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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Brown Forman Corp | NYSE:BF.B | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
-0.38 | -0.87% | 43.54 | 44.22 | 43.22 | 43.73 | 1,120,964 | 20:16:17 |
|
(Mark One)
|
|
þ
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the fiscal year ended April 30, 2016
|
OR
|
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the transition period from
to
|
|
|
Delaware
|
|
61-0143150
|
(State or other jurisdiction of
incorporation or organization)
|
|
(IRS Employer Identification No.)
|
850 Dixie Highway
Louisville, Kentucky
|
|
40210
|
(Address of principal executive offices)
|
|
(Zip Code)
|
Title of each class
|
|
Name of each exchange on which registered
|
Class A Common Stock (voting) $0.15 par value
|
|
New York Stock Exchange
|
Class B Common Stock (nonvoting) $0.15 par value
|
|
New York Stock Exchange
|
Large accelerated filer
þ
|
Accelerated filer
¨
|
Non-accelerated filer
¨
|
Smaller reporting company
¨
|
|
|
(Do not check if a smaller reporting company)
|
|
Class A Common Stock (voting)
|
84,509,838
|
|
Class B Common Stock (nonvoting)
|
112,418,105
|
|
|
Table of Contents
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|
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Page
|
PART I
|
|
|
Item 1.
|
||
Item 1A.
|
||
Item 1B.
|
||
Item 2.
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||
Item 3.
|
||
Item 4.
|
||
PART II
|
|
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Item 5.
|
||
Item 6.
|
||
Item 7.
|
||
Item 7A.
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||
Item 8.
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||
Item 9.
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||
Item 9A.
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Item 9B.
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PART III
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|
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
|
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PART IV
|
|
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Item 15.
|
||
•
|
Unfavorable global or regional economic conditions, and related low consumer confidence, high unemployment, weak credit or capital markets, budget deficits, burdensome government debt, austerity measures, higher interest rates, higher taxes, political instability, higher inflation, deflation, lower returns on pension assets, or lower discount rates for pension obligations
|
•
|
Risks associated with being a U.S.-based company with global operations, including commercial, political, and financial risks; local labor policies and conditions; protectionist trade policies or economic or trade sanctions; compliance with local trade practices and other regulations, including anti-corruption laws; terrorism; and health pandemics
|
•
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Fluctuations in foreign currency exchange rates, particularly a stronger U.S. dollar
|
•
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Changes in laws, regulations, or policies – especially those that affect the production, importation, marketing, labeling, pricing, distribution, sale, or consumption of our beverage alcohol products
|
•
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Tax rate changes (including excise, sales, VAT, tariffs, duties, corporate, individual income, dividends, capital gains) or changes in related reserves, changes in tax rules (for example, LIFO, foreign income deferral, U.S. manufacturing, and other deductions) or accounting standards, and the unpredictability and suddenness with which they can occur
|
•
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Dependence upon the continued growth of the Jack Daniel’s family of brands
|
•
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Changes in consumer preferences, consumption, or purchase patterns – particularly away from larger producers in favor of smaller distilleries or local producers, or away from brown spirits, our premium products, or spirits generally, and our ability to anticipate or react to them; bar, restaurant, travel, or other on-premise declines; shifts in demographic trends; or unfavorable consumer reaction to new products, line extensions, package changes, product reformulations, or other product innovation
|
•
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Decline in the social acceptability of beverage alcohol in significant markets
|
•
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Production facility, aging warehouse, or supply chain disruption
|
•
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Imprecision in supply/demand forecasting
|
•
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Higher costs, lower quality, or unavailability of energy, water, raw materials, product ingredients, labor, or finished goods
|
•
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Route-to-consumer changes that affect the timing of our sales, temporarily disrupt the marketing or sale of our products, or result in higher implementation-related or fixed costs
|
•
|
Inventory fluctuations in our products by distributors, wholesalers, or retailers
|
•
|
Competitors’ consolidation or other competitive activities, such as pricing actions (including price reductions, promotions, discounting, couponing, or free goods), marketing, category expansion, product introductions, or entry or expansion in our geographic markets or distribution networks
|
•
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Risks associated with acquisitions, dispositions, business partnerships, or investments – such as acquisition integration, or termination difficulties or costs, or impairment in recorded value
|
•
|
Inadequate protection of our intellectual property rights
|
•
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Product recalls or other product liability claims; or product counterfeiting, tampering, contamination, or product quality issues
|
•
|
Significant legal disputes and proceedings; or government investigations
|
•
|
Failure or breach of key information technology systems
|
•
|
Negative publicity related to our company, brands, marketing, personnel, operations, business performance, or prospects
|
•
|
Failure to attract or retain key executive or employee talent
|
•
|
Our status as a family “controlled company” under New York Stock Exchange rules
|
Principal Brands
|
||
Jack Daniel’s Tennessee Whiskey
|
|
Woodford Reserve Kentucky Bourbons
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Jack Daniel’s RTDs
|
|
el Jimador Tequilas
|
Jack Daniel’s Tennessee Honey
|
|
el Jimador New Mix RTDs
|
Gentleman Jack Rare Tennessee Whiskey
|
|
Herradura Tequilas
|
Jack Daniel’s Tennessee Fire
|
|
Canadian Mist Canadian Whisky
|
Jack Daniel’s Single Barrel Collection
2
|
|
Sonoma-Cutrer California Wines
|
Jack Daniel’s Sinatra Select
|
|
Early Times Kentucky Whisky and Bourbon
|
Jack Daniel’s Winter Jack
|
|
Chambord Liqueur
|
Jack Daniel’s No. 27 Gold Tennessee Whiskey
|
|
Old Forester Kentucky Bourbon
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Finlandia Vodkas
|
|
Antiguo Tequila
|
Finlandia RTDs
|
|
Pepe Lopez Tequila
|
Korbel California Champagnes
3
|
|
Santa Dose Cachaça
|
Korbel California Brandy
3
|
|
Collingwood Canadian Whisky
|
|
|
1
Impact Databank, a well-known U.S. trade publication, published these industry statistics in March 2016.
|
|
2
The Jack Daniel’s Single Barrel Collection includes Jack Daniel’s Single Barrel Select, Jack Daniel’s Single Barrel Barrel Proof, Jack Daniel’s Single Barrel Rye, and Jack Daniel’s Single Barrel 100 Proof.
|
|
3
While Korbel is not an owned brand, we sell Korbel products under contract in the United States and other select markets.
|
|
|
1
Human Rights Campaign 2016 Corporate Equity Index at www.hrc.org/resources/best-places-to-work-2016.
|
Name
|
Age
|
Principal Occupation and Business Experience
|
Paul C. Varga
|
52
|
Company Chairman and Chief Executive Officer since 2007. Chief Executive Officer since 2005.
|
Jane C. Morreau
|
57
|
Executive Vice President and Chief Financial Officer since 2014. Senior Vice President, Chief Production Officer, and Head of Information Technology from 2013 to 2014. Senior Vice President and Director of Financial Management, Accounting and Technology from 2008 to 2013.
|
Matthew E. Hamel
|
56
|
Executive Vice President, General Counsel, and Secretary since 2007.
|
Jill Ackerman Jones
|
50
|
Executive Vice President and President for North America, CCSA, IMEA, and Global Travel Retail since February 2015. Executive Vice President and President for North America and Latin America Regions from 2013 to 2015. Executive Vice President and Chief Production Officer from 2007 to 2012.
|
Mark I. McCallum
|
61
|
Executive Vice President and President of Jack Daniel’s Brands since February 2015. Executive Vice President and President for Europe, Africa, Middle East, Asia Pacific, and Travel Retail from 2013 to 2015. Executive Vice President and Chief Operating Officer from 2009 to 2013. Executive Vice President and Chief Brands Officer from 2006 to 2009.
|
Lawson E. Whiting
|
47
|
Executive Vice President and Chief Brands and Strategy Officer since February 2015. Senior Vice President and Chief Brands Officer from 2013 to 2015. Senior Vice President and Managing Director for Western Europe from 2011 to 2013. Vice President and Finance Director for Western Europe from 2010 to 2011. Vice President and Finance Director for North America from 2009 to 2010.
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Alejandro “Alex” Alvarez
|
48
|
Senior Vice President and Chief Production Officer since 2014. Vice President and General Manager for Brown-Forman Tequila Mexico Operations from 2008 to 2014.
|
Ralph De Chabert
|
69
|
Senior Vice President and Chief Diversity Officer since 2007.
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Brian P. Fitzgerald
|
43
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Senior Vice President and Chief Accounting Officer since 2013. Vice President and Finance Director for Greater Europe and Africa from 2009 to 2013.
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Kirsten M. Hawley
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46
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Senior Vice President and Chief Human Resources Officer since February 2015. Senior Vice President and Director of HR Business Partnerships from 2013 to 2015. Vice President and Director of Organization and Leader Development 2011 to 2013. Assistant Vice President and Director of Employee Engagement from 2009 to 2011.
|
Thomas Hinrichs
|
54
|
Senior Vice President and President for Europe, North Asia, and ANZSEA since February 2015. Senior Vice President and Managing Director for Europe from 2013 to 2015. Senior Vice President and Managing Director for Greater Europe and Africa from 2006 to 2013.
|
Lisa P. Steiner
|
56
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Senior Vice President, Chief of Staff, and Director of Global Corporate Communications and Services since February 2015. Senior Vice President and Chief Human Resources Officer from 2009 to 2015. Senior Vice President and Director of Global Human Resources from 2007 to 2009.
|
•
|
United States
: Irvine, California; Irving, Texas; Atlanta, Georgia; Baltimore, Maryland; and Washington, D.C.
|
•
|
International
: Guadalajara, Mexico; Hamburg, Germany; Sydney, Australia; London, United Kingdom; Warsaw, Poland; Paris, France; Mexico City, Mexico; Prague, Czech Republic; São Paulo, Brazil; Istanbul, Turkey; Amsterdam, Netherlands; Moscow, Russia; Shanghai, China; Hong Kong; and Gurgaon, India.
