanding 2.70% Senior Notes and 2.65% Senior Notes due in 2022

• Updates fiscal 2022 reported basis EPS outlook to $0.30 - $0.60; increases comparable basis EPS outlook to $10.15 - $10.45; guidance includes shares repurchased through September only
• Affirms fiscal 2022 operating cash flow target of $2.4 -
  $2.6 billion and free cash flow projection of $1.4 - $1.5 billion
• Repurchases 6.2 million shares of common stock for $1.4 billion through September of fiscal 2022
• Declares quarterly cash dividend of $0.76 per share of Class A Common Stock and $0.69 per share of Class B Common Stock

"The strong performance of our core Beer Business, driven by robust consumer demand for our iconic brands, gives us confidence to increase our guidance for the year."

Bill Newlands

President and Chief Executive Officer

"We executed a significant number of share repurchases during the second quarter as we believe our stock is undervalued at current levels. This represents progress toward achieving our goal of returning $5 billion in value to shareholders through dividends and share repurchases."

Garth Hankinson

Chief Financial Officer

Constellation Brands, Inc. Q2 FY2022 Earnings Release

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beer

Shipment	Depletion		Operating
Volume	Volume	Net Sales	Income

Three Months Ended | In millions; branded product, 24-pack,12-ounce case equivalents
August 31, 2021	101.0			$1,861.3	$693.0
August 31, 2020	90.4			$1,635.9	$695.7
% Change	11.7%		7.3%	14%	-%

HIGHLIGHTS

• Constellation's Beer Business posted depletion volume growth over 7%, driven by the continued strength of Modelo Especial and Corona Extra. Depletion volume selling days were flat year-over- year.
• In IRI channels, Constellation's Beer Business significantly outpaced the total beer category and the high-end segment and was the #1 dollar share gainer, adding 1.3 market share points during the quarter.
• Modelo Especial achieved 16% depletion volume growth and continued to be the #1 brand in the high-end and #1 brand share gainer in the entire U.S. beer category in IRI dollar sales.
• Corona Extra reported depletion volume growth of nearly 5% and remained the #2 import share gainer and #3 brand in the high- end in IRI channels.
• Operating margin decreased 530 basis points to 37.2%, as benefits from favorable pricing, mix, and foreign currency were more than offset by increased COGS, marketing investments, and SG&A. The increase in COGS was largely driven by an increase in obsolescence of $66 million relating to excess inventory of hard seltzers, resulting from a slowdown in the overall category in the U.S.

• Wholesaler depletions continued to outpace cases shipped during the quarter resulting in lower than normal distributor inventories at the end of the second quarter of fiscal 2022. Product inventories are expected to return to more normal levels by the end of the fiscal year as shipment volume is expected to exceed depletion volume in the second-half of the fiscal year.
• The Beer Business now expects 9 - 11% net sales growth and 4 - 6% operating income growth for fiscal 2022 reflecting the strong performance of the core beer portfolio.

wine and spirits

	Shipment	Organic Shipment	Depletion	Net Sales (2)	Organic		Operating
	Volume	Volume	(1)	Volume (1)	Net Sales	(1)	Income (2)
Three Months Ended | In millions; branded product, 9-liter case equivalents
August 31, 2021	7.4	7.4			$509.8	$509.8		$100.2
August 31, 2020	11.6	7.0			$624.5	$443.1		$161.5
% Change	(36.2%)	5.7%		(2.3%)	(18%)	15%		(38%)

1. Three months ended August 31, 2020, includes $181.4 million of net sales and $66.7 million of gross profit less marketing that are no longer part of the wine and spirits segment results.

HIGHLIGHTS

• The Prisoner Brand Family, Kim Crawford, and Meiomi continued to outpace their respective price segments while gaining share in IRI channels despite the challenging overlap from last year's pandemic-related consumer pantry loading behavior.
• Consumer-led,margin accretive, innovation initiatives continue to contribute to net sales growth driven by Meiomi cabernet sauvignon, Kim Crawford Illuminate, and The Prisoner cabernet sauvignon and chardonnay, which were all among the top 10 innovations across the high-end of the U.S. wine segment in IRI channels.
• Wine and Spirits eCommerce sales, including direct-to-consumer, have increased 3 to 4 times versus 2019 levels while the company's fine wine share has expanded, driven by robust growth of The Prisoner on Instacart and Robert Mondavi on Wine.com within the last year.
• The innovation pipeline is primed with impactful product launches for the third quarter of fiscal 2022 including Woodbridge Wine Seltzers, Woodbridge Sparkling Infusions, and Woodbridge 3 liter box wine in chardonnay, cabernet sauvignon, pinot grigio, and pinot noir varietals, as well as significant expansion of SVEDKA ready-to-drink cocktails in additional markets across the U.S.

