Constellation Brands, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Equity Method Investments

Equity Method Investments

12 Months Ended

Feb. 29, 2024

Equity Method Investments and Joint Ventures [Abstract]

Our equity method investments are as follows:


	February 29, 2024				February 28, 2023
	Carrying Value		Ownership Percentage		Carrying Value		Ownership Percentage
(in millions)
Canopy Equity Method Investment (1)	$	42.5	20.7	%	$	485.8	34.7	%
Other equity method investments	128.1		20%-50%		177.5		20%-50%
	$	170.6			$	663.3

(1)The fair value based on the closing price of the underlying equity security as of February 29, 2024, and February 28, 2023, was $56.1 million and $398.4 million, respectively.

Canopy Equity Method Investment

We have an investment in Canopy, a provider of medical and adult-use cannabis products. The Canopy Equity Method Investment consisted of 17.1 million Canopy common shares as of February 29, 2024. See “Conversion of Canopy common stock ownership and exchange of investment into Exchangeable Shares” below for additional information. Equity in earnings (losses) from the Canopy Equity Method Investment and related

activities is determined by recording the effect of basis differences. Amounts included in our consolidated results of operations for each period are as follows:


	For the Years Ended
	February 29, 2024		February 28, 2023		February 28, 2022
(in millions)
Equity in earnings (losses) from Canopy and related activities	$	(321.3)	$	(949.3)	$	(73.6)

The following tables present summarized financial information for Canopy prepared in accordance with U.S. GAAP. We recognize our equity in earnings (losses) for Canopy on a two-month lag. Accordingly, we recognized our share of Canopy’s earnings (losses) for the periods (i) January through December 2023 in our year ended February 29, 2024 results, (ii) January through December 2022 in our year ended February 28, 2023 results, and (iii) January through December 2021 in our year ended February 28, 2022 results. The year ended February 28, 2023, included a significant goodwill impairment related to Canopy’s operations. The amounts shown represent 100% of Canopy’s financial position and results of operations for the respective periods.


	February 29, 2024		February 28, 2023
(in millions)
Current assets	$	300.0	$	865.4
Noncurrent assets	$	726.8	$	1,362.9
Current liabilities	$	167.1	$	500.8
Noncurrent liabilities	$	448.3	$	665.2
Noncontrolling interests	$	0.1	$	2.1


	For the Years Ended
	February 29, 2024		February 28, 2023		February 28, 2022
(in millions)
Net sales	$	254.9	$	339.3	$	444.3
Gross profit (loss)	$	(22.4)	$	(125.7)	$	(18.6)
Net income (loss)	$	(915.7)	$	(2,466.0)	$	(274.3)
Net income (loss) attributable to Canopy	$	(897.5)	$	(2,447.9)	$	328.7

Conversion of Canopy common stock ownership and exchange of investment into Exchangeable Shares

In April 2024, the Canopy Amendment was approved by Canopy’s shareholders. In connection with the Canopy Transaction, Canopy amended its share capital to (i) create Exchangeable Shares and (ii) restate the rights of Canopy common shares to provide for their conversion into Exchangeable Shares through the Canopy Amendment. We subsequently elected to convert our 17.1 million Canopy common shares into Exchangeable Shares on a one-for-one basis. Additionally, we exchanged our 2023 Canopy Promissory Note for 9.1 million Exchangeable Shares and forgave all accrued but unpaid interest together with the remaining principal amount of the note.

Following the completion of the Canopy Transaction, the transactions included in the Consent Agreement, our election to convert our Canopy common shares into Exchangeable Shares, and the exchange of our 2023 Canopy Promissory Note for Exchangeable Shares:

•we only have an interest in our 26.3 million Exchangeable Shares;

•we terminated all legacy agreements and commercial arrangements between ourselves and Canopy, including the investor rights agreement but excluding the Consent Agreement, certain termination agreements, and the exchange agreement with respect to the 2023 Canopy Promissory Note;

•we have no further governance rights in relation to Canopy, including rights to nominate members to the board of directors of Canopy, or consulting rights related to certain transactions;

•all of our nominees resigned from the board of directors of Canopy; and

•we expect to recognize a gain based on the fair value of Exchangeable Shares on the date of the conversion and exchange. Future impairments, if any, will also be reported in income (loss) from unconsolidated investments within our consolidated results.

Other equity method investment

Corporate investment

In February 2022, we sold an investment made through our corporate venture capital function. We recognized a $51.0 million gain for the year ended February 28, 2022, related to the sale of our previously held equity interest in this investment. This gain is included in income (loss) from unconsolidated investments within our consolidated results of operations. Additionally, we recognized our share of their equity in earnings (losses) in our consolidated financial statements in the Corporate Operations and Other segment up to the date we sold our ownership interest.