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Significant Properties
|
||
Location
|
Principal Activities
|
Notes
|
|
|
|
United States:
|
||
Louisville, Kentucky
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Corporate offices
|
Includes several renovated historic structures
|
|
Distilling, bottling, warehousing
|
|
|
Cooperage
|
Brown-Forman Cooperage
|
Lynchburg, Tennessee
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Distilling, bottling, warehousing
|
Home of Jack Daniel’s
|
|
Visitors’ center
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|
Woodford County, Kentucky
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Distilling, bottling, warehousing
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Home of Woodford Reserve
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Visitors’ center
|
|
Windsor, California
|
Winery, bottling, warehousing
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Home of Sonoma-Cutrer
|
|
Visitors’ center
|
|
Decatur, Alabama
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Cooperage
|
Jack Daniel Cooperage
|
Clifton, Tennessee
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Stave and heading mill
|
|
Stevenson, Alabama
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Stave and heading mill
|
|
Spencer, Indiana
|
Stave and heading mill
|
Acquired in first quarter fiscal 2016
|
Jackson, Ohio
|
Stave and heading mill
|
Land is leased from a third party
|
|
|
|
International:
|
||
Collingwood, Canada
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Distilling, warehousing
|
Home of Canadian Mist
|
Cour-Cheverny, France
|
Distilling, bottling, warehousing
|
Home of Chambord
|
Amatitán, Mexico
|
Distilling, bottling, warehousing
|
Home of our tequilas and New Mix RTDs
|
|
Visitors’ center
|
|
Slane, Ireland
|
Distilling, visitors’ center
|
Future home of Slane Irish Whiskey
|
|
|
Fiscal 2015
|
|
Fiscal 2016
|
|||||||||||||||||||||||||||||||||||
|
|
First
Quarter |
|
Second
Quarter |
|
Third
Quarter |
|
Fourth
Quarter |
|
Year
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Year
|
|||||||||||||||||||
Market price per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Class A high
|
|
$
|
95.29
|
|
|
$
|
93.09
|
|
|
$
|
98.00
|
|
|
95.23
|
|
|
$
|
98.00
|
|
|
$
|
119.49
|
|
|
$
|
122.30
|
|
|
$
|
117.53
|
|
|
$
|
112.24
|
|
|
$
|
122.30
|
|
Class A low
|
|
85.98
|
|
|
81.38
|
|
|
85.33
|
|
|
86.85
|
|
|
81.38
|
|
|
93.09
|
|
|
105.87
|
|
|
99.50
|
|
|
100.40
|
|
|
93.09
|
|
|||||||||
Class B high
|
|
97.15
|
|
|
93.62
|
|
|
97.97
|
|
|
93.99
|
|
|
97.97
|
|
|
108.41
|
|
|
110.81
|
|
|
106.88
|
|
|
103.39
|
|
|
110.81
|
|
|||||||||
Class B low
|
|
86.48
|
|
|
81.89
|
|
|
85.43
|
|
|
86.71
|
|
|
81.89
|
|
|
90.65
|
|
|
95.21
|
|
|
90.60
|
|
|
93.25
|
|
|
90.60
|
|
|||||||||
Cash dividends per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Declared
|
|
0.580
|
|
|
—
|
|
|
0.630
|
|
|
—
|
|
|
1.210
|
|
|
0.630
|
|
|
—
|
|
|
0.680
|
|
|
—
|
|
|
1.310
|
|
|||||||||
Paid
|
|
0.290
|
|
|
0.290
|
|
|
0.315
|
|
|
0.315
|
|
|
1.210
|
|
|
0.315
|
|
|
0.315
|
|
|
0.340
|
|
|
0.340
|
|
|
1.310
|
|
|
|
Plan Category
|
|
Number of Securities to Be Issued Upon Exercise of Outstanding Options, Warrants and Rights
1
|
|
Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights
2
|
|
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans
|
|
Equity compensation plans approved by Class A common stockholders
|
|
1,532,196
|
|
$56.83
|
|
6,803,869
|
Period
|
Total Number of Shares Purchased
|
Average Price Paid per Share
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs
|
||||
February 1, 2016 - February 29, 2016
|
1,133,637
|
|
$96.03
|
1,133,637
|
|
$
|
1,124,800,000
|
|
March 1, 2016 - March 31, 2016
|
1,282,310
|
|
$97.38
|
1,282,310
|
|
$
|
1,000,000,000
|
|
April 1, 2016 - April 30, 2016
|
1,165,013
|
|
$95.70
|
1,165,013
|
|
$
|
888,500,000
|
|
Total
|
3,580,960
|
|
$96.41
|
3,580,960
|
|
|
Year Ended April 30,
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|||||||||||
Continuing Operations:
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net sales
|
$
|
2,806
|
|
3,282
|
|
3,192
|
|
3,226
|
|
3,404
|
|
3,614
|
|
3,784
|
|
3,946
|
|
4,096
|
|
4,011
|
|
Gross profit
|
$
|
1,481
|
|
1,695
|
|
1,577
|
|
1,611
|
|
1,724
|
|
1,795
|
|
1,955
|
|
2,078
|
|
2,183
|
|
2,144
|
|
Operating income
|
$
|
602
|
|
685
|
|
661
|
|
710
|
|
855
|
|
788
|
|
898
|
|
971
|
|
1,027
|
|
1,533
|
|
Net income
|
$
|
400
|
|
440
|
|
435
|
|
449
|
|
572
|
|
513
|
|
591
|
|
659
|
|
684
|
|
1,067
|
|
Weighted average shares used to calculate earnings per share
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
– Basic
|
230.4
|
|
229.6
|
|
225.7
|
|
221.8
|
|
218.4
|
|
214.5
|
|
213.4
|
|
213.5
|
|
211.6
|
|
203.0
|
|
|
– Diluted
|
232.8
|
|
231.6
|
|
227.1
|
|
222.9
|
|
219.8
|
|
216.1
|
|
215.0
|
|
215.1
|
|
213.1
|
|
204.3
|
|
|
Earnings per share from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
– Basic
|
$
|
1.74
|
|
1.91
|
|
1.92
|
|
2.02
|
|
2.61
|
|
2.39
|
|
2.77
|
|
3.08
|
|
3.23
|
|
5.26
|
|
– Diluted
|
$
|
1.72
|
|
1.89
|
|
1.91
|
|
2.01
|
|
2.60
|
|
2.37
|
|
2.75
|
|
3.06
|
|
3.21
|
|
5.22
|
|
Gross margin
|
52.8
|
%
|
51.6
|
%
|
49.4
|
%
|
50.0
|
%
|
50.7
|
%
|
49.7
|
%
|
51.7
|
%
|
52.7
|
%
|
53.3
|
%
|
53.4
|
%
|
|
Operating margin
|
21.5
|
%
|
20.9
|
%
|
20.7
|
%
|
22.0
|
%
|
25.1
|
%
|
21.8
|
%
|
23.7
|
%
|
24.6
|
%
|
25.1
|
%
|
38.2
|
%
|
|
Effective tax rate
|
31.7
|
%
|
31.7
|
%
|
31.1
|
%
|
34.1
|
%
|
31.0
|
%
|
32.5
|
%
|
31.7
|
%
|
30.5
|
%
|
31.7
|
%
|
28.3
|
%
|
|
Average invested capital
|
$
|
2,431
|
|
2,747
|
|
2,893
|
|
2,825
|
|
2,711
|
|
2,803
|
|
2,834
|
|
3,131
|
|
3,196
|
|
3,221
|
|
Return on average invested capital
|
17.4
|
%
|
17.2
|
%
|
15.9
|
%
|
16.6
|
%
|
21.8
|
%
|
19.1
|
%
|
21.7
|
%
|
21.6
|
%
|
22.0
|
%
|
34.1
|
%
|
|
Total Company:
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash dividends declared per common share
|
$
|
0.62
|
|
0.69
|
|
0.75
|
|
0.78
|
|
1.49
|
|
0.89
|
|
4.98
|
|
1.09
|
|
1.21
|
|
1.31
|
|
Total assets at April 30
|
$
|
3,551
|
|
3,405
|
|
3,475
|
|
3,383
|
|
3,712
|
|
3,477
|
|
3,626
|
|
4,103
|
|
4,188
|
|
4,183
|
|
Long-term debt at April 30
|
$
|
422
|
|
417
|
|
509
|
|
508
|
|
504
|
|
503
|
|
997
|
|
997
|
|
743
|
|
1,230
|
|
Total debt at April 30
|
$
|
1,177
|
|
1,006
|
|
999
|
|
699
|
|
759
|
|
510
|
|
1,002
|
|
1,005
|
|
1,183
|
|
1,501
|
|
Cash flow from operations
|
$
|
355
|
|
534
|
|
491
|
|
545
|
|
527
|
|
516
|
|
537
|
|
649
|
|
608
|
|
524
|
|
Dividend payout ratio
|
36.8
|
%
|
35.8
|
%
|
38.9
|
%
|
38.7
|
%
|
57.0
|
%
|
37.4
|
%
|
179.8
|
%
|
35.3
|
%
|
37.5
|
%
|
25.0
|
%
|
|
|
1.