• Operating margin decreased 620 basis points to 19.7% as mix benefits from the existing portfolio and divestitures combined with favorable price, were more than offset by increased marketing and SG&A spend, increased COGS, and margin dilutive smoke tainted bulk wine sales.
• The Wine and Spirits Business continues to expect fiscal 2022 reported net sales and operating income decline of 22 - 24% and 23 - 25%, respectively; organic net sales growth of 2 - 4%.

Constellation Brands, Inc. Q2 FY2022 Earnings Release

#WORTHREACHINGFOR I 2

outlook

The table sets forth management's current EPS expectations for fiscal 2022 compared to fiscal 2021 actual results, both on a reported basis, a comparable basis, and a comparable basis excluding Canopy equity earnings (losses) and related activities.

	Reported Basis			Comparable Basis
				FY22 Estimate		FY21 Actual
	FY22 Estimate	FY21 Actual		(Excl. Canopy)	FY21 Actual	(Excl. Canopy)
Fiscal Year Ending February 28	$0.30 - $0.60	$10.23	$10.15 - $10.45	$9.97	$10.44
Fiscal 2022 Guidance Assumptions:

• Beer: net sales growth 9 - 11%; operating income growth 4 - 6%
• Wine and Spirits: net sales decline 22 - 24% and operating income decline 23 - 25%; organic net sales growth 2 - 4%
• Interest expense: $355 - $365 million
• Tax rate: reported approximately 83%; comparable excluding Canopy equity earnings impact approximately 20%
• Weighted average diluted shares outstanding: approximately 192 million; assumes approximately $1.4 billion of share repurchases

• Operating cash flow: $2.4 - $2.6 billion
• Capital expenditures: $1.0 - $1.1 billion, including approximately $900 million targeted for Mexico beer operations expansion activities
• Free cash flow: $1.4 - $1.5 billion

The reported basis EPS guidance includes the fiscal 2022 year to date Canopy equity earnings and related activities impact. Our guidance does not reflect future changes in the fair value of the company's investment in Canopy's warrants and convertible debt securities. Additionally, the company continues to evaluate the future potential equity earnings impact from the Canopy equity method investment and related activities and, as such, these items have been excluded from the target assumptions noted above.

BEER BUSINESS CAPITAL EXPANSION INITIATIVES

The company has developed plans to invest in the next increment of capacity in Mexico that will provide the long-term flexibility needed to support the expected future growth of the core, high-end Mexican beer portfolio. Annual capex spend for the Beer Business is expected to be in the $700 million to $900 million range to support 15 million hectoliters of capacity expansion during the fiscal 2023 - fiscal 2025 timeframe. Given the current state of activities in Mexicali, Constellation determined that it will be unable to use or repurpose certain assets at the facility. As a result, a $666 million impairment was recorded for the first quarter of fiscal 2022, which is included above in the fiscal 2022 reported basis EPS guidance. The company will continue to work with government officials in Mexico to pursue various forms of recovery for capitalized costs and additional expenses incurred in establishing the brewery.

WINE & SPIRITS FISCAL 2021 DIVESTITURES

In January 2021, the company sold a portion of the Wine and Spirits Business to E. & J. Gallo Winery ("Gallo") and in a separate, but related, transaction sold the Nobilo Wine brand to Gallo, collectively (the "Wine and Spirits Divestitures"). Additionally, in January 2021, the company sold the Paul Masson Grande Amber Brandy brand to Sazerac (the "Paul Masson Divestiture"), while in December 2020, the company sold the concentrate business to Vie-Del (the "Concentrate Business Divestiture").