|
Includes the consolidated results of Chambord and Casa Herradura since their acquisitions in May 2006 and January 2007, respectively. Includes the results of our Hopland-based wine brands, which were sold in April 2011 but retained in our portfolio as agency brands through December 2011. Includes the results of Southern Comfort and Tuaca, both of which were sold on March 1, 2016.
|
2.
|
Weighted average shares, earnings per share, and cash dividends declared per common share have been adjusted for a 5-for-4 stock split in October 2008 and a 3-for-2 stock split in August 2012.
|
3.
|
See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation – Non-GAAP Financial Measures” for details on our use of “return on average invested capital,” including how we calculate this measure and why we think this information is useful to readers.
|
4.
|
Cash dividends declared per common share include special cash dividends of $0.67 per share in fiscal 2011 and $4.00 per share in fiscal 2013.
|
5.
|
We define dividend payout ratio as cash dividends divided by net income.
|
6.
|
Results for fiscal 2016 include a gain of $485 million on the sale of Southern Comfort and Tuaca. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation – Executive Summary – Fiscal 2016 Financial Highlights” for additional information about the impact of that sale on our operating results for fiscal 2016.
|
•
|
“Foreign exchange.” We calculate the percentage change in our income statement line items in accordance with GAAP and adjust to exclude the cost or benefit of currency fluctuations. Adjusting for foreign exchange allows us to understand our business on a constant-dollar basis, as fluctuations in exchange rates can distort the underlying trend both positively and negatively. (In this report, “dollar” always means the U.S. dollar unless stated otherwise.) To eliminate the effect of foreign exchange fluctuations when comparing across periods, we translate current year results at prior-year rates.
|
•
|
“Estimated net change in distributor inventories.” This measure refers to the estimated net effect of changes in distributor inventories on changes in our measures. For each period compared, we estimate the effect of distributor inventory changes on our results using depletion information provided by our distributors. We believe that this adjustment reduces the effect of varying levels of distributor inventories on changes in our measures and allows us to understand better our underlying results and trends.
|
•
|
“Sale of Southern Comfort and Tuaca.” On January 14, 2016, we reached an agreement to sell our Southern Comfort and Tuaca brands and related assets to Sazerac Company, Inc. The transaction closed March 1, 2016, for $543 million in cash (subject to a post-closing inventory adjustment), which resulted in a one-time gain of $485 million in the fourth quarter of fiscal 2016. This adjustment removes (a) the gain on sale, (b) those transaction-related costs not included in the gain on sale, and (c) operating activity for the non-comparable period, March and April in fiscal 2015 and 2016. We believe that these adjustments allow us to understand better our underlying results on a comparable basis.
|
•
|
“Return on average invested capital.” This measure refers to the sum of net income and after-tax interest expense, divided by average invested capital. Average invested capital equals assets less liabilities, excluding interest-bearing debt, and is calculated using the average of the most recent 13 month-end balances. After-tax interest expense equals interest expense multiplied by one minus our effective tax rate. We consider return on average invested capital to be a meaningful indicator of how effectively and efficiently we use capital invested in our business.
|
•
|
“Adjusted” measures for (a) operating income, (b) operating margin, (c) effective tax rate, (d) diluted earnings per share, and (e) return on average invested capital. We provide these adjusted measures to identify the effect of the sale of Southern Comfort and Tuaca on reported income from operations and other key measures derived therefrom; this effect is expected not be part of our sustainable results or trends. These measures remove the effects of (a) the gain on sale, (b) those transaction-related costs not included in the gain on sale, and (c) operating activity related to the brands for the period subsequent to their divestiture (March and April in fiscal 2016). Tax effects on items (c), (d), and (e) are calculated consistent with the nature of the underlying transaction.
|
•
|
We have further developed the Jack Daniel’s family of brands through innovations designed to create new demand for products from the world’s foremost maker of American whiskey. These efforts resulted in the successful launch of Jack Daniel’s Tennessee Honey (JDTH), Jack Daniel’s Tennessee Fire (JDTF), and a series of ultra-premium-priced line extensions including Jack Daniel’s Sinatra Select, Jack Daniel’s No. 27 Gold Tennessee Whiskey, and several additions to the Jack Daniel’s Single Barrel Collection. At the same time, we have invested steadily in our core Jack Daniel’s Tennessee Whiskey (JDTW) brand to support its growth around the world.
|
•
|
The continued growth of the Jack Daniel’s family of brands is the most important measure of our progress toward becoming a global leader in whiskey. Woodford Reserve’s growth has also helped us move forward on this ambition, as this super-premium brand grew volume at a compound annual rate of approximately 25% from fiscal 2011 to fiscal 2016 – more than doubling its annual volume to approximately 500,000 nine-liter cases by the end of fiscal 2016. In June 2013, we announced a more than $35 million expansion at our Woodford Reserve Distillery to support our expected growth. During fiscal 2014, we completed a renovation of our visitors’ center at the Woodford Reserve Distillery, as visitors have increased over 20% since fiscal 2014 to almost 125,000 visitors in fiscal 2016. During fiscal 2016, we completed the construction of two new warehouses, and we entered into the second phase of a bottling expansion. In fiscal 2017, we expect to complete two new warehouses.
|
•
|
Brown-Forman was founded in 1870 with Old Forester, the world’s first bottled bourbon brand. Old Forester is attracting a new generation of fans, as it has grown net sales by approximately 20% annually since fiscal 2011, including growth of nearly 50% in fiscal 2016. We plan to leverage the current momentum of Old Forester and the favorable trends in American whiskey to reestablish Old Forester as an iconic bourbon brand. To support our ambition, we announced the construction of the Old Forester Distillery and visitors’ center in fiscal 2014, and in May 2015 purchased two historic buildings on Main Street in Louisville for its location. We began construction of the Old Forester Distillery in February 2016, and we expect to open late in 2017. We anticipate investing approximately $50 million in this project.
|
•
|
Over the past five years, we have divested certain businesses to enable better alignment of our resources with our long-term strategy. We divested our Hopland-based wine brands in 2011, leaving us with a portfolio primarily focused on spirits. Since then, we have pursued growth of our spirits portfolio mostly by organic means, with innovation playing a key role (see discussion below). In March 2016, we sold Southern Comfort and Tuaca to dedicate additional resources to opportunities with greater long-term growth prospects. See ‘‘Financial Highlights’’ below, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations,” and Note 15 to the accompanying financial statements for details about the financial impact of the sale of Southern Comfort and Tuaca.
|
•
|
In addition to our successful efforts to develop and introduce new products and line extensions for the Jack Daniel’s family of brands, we have pursued growth through innovation in the rest of our portfolio. Notable introductions have included Woodford Reserve Double Oaked (fiscal 2012) and Herradura Ultra (fiscal 2015). In April 2016, we announced plans to release our first new bourbon trademark in 20 years, Coopers’ Craft, in the summer of 2016 (fiscal 2017).
|
•
|
In June 2015 (fiscal 2016), we purchased all of the shares of Slane Castle Irish Whiskey Limited and announced plans to invest approximately $40 million to build a new distillery, construct warehouses, and develop a consumer experience on the historic Slane Castle Estate (in County Meath, about 30 miles north of Dublin). We plan to open the Slane Castle Whiskey Distillery and to introduce new Irish whiskeys in the spring of 2017, using high-quality whiskey purchased from other Irish distilleries and finished to Slane’s specifications while the whiskey made at the new Slane Distillery matures.
|
•
|
In June 2016 (fiscal 2017), we purchased The BenRiach Distillery Company Limited and, with it, three single malt Scotch whisky brands and distilleries – The GlenDronach, BenRiach, and Glenglassaugh. This purchase included other trademarks, a bottling plant, and The BenRiach Distillery Company Limited’s headquarters in Edinburgh, Scotland. We believe that these super-premium brands will provide us an immediate opportunity to participate in the growing single malt Scotch category and strengthen our portfolio’s long-term growth prospects in markets such as the United States, the United Kingdom, Taiwan, Germany, and in travel retail. We plan to build three new warehouses in fiscal 2017 to support the growth of these brands.
|
•
|
Our focus on the importance of
the barrel
in crafting whiskeys of the highest quality is perhaps unique in the industry. We believe we are the largest maker of new whiskey barrels in the world and, within the global spirits industry, only we own manufacturing facilities for new whiskey barrels. Our control over this critical input to the whiskey-making process gives us a competitive advantage – one that applies both to Jack Daniel’s and to our other aged spirits, including bourbons and tequilas today and – over time – Irish and Scotch whiskeys. For example, our barrel-making expertise enables us to introduce unique characteristics into our products, as we did with our successful recent innovation, Woodford Reserve Double Oaked. In addition, newly-introduced Coopers’ Craft bourbon was created to celebrate our more than 70 years of expertise raising barrels at the Brown-Forman Cooperage. While we expect it to benefit from a generally favorable craft spirits trend, we also believe that linking its identity to our distinctive barrel-making expertise will benefit Coopers’. As we progress toward becoming a global leader in whiskey, we will continue to take advantage of this source of differentiation for our existing portfolio and across the range of new opportunities.
|
•
|
Over the past several decades, we have pursued international growth both in larger, developed markets and in the emerging world. In recent years, our most visible progress has been the evolution of our RTC strategy in several key markets. We set up new distribution companies in three of our current top ten countries (Germany, France, and Turkey) and also in Brazil, a market that we believe is among our most promising long-term growth opportunities. In fiscal 2017, we plan to establish a new distribution company in Spain, which we expect to begin operating in fiscal 2018. We have added substantially to our employee base outside the United States, mostly in markets where we evolved our RTC strategy.
|
•
|
Our capital deployment initiatives have been focused on (1) enabling the expected future growth of our existing businesses through investments in our production capacity, innovation, and brand-building efforts for our existing portfolio; and (2) returning cash to our shareholders. From fiscal 2010 through 2016, we returned over $4.6 billion to our shareholders through $1.5 billion in regular quarterly dividends, $1.0 billion in two special dividends, and $2.1 billion in share repurchases.
|
Summary and Timing of Recent Developments
|
||||||
Fiscal year
|
|
PORTFOLIO
|
|
ROUTE-TO-CONSUMER
|
|
PRODUCTION
|
|
|
|
|
|
|
|
2011
|
|
Introduced Jack Daniel’s Tennessee Honey in Q4
|
|
Started distribution operations in Germany
|
|
|
|
|
Sold Hopland-based wine brands and properties
|
|
Started distribution operations in Brazil
|
|
|
2012
|
|
Introduced Woodford Reserve Double Oaked
|
|
Started distribution operations in Turkey
|
|
|
|
|
Introduced Jack Daniel’s Winter Jack
|
|
|
|
|
2013
|
|
Introduced Jack Daniel’s Sinatra Select
|
|
|
|
Announced plans for the Jack Daniel Cooperage
|
|
|
Introduced Jack Daniel’s Tennessee Rye Whiskey
|
|
|
|
Opened the Stevenson Mill
|
2014
|
|
Introduced Jack Daniel’s No. 27 Gold Tennessee Whiskey
|
|
Started distribution operations in France
|
|
Announced capacity expansion at the Woodford Reserve Distillery
|
|
|
Introduced Jack Daniel’s Tennessee Fire (limited test)
|
|
|
|
Announced capacity expansion at the Jack Daniel Distillery
|
|
|
|
|
|
|
Opened the Jack Daniel Cooperage
|
2015
|
|
Introduced Herradura Ultra in Mexico in Q2
|
|
|
|
Announced plans for the Old Forester Distillery and bourbon experience
|
|
|
Introduced Jack Daniel’s Tennessee Fire nationwide in the United States in Q4
|
|
|
|
Completed new barrel warehouses at Jack Daniel's and Woodford Reserve
|
|
|
Introduced Woodford Reserve Rye Whiskey
|
|
|
|
|
2016
|
|
Purchased Slane Castle Irish Whiskey Limited in Q1
|
|
|
|
Announced plans to construct a new distillery at Slane Castle in Ireland
|
|
|
Sold Southern Comfort and Tuaca in Q4
|
|
|
|
Opened the Spencer Mill
|
2017
|
|
Announced Coopers’ Craft bourbon to be released in Q1
|
|
|
|
|
|
|
Purchased The BenRiach Distillery Company Limited in Q1
|
|
|
|
|
Summary of Operating Performance Fiscal 2014 - 2016
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
Reported Change
|
|
Underlying Change
1
|
||||||||||||||
Fiscal year ended April 30
|
2014
|
|
2015
|
|
2016
|
|
2015 vs. 2014
|
|
2016 vs. 2015
|
|
2015 vs. 2014
|
|
2016 vs. 2015
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net sales
|
$
|
3,946
|
|
|
$
|
4,096
|
|
|
$
|
4,011
|
|
|
4
|
%
|
|
(2
|
)%
|
|
6
|
%
|
|
5
|
%
|
Excise taxes
|
955
|
|
|
962
|
|
|
922
|
|
|
1
|
%
|
|
(4
|
)%
|
|
5
|
%
|
|
6
|
%
|
|||
Cost of sales
|
913
|
|
|
951
|
|
|
945
|
|
|
4
|
%
|
|
(1
|
)%
|
|
7
|
%
|
|
3
|
%
|
|||
Gross profit
|
2,078
|
|
|
2,183
|
|
|
2,144
|
|
|
5
|
%
|
|
(2
|
)%
|
|
7
|
%
|
|
5
|
%
|
|||
Advertising
|
436
|
|
|
437
|
|
|
417
|
|
|
—
|
%
|
|
(4
|
)%
|
|
4
|
%
|
|
2
|
%
|
|||
SG&A
|
686
|
|
|
697
|
|
|
688
|
|
|
2
|
%
|
|
(1
|
)%
|
|
4
|
%
|
|
2
|
%
|
|||
Operating income
|
$
|
971
|
|
|
$
|
1,027
|
|
|
$
|
1,533
|
|
|
6
|
%
|
|
49
|
%
|
|
9
|
%
|
|
8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Gross margin
|
52.7
|
%
|
|
53.3
|
%
|
|
53.4
|
%
|
|
0.6pp
|
|
|
0.1pp
|
|
|
|
|
|
|||||
Operating margin
|
24.6
|
%
|
|
25.1
|
%
|
|
38.2
|
%
|
|
0.5pp
|
|
|
13.1pp
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest expense, net
|
$
|
24
|
|
|
$
|
25
|
|
|
$
|
44
|
|
|
6
|
%
|
|
70
|
%
|
|
|
|
|
||
Effective tax rate
|
30.5
|
%
|
|
31.7
|
%
|
|
28.3
|
%
|
|
1.2pp
|
|
|
(3.4)pp
|
|
|
|
|
|
|||||
Diluted earnings per share
|
$
|
3.06
|
|
|
$
|
3.21
|
|
|
$
|
5.22
|
|
|
5
|
%
|
|
63
|
%
|
|
|
|
|
||
Return on average invested capital
2
|
21.6
|
%
|
|
22.0
|
%
|
|
34.1
|
%
|
|
0.4pp
|
|
|
12.1pp
|
|
|
|
|
|
|
|
Sale of Southern Comfort and Tuaca
|
|||||||||||
Fiscal year ended April 30, 2016
|
Reported
|
|
Sale of Southern Comfort and Tuaca
1
|
|
Adjusted
|
||||||
|
|
|
|
|
|
||||||
Operating income
|
$
|
1,533
|
|
|
$
|
486
|
|
|
$
|
1,047
|
|
Operating margin
|
38.2
|
%
|
|
12.0
|
%
|
|
26.2
|
%
|
|||
Effective tax rate
|
28.3
|
%
|
|
(1.1
|
)%
|
|
29.4
|
%
|
|||
Diluted earnings per share
|
$
|
5.22
|
|
|
$
|
1.76
|
|
|
$
|
3.46
|
|
Return on average invested capital
2
|
34.1
|
%
|
|
11.1
|
%
|
|
23.0
|
%
|
|
|
•
|
Favorable global whiskey trends.
The markets for American, Irish, and single malt Scotch whiskey are growing faster than total distilled spirits globally, and premium whiskey is among the best-performing components of the broader whiskey category.
1
We face strong competition, and the size of the opportunity is bringing new entrants to the market. Even so, we believe that our whiskey brands are poised to benefit from this trend, including JDTW, Gentleman Jack, Woodford Reserve, Old Forester, Slane, and our newly acquired Scotch whisky brands (The GlenDronach, BenRiach, and Glenglassaugh). Furthermore, we believe that we are well positioned to access emerging growth opportunities driven by consumer trends affecting these categories, including increased interest in luxury, craft, and small-batch whiskeys. We should benefit from these trends with our existing portfolio of American whiskeys, Slane, and the newly acquired single malt Scotch whiskeys. In addition, we expect that Coopers’ Craft, our new bourbon to be introduced in the summer of 2016, will further allow us to benefit from favorable premium whiskey trends.
|
•
|
Growing competitive intensity of flavored whiskeys.
Flavored whiskey continues to be the fastest-growing component of the whiskey category
1
, and we have participated fully in this market opportunity through our successful introductions of both JDTH and JDTF. Competition in the flavored whiskey category has intensified recently as industry participants seek to capitalize on the trend through sequential new product introductions. Our strategy has been to limit our flavored whiskey portfolio while investing to build JDTH and JDTF as sustainable growth brands in the United States and to expand both brands internationally. We believe that our strategy will allow us to benefit from this trend in a manner compatible with the long-term value of the Jack Daniel’s brand, but we may forgo growth opportunities in the nearer term. Because we essentially concluded the global rollout of JDTH in fiscal 2015, its growth slowed in fiscal 2016; however, we expect it will continue to be an important contributor to our growth in fiscal 2017. We launched JDTF in the United States in fiscal 2015 and then tested it in a few international markets in fiscal 2016. We will continue to roll out JDTF globally in fiscal 2017, and we expect it to continue to be an important contributor to our growth.
|
•
|
Challenging pricing environment.
During fiscal years 2013 and 2014, and to a lesser extent in fiscal 2015 and 2016, our operating results have benefited from price increases for several of our brands, including, most importantly, JDTW. Looking ahead, we anticipate volume will be the more significant driver of growth compared to the last few years. We have not raised prices generally in international markets in response to the strengthened U.S. dollar, but we have recently increased prices in higher-inflation economies including Russia, Turkey, Brazil, and certain other markets. In many emerging markets, and for many of our travel retail customers around the world, we price our products in dollars. As foreign currencies generally weakened in fiscal 2015 and 2016, we believe that lower purchasing power in dollar terms of emerging-market consumers has dampened demand for our products; we do not expect improvement in fiscal 2017. In fiscal 2017, we expect lower prices for our used barrels as a result of weaker demand from blended Scotch industry buyers.
|
|
1
The IWSR, 2015 data.
|
•
|
Uncertain increase in costs of sales.