The following table presents selected financial information included in our historical consolidated financial statements that are no longer part of our consolidated results following the transactions described above:

	FY21 Q1	FY21 Q2	FY21 Q3	FY21 Q4
(in millions)
Shipment volume (9-liter case equivalents)	4.5	4.6	5.3	1.6
Net sales	$187	$181	$210	$64
CAM (gross profit less marketing)	$77	$67	$74	$21

canopy

Constellation's share of Canopy's equity earnings (losses) and related activities were as follows:
		Reported	Comparable
		Basis	Basis
Three Months Ended I In millions
August 31, 2021		$120.5	$(29.9)
August 31, 2020		$(31.0)	$(34.1)

Constellation has recognized a $224 million unrealized net loss in reported basis results since the initial Canopy investment in November 2017; a $590 million decrease in the fair value of our Canopy investment was recognized for second quarter of fiscal 2022.

Constellation Brands, Inc. Q2 FY2022 Earnings Release

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QUARTERLY DIVIDEND

On October 5, 2021, Constellation's board of directors declared a quarterly cash dividend of $0.76 per share of Class A Common Stock and $0.69 per share of Class B Common Stock, payable on November 19, 2021, to stockholders of record as of the close of business on November 5, 2021.

• A copy of this news release, including the attachments and other financial
  information that may be discussed during the call, will be available on our website cbrands.com under "Investors/Reporting" prior to the call.

AWARDS and BRAND NEWS

Shanken News recognized eight of our premium, consumer-loved brands with IMPACT Blue Chip Awards, given to the industry's best long-term performers: SVEDKA, Woodbridge, Kim Crawford, Meiomi, Ruffino, Modelo Especial, Pacifico, and Modelo Negra.

Modelo, the brand brewed for those with The Fighting Spirit, and UFC, the world's premier mixed martial arts organization, recently announced a new initiative with leading nonprofit Rebuilding Together to revitalize training gyms across the country and positively impact the local communities they touch.

Learn more here.

ABOUT CONSTELLATION BRANDS

At Constellation Brands (NYSE: STZ and STZ.B), our mission is to build brands that people love because we believe sharing a toast, unwinding after a day, celebrating milestones, and helping people connect, are Worth Reaching For. It's worth our dedication, hard work, and the bold calculated risks we take to deliver more for our consumers, trade partners, shareholders, and communities in which we live and work. It's what has made us one of the fastest-growing large CPG companies in the U.S. at retail, and it drives our pursuit to deliver what's next.

Today, we are a leading international producer and marketer of beer, wine, and spirits with operations in the U.S., Mexico, New Zealand, and Italy. Every day, people reach for our high-end, iconic imported beer brands such as Corona Extra, Corona Light, Corona Premier, Modelo Especial, Modelo Negra, and Pacifico, and our high-quality premium wine and spirits brands, including the Robert Mondavi Brand Family, Kim Crawford, Meiomi, The Prisoner Brand Family, SVEDKA Vodka, Casa Noble Tequila, and High West Whiskey.

But we won't stop here. Our visionary leadership team and passionate employees from barrel room to boardroom are reaching for the next level, to explore the boundaries of the beverage alcohol industry and beyond. Join us in discovering what's Worth Reaching For.

To learn more, follow us on Twitter @cbrandsand visit www.cbrands.com.

MEDIA CONTACTS		INVESTOR RELATIONS CONTACTS
Mike McGrew	773-251-4934	[e-mail]	Patty Yahn-Urlaub	585-678-7483	[e-mail]
Amy Martin	585-678-7141	[e-mail]	Marisa Pepelea	312-741-2316	[e-mail]

Constellation Brands, Inc. Q2 FY2022 Earnings Release

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SUPPLEMENTAL INFORMATION

Reported basis ("reported") are amounts as reported under generally accepted accounting principles. Comparable basis ("comparable") are amounts which exclude items that affect comparability ("comparable adjustments"), as they are not reflective of core operations of the segments. The company's measure of segment profitability excludes comparable adjustments, which is consistent with the measure used by management to evaluate results. The company discusses various non-GAAP measures in this news release. Financial statements, as well as supplemental schedules and tables reconciling non-GAAP measures, together with definitions of these measures and the reasons management uses these measures, are included in this news release.