We expect that freight, logistics, and raw materials costs will generally increase in the low single digits during fiscal 2017. Our cost of sales are somewhat sensitive to variation in prices of certain commodities, including prices of corn, natural gas, oil, and wood used in our barrels, among others. In addition, we have been investing in our production capacity over the last four years at more than twice the rate of historical capital expenditure investment, which will also contribute to rising costs as we depreciate these investments.
|
•
|
Uncertain impact of excise taxes and government regulations restricting trade in spirits and wine.
From time to time, governments increase excise taxes or duties on spirits and introduce other regulatory measures that either restrict our ability to sell and market our brands or raise the cost of our doing so. For example, Brazil increased excise taxes in December 2015, and we expect that the increase will weaken our results there due to the higher costs of our products to consumers combined with current local economic trends. In fiscal 2016, our business was also disrupted by regulatory measures in certain countries, most notably Indonesia. In fiscal 2017, we are aware of several enacted (or proposed and likely-to-be-enacted) excise tax increases.
Whenever practicable, we increase our prices to the extent of those tax increases. We do not believe that any one known or expected excise tax increase will have a significant negative effect on our results, nor do we expect that they collectively will. But because excise tax increases can lead to inflation in consumer prices, the cumulative effect over time in a given market could soften demand for our products.
|
•
|
Emerging-market uncertainty.
During fiscal 2016, we grew underlying net sales in emerging markets, led by the Jack Daniel’s family of brands. While our competition reported a general slowdown or declines in emerging markets, we grew, but our rate of growth slowed. In fiscal 2016, we experienced challenges in Russia and Southeast Asia, and looking ahead to fiscal 2017, we are cautious about our growth outlook in emerging markets given the geopolitical uncertainty in Brazil, Turkey, and Russia. These three countries have contributed to our growth from emerging markets in recent years. Looking beyond the current challenges, we believe that emerging markets will be important to our sustained, long-term growth potential, and we remain committed to developing our business there.
|
•
|
Foreign currency headwinds anticipated to continue.
The more we expand our business globally, the more exchange rate fluctuations relative to the U.S. dollar influence our financial results. We sell more in local currencies than we purchase – for example, Jack Daniel’s Tennessee Whiskey can be distilled only in Tennessee. Accordingly, we have a net negative exposure to a strengthening U.S. dollar relative to other currencies. Additionally, the U.S. dollar is the functional currency for most of our consolidated operations. Our reported results were significantly affected in fiscal 2016 by negative foreign exchange due to the strength of the U.S. dollar, and we anticipate our fiscal 2017 results will be negatively affected as well. See “Item 7A.
Quantitative and Qualitative Disclosures about Market Risk” for more information about foreign exchange and our business.
|
|
|
•
|
In the United Kingdom, underlying net sales growth was driven by the Jack Daniel’s family of brands, led by volume growth for JDTW reflecting strong consumer demand, volume growth for JD RTDs, and the test market introduction of JDTF.
|
•
|
In Germany, underlying net sales growth was primarily driven by higher volumes of JDTW. Volume growth of JDTH and JD RTDs also contributed.
|
•
|
In Poland, volume gains for JDTW led underlying net sales growth, partially offset by a decline in volume of a lower-margin brand that we discontinued in fiscal 2016.
|
•
|
In France, underlying net sales growth was primarily driven by higher volumes for JDTW and JDTH, as the Jack Daniel’s family of brands continued to gain market share in the world’s third largest whiskey market.
|
•
|
In Turkey, price increases, higher volumes, and a beneficial channel mix for JDTW drove underlying net sales growth.
|
•
|
In Russia, volume declines for both Finlandia and JDTW were responsible for the decrease in underlying net sales. We believe that our results in this market were driven by factors common to all premium spirits companies – namely, challenging economic conditions and consumer trends toward less expensive, local products.
|
Major Brands Worldwide Results for Fiscal 2016
1
|
|||||||||||||||||||
|
Depletion Volume
|
|
Net Sales
% Change vs. 2015
|
||||||||||||||||
Brand family / brand
|
Nine-Liter Cases (Millions)
|
% Change vs. 2015
|
|
Drinks Equivalent (Millions)
|
% Change vs. 2015
|
|
Reported
|
Foreign Exchange
|
Net Chg in Est. Distributor Inventories
|
|
Underlying
|
||||||||
Jack Daniel’s Family
|
22.3
|
|
5
|
%
|
|
15.7
|
|
5
|
%
|
|
(1
|
%)
|
6
|
%
|
1
|
%
|
|
6
|
%
|
Jack Daniel’s Tennessee Whiskey
|
12.3
|
|
3
|
%
|
|
12.3
|
|
3
|
%
|
|
(1
|
%)
|
6
|
%
|
(1
|
%)
|
|
4
|
%
|
Jack Daniel’s Tennessee Honey
|
1.5
|
|
8
|
%
|
|
1.5
|
|
8
|
%
|
|
—
|
%
|
5
|
%
|
4
|
%
|
|
9
|
%
|
Other Jack Daniel’s whiskey brands
2
|
1.2
|
|
30
|
%
|
|
1.2
|
|
30
|
%
|
|
11
|
%
|
5
|
%
|
12
|
%
|
|
28
|
%
|
Jack Daniel’s RTDs/RTP
3
|
7.3
|
|
4
|
%
|
|
0.7
|
|
4
|
%
|
|
(7
|
%)
|
11
|
%
|
—
|
%
|
|
4
|
%
|
New Mix RTDs
|
5.9
|
|
14
|
%
|
|
0.6
|
|
14
|
%
|
|
2
|
%
|
20
|
%
|
—
|
%
|
|
23
|
%
|
Finlandia
|
3.0
|
|
(12
|
%)
|
|
3.0
|
|
(9
|
%)
|
|
(16
|
%)
|
13
|
%
|
(2
|
%)
|
|
(5
|
%)
|
Canadian Mist
|
1.3
|
|
(11
|
%)
|
|
1.3
|
|
(11
|
%)
|
|
(10
|
%)
|
—
|
%
|
(1
|
%)
|
|
(11
|
%)
|
El Jimador
|
1.1
|
|
(4
|
%)
|
|
1.1
|
|
(4
|
%)
|
|
(5
|
%)
|
9
|
%
|
1
|
%
|
|
5
|
%
|
Woodford Reserve
|
0.5
|
|
26
|
%
|
|
0.5
|
|
26
|
%
|
|
29
|
%
|
2
|
%
|
(3
|
%)
|
|
28
|
%
|
Herradura
|
0.4
|
|
6
|
%
|
|
0.4
|
|
6
|
%
|
|
—
|
%
|
11
|
%
|
1
|
%
|
|
13
|
%
|
Note: Totals may differ due to rounding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
Based on industry statistics published by Impact Databank, a well-known U.S. trade publication, in March 2016.
|
|
2
The IWSR, 2015 data.
|
|
3
Impact Databank published the Impact’s “Hot Brands - Spirits” list in March 2016.
|
NET SALES
|
|||||||||
Percentage change versus the prior fiscal year ended April 30
|
|
2016
|
|
|
2015
|
||||
Change in reported net sales
|
|
(2
|
)%
|
|
|
4
|
%
|
||
Sale of Southern Comfort and Tuaca
|
|
1
|
%
|
|
|
—
|
%
|
||
Foreign exchange
|
|
6
|
%
|
|
|
3
|
%
|
||
Estimated net change in distributor inventories
|
|
—
|
%
|
|
|
(1
|
)%
|
||
Change in underlying net sales
|
|
5
|
%
|
|
|
6
|
%
|
||
|
|
|
|
|
|
||||
Change in underlying net sales attributed to:
|
|
|
|
|
|
||||
Volume
|
1
|
%
|
|
|
4
|
%
|
|
||
Net price/mix
|
4
|
%
|
|
|
3
|
%
|
|
||
Note: Totals may differ due to rounding
|
|
|
|
|
|
•
|
broad-based, consumer-oriented growth of JDTW volumes, led by the United States, the United Kingdom, Germany, France, Mexico, and Poland, and beneficial channel mix in Turkey;
|
•
|
launch of JDTF in the United States, the United Kingdom (test market), Czech Republic, and Australia (introduced late in fiscal 2016);
|
•
|
growth of our tequila brands led by (1) higher volumes of New Mix in Mexico, (2) higher prices and volumes of Herradura in Mexico and the United States, and (3) higher volumes of el Jimador in the United States;
|
•
|
volume growth of Woodford Reserve in the United States;
|
•
|
broad-based volume growth of JDTH outside the United States, led by Brazil and France; and
|
•
|
higher volumes of JD RTDs in the United Kingdom and Australia.
|
•
|
broad-based declines of Finlandia in Europe, most notably in Russia;
|
•
|
volume declines for lower-margin brands that we discontinued in fiscal 2016 and for lower-margin agency brands that we no longer distribute;
|
•
|
declines in Southern Comfort in the United States before we sold it;
|
•
|
volume declines of el Jimador in Mexico; and
|
•
|
volume declines of JDTW in Russia.
|
•
|
broad-based, consumer-oriented growth of JDTW volumes, led by (1) the United States; (2) several large European markets, including Turkey, the United Kingdom, and Ukraine; and (3) Brazil, despite worsening economic trends;
|
•
|
Jack Daniel’s family of brands in France, driven by volume growth and higher pricing related to the RTC change;
|
•
|
JDTH volume growth, led by increases in existing markets, including the United States, the United Kingdom, and the Czech Republic, and by volumes in recent launch markets, including France (launched at the end of fiscal 2014) and Brazil;
|
•
|
volume growth from the nationwide launch of Jack Daniel’s Tennessee Fire in the United States in the fourth quarter of fiscal 2015;
|
•
|
volume growth of Woodford Reserve in the United States;
|
•
|
better mix in our tequila portfolio with the launch of Herradura Ultra and price increases for el Jimador in Mexico; and
|
•
|
higher prices for our used barrel sales driven by higher demand from makers of Scotch whisky and other aged spirits.
|
•
|
declines in Finlandia Vodka, driven predominantly by Poland, where year-over-year volumes declined due to a buy-in in advance of a significant excise tax increase and weaker consumer demand during fiscal 2015;
|
•
|
lower volumes for the Southern Comfort family of brands, primarily in the United States, driven by weaker demand in the on-premise channel; and
|
•
|
lower volumes of Jack Daniel’s RTDs in Australia, driven by weaker consumer demand for spirits and spirit-based RTDs and by increased competition.
|
COST OF SALES
|
|||||||||
Percentage change versus the prior fiscal year ended April 30
|
|
2016
|
|
|
2015
|
||||
Change in reported cost of sales
|
|
(1
|
)%
|
|
|
4
|
%
|
||
Sale of Southern Comfort and Tuaca
|
|
—
|
%
|
|
|
—
|
%
|
||
Foreign exchange
|
|
4
|
%
|
|
|
3
|
%
|
||
Estimated net change in distributor inventories
|
|
—
|
%
|
|
|
—
|
%
|
||
Change in underlying cost of sales
|
|
3
|
%
|
|
|
7
|
%
|
||
|
|
|
|
|
|
||||
Change in underlying cost of sales attributed to:
|
|
|
|
|
|
||||
Volume
|
1
|
%
|
|
|
4
|
%
|
|
||
Cost/mix
|
2.4
|
%
|
|
|
3
|
%
|
|
||
Note: Totals may differ due to rounding
|
|
|
|
|
|
GROSS PROFIT
|
|||||
Percentage change versus the prior fiscal year ended April 30
|
2016
|
|
2015
|
||
Change in reported gross profit
|
(2
|
)%
|
|
5
|
%
|
Sale of Southern Comfort and Tuaca
|
1
|
%
|
|
—
|
%
|
Foreign exchange
|
6
|
%
|
|
3
|
%
|
Estimated net change in distributor inventories
|
—
|
%
|
|
(1
|
)%
|
Change in underlying gross profit
|
5
|
%
|
|
7
|
%
|
Note: Totals may differ due to rounding
|
|
|
|
ADVERTISING EXPENSES
|
|||||
Percentage change versus the prior fiscal year ended April 30
|
2016
|
|
2015
|
||
Change in reported advertising
|
(4
|
)%
|
|
—
|
%
|
Sale of Southern Comfort and Tuaca
|
2
|
%
|
|
—
|
%
|
Foreign exchange
|
5
|
%
|
|
4
|
%
|
Change in underlying advertising
|
2
|
%
|
|
4
|
%
|
Note: Totals may differ due to rounding
|
|
|
|
SELLING, GENERAL, AND ADMINISTRATIVE (SG&A) EXPENSES
|
|||||
Percentage change versus the prior fiscal year ended April 30
|
2016
|
|
2015
|
||
Change in reported SG&A
|
(1
|
)%
|
|
2
|
%
|
Sale of Southern Comfort and Tuaca
|
—
|
%
|
|
—
|
%
|
Foreign exchange
|
4
|
%
|
|
2
|
%
|
Change in underlying SG&A
|
2
|
%
|
|
4
|
%
|
Note: Totals may differ due to rounding
|
|
|
|
OPERATING INCOME
|
|||||
Percentage change versus the prior fiscal year ended April 30
|
2016
|
|
2015
|
||
Change in reported operating income
|
49
|
%
|
|
6
|
%
|
Sale of Southern Comfort and Tuaca
|
(46
|
)%
|
|
—
|
%
|
Foreign exchange
|
4
|
%
|
|
6
|
%
|
Estimated net change in distributor inventories
|
1
|
%
|
|
(3
|
)%
|
Change in underlying operating income
|
8
|
%
|
|
9
|
%
|
Note: Totals may differ due to rounding
|
|
|
|
(Dollars in millions)
|
|
2014
|
|
2015
|
|
2016
|
||||||
Operating activities
|
|
$
|
649
|
|
|
$
|
608
|
|
|
$
|
524
|
|
Investing activities:
|
|
|
|
|
|
|
||||||
Proceeds from sale of business
|
|
—
|
|
|
—
|
|
|
543
|
|
|||
Additions to property, plant, and equipment
|
|
(126
|
)
|
|
(120
|
)
|
|
(108
|
)
|
|||
Other
|
|
(1
|
)
|
|
(5
|
)
|
|
(2
|
)
|
|||
|
|
(127
|
)
|
|
(125
|
)
|
|
433
|
|
|||
Financing activities:
|
|
|
|
|
|
|
||||||
Net change in short-term borrowings
|
|
5
|
|
|
183
|
|
|
80
|
|
|||
Net issuance (repayment) of long-term debt
|
|
(2
|
)
|
|
—
|
|
|
240
|
|
|||
Acquisition of treasury stock
|
|
(49
|
)
|
|
(462
|
)
|
|
(1,107
|
)
|
|||
Dividends paid
|
|
(233
|
)
|
|
(256
|
)
|
|
(266
|
)
|
|||
Other
|
|
(9
|
)
|
|
4
|
|
|
(7
|
)
|
|||
|
|
(288
|
)
|
|
(531
|
)
|
|
(1,060
|
)
|
|||
Foreign exchange effect
|
|
(1
|
)
|
|
(19
|
)
|
|
(4
|
)
|
|||
Change in cash and cash equivalents
|
|
$
|
233
|
|
|
$
|
(67
|
)
|
|
$
|
(107
|
)
|
|
|
Shares Purchased
|
|
Average Price Per Share, Including Brokerage Commissions
|
|
Total Cost of Shares
|
||||||||||||
Period
|
|
Class A
|
|
Class B
|
|
Class A
|
|
Class B
|
|
(Millions)
|
||||||||
May 1, 2013 – April 30, 2014
|
|
24,800
|
|
|
661,472
|
|
|
$
|
68.03
|
|
|
$
|
69.04
|
|
|
$
|
47
|
|
May 1, 2014 – April 30, 2015
|
|
65,105
|
|
|
5,034,330
|
|
|
$
|
90.21
|
|
|
$
|
90.36
|
|
|
$
|
461
|
|
May 1, 2015 – April 30, 2016
|
|
21,041
|
|
|
11,357,349
|
|
|
$
|
95.43
|
|
|
$
|
96.98
|
|
|
$
|
1,104
|
|
May 1, 2016 – June 10, 2016
|
|
—
|
|
|
1,121,306
|
|
|
$
|
—
|
|
|
$
|
96.71
|
|
|
$
|
108
|
|
|
|
110,946
|
|
|
18,174,457
|
|
|
|
|
|
|
$
|
1,720
|
|
|
|
|
|
|
|
|
|
Average Price Per
Share, Including
|
|
Total Spent on
Stock Repurchase
|
||||||||||
Dates
(1)
|
|
Shares Purchased
|
|
Brokerage Commissions
|
|
Program
|
||||||||||||||
Starting
|
|
Ending
|
|
Class A
|
|
Class B
|
|
Class A
|
|
Class B
|
|
(Millions)
|
||||||||
October 2013
|
|
September 2014
|
|
47,463
|
|
|
2,861,626
|
|
|
$
|
78.81
|
|
|
$
|
86.08
|
|
|
$
|
250
|
|
October 2014
|
|
March 2016
|
|
63,483
|
|
|
13,026,512
|
|
|
$
|
91.80
|
|
|
$
|
95.51
|
|
|
$
|
1,250
|
|
April 2016
|
|
March 2017
|
|
—
|
|
|
2,286,319
|
|
|
$
|
—
|
|
|
$
|
96.19
|
|
|
$
|
220
|
|
|
|
|
|
110,946
|
|
|
18,174,457
|
|
|
|
|
|
|
$
|
1,720
|
|
(Dollars in millions)
|
|
Total
|
|
2017
|
|
2018-2019
|
|
2020-2021
|
|
After 2021
|
||||||||||
Long-term debt
|
|
$
|
1,250
|
|
|
$
|
—
|
|
|
$
|
250
|
|
|
$
|
—
|
|
|
$
|
1,000
|
|
Interest on long-term debt
|
|
950
|
|
|
40
|
|
|
77
|
|
|
75
|
|
|
758
|
|
|||||
Grape purchase obligations
|
|
20
|
|
|
10
|
|
|
7
|
|
|
2
|
|
|
1
|
|
|||||
Operating leases
|
|
46
|
|
|
18
|
|
|
18
|
|
|
7
|
|
|
3
|
|
|||||
Postretirement benefit obligations
2
|
|
33
|
|
|
33
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|||||
Agave purchase obligations
3
|
|
2
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|||||
Total
|
|
$
|
2,301
|
|
|
$
|
101
|
|
|
$
|
352
|
|
|
$
|
84
|
|
|
$
|
1,762
|
|
1
|
Excludes liabilities for tax uncertainties, as we cannot reasonably predict the ultimate amount or timing of settlement.