FORWARD-LOOKING STATEMENTS

The statements made under the heading Outlook and all statements other than statements of historical fact set forth in this news release regarding Constellation Brands' business strategy, future operations and business, future financial position, expected effective tax rates and anticipated tax liabilities, estimated revenues, projected costs and expenses, expected net sales and operating income, estimated diluted EPS, expected capital expenditures, expected operating cash flow and free cash flow, future payments of dividends, amount, manner and timing of share repurchases under the share repurchase authorization, and prospects, plans and objectives of management, as well as information concerning expected actions of third parties, are forward-looking statements (collectively, the "Projections") that involve risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by the Projections.

During the current quarter, Constellation Brands may reiterate the Projections. Prior to the start of the company's quiet period, which will begin at the close of business on November 30, 2021, the public can continue to rely on the Projections as still being Constellation Brands' current expectations on the matters covered, unless the company publishes a notice stating otherwise. During Constellation Brands' "quiet period," the Projections should not be considered to constitute the company's expectations and should be considered historical, speaking as of prior to the quiet period only and not subject to update by the company.

The Projections are based on management's current expectations and, unless otherwise noted, do not take into account the impact of any future acquisition, investment, merger, or any other business combination, divestiture, restructuring, or other strategic business realignments, financing or share repurchase that may be completed after the date of this release, or any incremental contingent consideration payment paid or any specific amount of incremental contingent consideration payment received, if any, in association with the Wine and Spirits Divestitures. The Projections should not be construed in any manner as a guarantee that such results will in fact occur. The actual impact of COVID-19 and its associated operating environment may be materially different than management's expectations.

In addition to the risks and uncertainties of ordinary business operations, the Projections of the company contained in this news release are subject to a number of risks and uncertainties, including:

• duration and impact of the COVID-19 pandemic, including but not limited to the impact and severity of new variants, the efficacy of the vaccine rollout, the closure of non-essential businesses, which may include our manufacturing facilities, and other associated governmental containment actions, and the increase in cyber- security attacks that have occurred while non-production employees work remotely;
• production or shipment difficulties could adversely affect our ability to supply our customers;
• the actual impact to supply, production levels, and costs due to wildfires and severe weather events may vary from our current expectations due to, among other reasons, the actual severity and geographical reach of wildfires and severe weather events;
• impact of the Wine and Spirits Divestitures, the Concentrate Business Divestiture, and the Paul Masson Divestiture, and amount and timing of cost reductions, if any, may vary from management's current expectations;
• amount of contingent consideration, if any, that may be received in the Wine and Spirits Divestitures will depend on actual brand performance;
• beer operations expansion and construction activities, scope, costs, and timing associated with these activities, and amount of impairment from non-recoverable brewery construction assets in Mexico may vary from management's current estimates due to market conditions, our cash and debt position, receipt of regulatory approvals on the expected dates and terms, results of discussions with government officials in Mexico, actual amount of non- recoverable brewery construction assets, and other factors determined by management;
• accuracy of supply projections, including those relating to wine and spirits operating activities, beer operations expansion activities, product inventory levels, glass sourcing, and raw materials and water supply expectations;
  Constellation Brands, Inc. Q2 FY2022 Earnings Release

• operating cash flow, free cash flow, effective tax rate, and capital expenditures to support long-term growth may vary from management's current estimates;

• accuracy of projections associated with market opportunities and previously announced acquisitions, investments, and divestitures;

• accuracy of projections relating to the Canopy investment may vary from management's current expectations;

• exact duration of the share repurchase implementation and the amount, timing, and source of funds for any share repurchases;

• amount and timing of future dividends are subject to the determination and discretion of the board of directors and may differ from current expectations if our ability to use cash flow to fund dividends is affected by unanticipated increases in total net debt, we are unable to generate cash flow at anticipated levels, or we fail to generate expected earnings;

• raw material and water supply, production, or shipment difficulties could adversely affect our ability to supply our customers;

• general economic, geo-political, domestic, international and regulatory conditions, instability in world financial markets, inflation, health epidemics or pandemics, quarantines or curfews, unanticipated environmental liabilities and costs, or enhanced competitive activities;

• changes to international trade agreements and tariffs, accounting standards, elections or assertions, tax laws or other governmental rules and regulations, and other factors which could impact the company's reported financial position, results of operations, effective tax rate, or accuracy of any associated Projections;

• changes in interest rates and the inherent unpredictability of currency fluctuations, commodity prices, and raw materials; and

• other factors and uncertainties disclosed in the company's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended February 28, 2021, which could cause actual future performance to differ from current expectations.

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