|
2
|
As of
April 30, 2016
, we have unfunded pension and other postretirement benefit obligations of
$360 million
. Because we cannot determine the specific periods in which those obligations will be funded, the table above reflects no amounts related to those obligations other than the
$33 million
of expected contributions (including
$26 million
of expected discretionary contributions) in fiscal
2017
.
|
3
|
As discussed in Note 4 to our Consolidated Financial Statements, we have obligations to purchase agave, a plant whose sap forms the raw material for tequila. As of
April 30, 2016
, based on current market prices, obligations under these contracts totaled
$2 million
. Because we cannot determine the specific periods in which those obligations will be paid, the above table reflects only the total related to those obligations.
|
•
|
Our Board of Directors is responsible for overseeing our enterprise risk assessment and mitigation processes and procedures. The Board itself oversees some strategic enterprise risks and delegates responsibility for other risks to committees that report to the Board regularly on risks within their purview, and to management.
|
◦
|
The Audit Committee oversees policies and processes related to enterprise risk management, compliance with legal and regulatory requirements, and financial reporting and accounting control risks.
|
◦
|
The Compensation Committee periodically reviews our compensation policies and practices to assess whether they could lead to unnecessary risk taking.
|
•
|
Our Risk Committee, composed of managers from an array of levels, functions, and geographies, reports to the Board at least annually. It leads our enterprise risk management program, which systematically identifies and evaluates the major risks we face, identifies “owners” for each risk, and ensures that risk mitigation plans are in place and are being followed.
|
•
|
Our Risk Management function identifies and assesses potential operational hazards and safety and security risks, and facilitates ongoing communication about those risks with the Risk Committee and our executive leaders.
|
•
|
Our Internal Audit Department evaluates the ongoing effectiveness of our key internal controls through periodic audit and review procedures, in coordination with our external auditors.
|
•
|
The Chief Compliance Officer in our legal department helps ensure that all of our employees’ actions globally comply with all internal policies and applicable laws.
|
Table of Contents
|
|
|
Page
|
Dated:
|
June 15, 2016
|
|
|
|
|
By:
|
/s/ Paul C. Varga
|
|
|
|
Paul C. Varga
|
|
|
|
Chief Executive Officer and Chairman of the Company
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Jane C. Morreau
|
|
|
|
Jane C. Morreau
|
|
|
|
Executive Vice President and Chief Financial Officer
|
Year Ended April 30,
|
2014
|
|
2015
|
|
2016
|
||||||
Net sales
|
$
|
3,946
|
|
|
$
|
4,096
|
|
|
$
|
4,011
|
|
Excise taxes
|
955
|
|
|
962
|
|
|
922
|
|
|||
Cost of sales
|
913
|
|
|
951
|
|
|
945
|
|
|||
Gross profit
|
2,078
|
|
|
2,183
|
|
|
2,144
|
|
|||
Advertising expenses
|
436
|
|
|
437
|
|
|
417
|
|
|||
Selling, general, and administrative expenses
|
686
|
|
|
697
|
|
|
688
|
|
|||
Gain on sale of business
|
—
|
|
|
—
|
|
|
(485
|
)
|
|||
Other expense (income), net
|
(15
|
)
|
|
22
|
|
|
(9
|
)
|
|||
Operating income
|
971
|
|
|
1,027
|
|
|
1,533
|
|
|||
Interest income
|
2
|
|
|
2
|
|
|
2
|
|
|||
Interest expense
|
26
|
|
|
27
|
|
|
46
|
|
|||
Income before income taxes
|
947
|
|
|
1,002
|
|
|
1,489
|
|
|||
Income taxes
|
288
|
|
|
318
|
|
|
422
|
|
|||
Net income
|
$
|
659
|
|
|
$
|
684
|
|
|
$
|
1,067
|
|
Earnings per share:
|
|
|
|
|
|
||||||
Basic
|
$
|
3.08
|
|
|
$
|
3.23
|
|
|
$
|
5.26
|
|
Diluted
|
$
|
3.06
|
|
|
$
|
3.21
|
|
|
$
|
5.22
|
|
Year Ended April 30,
|
2014
|
|
2015
|
|
2016
|
||||||
Net income
|
$
|
659
|
|
|
$
|
684
|
|
|
$
|
1,067
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
||||||
Currency translation adjustments
|
(4
|
)
|
|
(114
|
)
|
|
(23
|
)
|
|||
Cash flow hedge adjustments
|
(4
|
)
|
|
32
|
|
|
(17
|
)
|
|||
Postretirement benefits adjustments
|
31
|
|
|
(30
|
)
|
|
(10
|
)
|
|||
Net other comprehensive income (loss)
|
23
|
|
|
(112
|
)
|
|
(50
|
)
|
|||
Comprehensive income
|
$
|
682
|
|
|
$
|
572
|
|
|
$
|
1,017
|
|
April 30,
|
2015
|
|
2016
|
||||
ASSETS
|
|
|
|
||||
Cash and cash equivalents
|
$
|
370
|
|
|
$
|
263
|
|
Accounts receivable, less allowance for doubtful accounts of $10 in 2015 and $9 in 2016
|
583
|
|
|
559
|
|
||
Inventories:
|
|
|
|
||||
Barreled whiskey
|
571
|
|
|
666
|
|
||
Finished goods
|
200
|
|
|
187
|
|
||
Work in process
|
121
|
|
|
116
|
|
||
Raw materials and supplies
|
61
|
|
|
85
|
|
||
Total inventories
|
953
|
|
|
1,054
|
|
||
Current deferred tax assets
|
16
|
|
|
—
|
|
||
Other current assets
|
332
|
|
|
357
|
|
||
Total current assets
|
2,254
|
|
|
2,233
|
|
||
Property, plant, and equipment, net
|
586
|
|
|
629
|
|
||
Goodwill
|
607
|
|
|
590
|
|
||
Other intangible assets
|
611
|
|
|
595
|
|
||
Deferred tax assets
|
18
|
|
|
17
|
|
||
Other assets
|
112
|
|
|
119
|
|
||
Total assets
|
$
|
4,188
|
|
|
$
|
4,183
|
|
LIABILITIES
|
|
|
|
||||
Accounts payable and accrued expenses
|
$
|
497
|
|
|
$
|
501
|
|
Accrued income taxes
|
12
|
|
|
19
|
|
||
Current deferred tax liabilities
|
9
|
|
|
—
|
|
||
Short-term borrowings
|
190
|
|
|
271
|
|
||
Current portion of long-term debt
|
250
|
|
|
—
|
|
||
Total current liabilities
|
958
|
|
|
791
|
|
||
Long-term debt
|
743
|
|
|
1,230
|
|
||
Deferred tax liabilities
|
107
|
|
|
101
|
|
||
Accrued pension and other postretirement benefits
|
311
|
|
|
353
|
|
||
Other liabilities
|
164
|
|
|
146
|
|
||
Total liabilities
|
2,283
|
|
|
2,621
|
|
||
Commitments and contingencies
|
|
|
|
|
|
||
STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Common stock:
|
|
|
|
||||
Class A, voting, $0.15 par value (85,000,000 shares authorized; 85,000,000 shares issued)
|
13
|
|
|
13
|
|
||
Class B, nonvoting, $0.15 par value (400,000,000 shares authorized; 142,313,000 shares issued)
|
21
|
|
|
21
|
|
||
Additional paid-in capital
|
99
|
|
|
114
|
|
||
Retained earnings
|
3,300
|
|
|
4,065
|
|
||
Accumulated other comprehensive income (loss), net of tax
|
(300
|
)
|
|
(350
|
)
|
||
Treasury stock, at cost (18,613,000 and 29,571,000 shares in 2015 and 2016, respectively)
|
(1,228
|
)
|
|
(2,301
|
)
|
||
Total stockholders’ equity
|
1,905
|
|
|
1,562
|
|
||
Total liabilities and stockholders’ equity
|
$
|
4,188
|
|
|
$
|
4,183
|
|
Year Ended April 30,
|
2014
|
|
2015
|
|
2016
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net income
|
$
|
659
|
|
|
$
|
684
|
|
|
$
|
1,067
|
|
Adjustments to reconcile net income to net cash provided by operations:
|
|
|
|
|
|
||||||
Gain on sale of business
|
—
|
|
|
—
|
|
|
(485
|
)
|
|||
Depreciation and amortization
|
50
|
|
|
51
|
|
|
56
|
|
|||
Stock-based compensation expense
|
13
|
|
|
15
|
|
|
15
|
|
|||
Deferred income taxes
|
(5
|
)
|
|
6
|
|
|
10
|
|
|||
Other, net
|
1
|
|
|
9
|
|
|
2
|
|
|||
Changes in assets and liabilities, excluding the effects of sale of business:
|
|
|
|
|
|
||||||
Accounts receivable
|
(34
|
)
|
|
(50
|
)
|
|
8
|
|
|||
Inventories
|
(67
|
)
|
|
(102
|
)
|
|
(127
|
)
|
|||
Other current assets
|
(43
|
)
|
|
(30
|
)
|
|
(57
|
)
|
|||
Accounts payable and accrued expenses
|
31
|
|
|
64
|
|
|
29
|
|
|||
Accrued income taxes
|
60
|
|
|
(58
|
)
|
|
7
|
|
|||
Noncurrent assets and liabilities
|
(16
|
)
|
|
19
|
|
|
(1
|
)
|
|||
Cash provided by operating activities
|
649
|
|
|
608
|
|
|
524
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Proceeds from sale of business
|
—
|
|
|
—
|
|
|
543
|
|
|||
Additions to property, plant, and equipment
|
(126
|
)
|
|
(120
|
)
|
|
(108
|
)
|
|||
Proceeds from sale of property, plant, and equipment
|
2
|
|
|
—
|
|
|
—
|
|
|||
Acquisition of brand names and trademarks
|
(1
|
)
|
|
(4
|
)
|
|
—
|
|
|||
Computer software expenditures
|
(2
|
)
|
|
(1
|
)
|
|
(2
|
)
|
|||
Cash provided by (used for) investing activities
|
(127
|
)
|
|
(125
|
)
|
|
433
|
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Net change in short-term borrowings
|
5
|
|
|
183
|
|
|
80
|
|
|||
Repayment of long-term debt
|
(2
|
)
|
|
—
|
|
|
(250
|
)
|
|||
Proceeds from long-term debt
|
—
|
|
|
—
|
|
|
490
|
|
|||
Debt issuance costs
|
—
|
|
|
—
|
|
|
(5
|
)
|
|||
Net payments related to exercise of stock-based awards
|
(19
|
)
|
|
(14
|
)
|
|
(17
|
)
|
|||
Excess tax benefits from stock-based awards
|
10
|
|
|
18
|
|
|
15
|
|
|||
Acquisition of treasury stock
|
(49
|
)
|
|
(462
|
)
|
|
(1,107
|
)
|
|||
Dividends paid
|
(233
|
)
|
|
(256
|
)
|
|
(266
|
)
|
|||
Cash used for financing activities
|
(288
|
)
|
|
(531
|
)
|
|
(1,060
|
)
|
|||
Effect of exchange rate changes on cash and cash equivalents
|
(1
|
)
|
|
(19
|
)
|
|
(4
|
)
|
|||
Net increase (decrease) in cash and cash equivalents
|
233
|
|
|
(67
|
)
|
|
(107
|
)
|
|||
Cash and cash equivalents, beginning of period
|
204
|
|
|
437
|
|
|
370
|
|
|||
Cash and cash equivalents, end of period
|
$
|
437
|
|
|
$
|
370
|
|
|
$
|
263
|
|
Supplemental disclosure of cash paid for:
|
|
|
|
|
|
||||||
Interest
|
$
|
28
|
|
|
$
|
27
|
|
|
$
|
41
|
|
Income taxes
|
$
|
281
|
|
|
$
|
375
|
|
|
$
|
430
|
|
Year Ended April 30,
|
2014
|
|
2015
|
|
2016
|
||||||
Class A common stock:
|
|
|
|
|
|
||||||
Balance at beginning and end of year
|
$
|
13
|
|
|
$
|
13
|
|
|
$
|
13
|
|
Class B common stock:
|
|
|
|
|
|
||||||
Balance at beginning and end of year
|
21
|
|
|
21
|
|
|
21
|
|
|||
Additional paid-in capital:
|
|
|
|
|
|
||||||
Balance at beginning of year
|
71
|
|
|
81
|
|
|
99
|
|
|||
Stock-based compensation expense
|
13
|
|
|
15
|
|
|
15
|
|
|||
Loss on issuance of treasury stock issued under compensation plans
|
(13
|
)
|
|
(15
|
)
|
|
(15
|
)
|
|||
Excess tax benefits from stock-based awards
|
10
|
|
|
18
|
|
|
15
|
|
|||
Balance at end of year
|
81
|
|
|
99
|
|
|
114
|
|
|||
Retained earnings:
|
|
|
|
|
|
||||||
Balance at beginning of year
|
2,500
|
|
|
2,894
|
|
|
3,300
|
|
|||
Net income
|
659
|
|
|
684
|
|
|
1,067
|
|
|||
Cash dividends ($1.09, $1.21, and $1.31 per share in 2014, 2015, and 2016, respectively)
|
(233
|
)
|
|
(256
|
)
|
|
(266
|
)
|
|||
Loss on issuance of treasury stock issued under compensation plans
|
(32
|
)
|
|
(22
|
)
|
|
(36
|
)
|
|||
Balance at end of year
|
2,894
|
|
|
3,300
|
|
|
4,065
|
|
|||
Accumulated other comprehensive income (loss), net of tax:
|
|
|
|
|
|
||||||
Balance at beginning of year
|
(211
|
)
|
|
(188
|
)
|
|
(300
|
)
|
|||
Net other comprehensive income (loss)
|
23
|
|
|
(112
|
)
|
|
(50
|
)
|
|||
Balance at end of year
|
(188
|
)
|
|
(300
|
)
|
|
(350
|
)
|
|||
Treasury stock, at cost:
|
|
|
|
|
|
||||||
Balance at beginning of year
|
(766
|
)
|
|
(789
|
)
|
|
(1,228
|
)
|
|||
Acquisition of treasury stock
|
(49
|
)
|
|
(462
|
)
|
|
(1,107
|
)
|
|||
Stock issued under compensation plans
|
26
|
|
|
23
|
|
|
34
|
|
|||
Balance at end of year
|
(789
|
)
|
|
(1,228
|
)
|
|
(2,301
|
)
|
|||
Total stockholders’ equity
|
$
|
2,032
|
|
|
$
|
1,905
|
|
|
$
|
1,562
|
|
Class A common shares outstanding (in thousands):
|
|
|
|
|
|
||||||
Balance at beginning of year
|
84,446
|
|
|
84,462
|
|
|
84,463
|
|
|||
Acquisition of treasury stock
|
(46
|
)
|
|
(85
|
)
|
|
(57
|
)
|
|||
Stock issued under compensation plans
|
62
|
|
|
86
|
|
|
124
|
|
|||
Balance at end of year
|
84,462
|
|
|
84,463
|
|
|
84,530
|
|
|||
Class B common shares outstanding (in thousands):
|
|
|
|
|
|
||||||
Balance at beginning of year
|
129,261
|
|
|
128,993
|
|
|
124,237
|
|
|||
Acquisition of treasury stock
|
(661
|
)
|
|
(5,034
|
)
|
|
(11,357
|
)
|
|||
Stock issued under compensation plans
|
393
|
|
|
278
|
|
|
332
|
|
|||
Balance at end of year
|
128,993
|
|
|
124,237
|
|
|
113,212
|
|
|||
Total common shares outstanding (in thousands)
|
213,455
|
|
|
208,700
|
|
|
197,742
|
|
April 30,
|
2015
|
|
2016
|
||||
Other current assets:
|
|
|
|
||||
Prepaid taxes
|
$
|
181
|
|
|
$
|
208
|
|
Other
|
151
|
|
|
149
|
|
||
|
$
|
332
|
|
|
$
|
357
|
|
Property, plant, and equipment:
|
|
|
|
||||
Land
|
$
|
72
|
|
|
$
|
76
|
|
Buildings
|
419
|
|
|
468
|
|
||
Equipment
|
561
|
|
|
619
|
|
||
Construction in process
|
88
|
|
|
54
|
|
||
|
1,140
|
|
|
1,217
|
|
||
Less accumulated depreciation
|
554
|
|
|
588
|
|
||
|
$
|
586
|
|
|
$
|
629
|
|
Accounts payable and accrued expenses:
|
|
|
|
||||
Accounts payable, trade
|
$
|
123
|
|
|
$
|
121
|
|
Accrued expenses:
|
|
|
|
||||
Advertising and promotion
|
128
|
|
|
133
|
|
||
Compensation and commissions
|
110
|
|
|
105
|
|
||
Excise and other non-income taxes
|
59
|
|
|
58
|
|
||
Other
|
77
|
|
|
84
|
|
||
|
374
|
|
|
380
|
|
||
|
$
|
497
|
|
|
$
|
501
|
|
Other liabilities:
|
|
|
|
||||
Deferred benefit – tax (Note 11)
|
$
|
75
|
|
|
$
|
59
|
|
Other
|
89
|
|
|
87
|
|
||
|
$
|
164
|
|
|
$
|
146
|
|
Balance as of April 30, 2014
|
$
|
620
|
|
Foreign currency translation adjustment
|
(13
|
)
|
|
Balance as of April 30, 2015
|
607
|
|
|
Sale of business (Note 15)
|
(16
|
)
|
|
Foreign currency translation adjustment
|
(1
|
)
|
|
Balance as of April 30, 2016
|
$
|
590
|
|
April 30,
|
2015
|
|
2016
|
||||
2.50% senior notes, $250 principal amount, due in fiscal 2016
|
$
|
250
|
|
|
$
|
—
|
|
1.00% senior notes, $250 principal amount, due in fiscal 2018
|
248
|
|
|
249
|
|
||
2.25% senior notes, $250 principal amount, due in fiscal 2023
|
247
|
|
|
248
|
|
||
3.75% senior notes, $250 principal amount, due in fiscal 2043
|
248
|
|
|
248
|
|
||
4.50% senior notes, $500 principal amount, due in fiscal 2046
|
—
|
|
|
485
|
|
||
|
993
|
|
|
1,230
|
|
||
Less current portion
|
250
|
|
|
—
|
|
||
|
$
|
743
|
|
|
$
|
1,230
|
|
•
|
Level 1
–
Quoted prices (unadjusted) in active markets for identical assets or liabilities.
|
•
|
Level 2
–
Observable inputs other than those included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in inactive markets, or other inputs that are observable or can be derived from or corroborated by observable market data.
|
•
|
Level 3
–
Unobservable inputs supported by little or no market activity.
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
April 30, 2015:
|
|
|
|
|
|
|
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Currency derivatives
|
$
|
—
|
|
|
$
|
59
|
|
|
$
|
—
|
|
|
$
|
59
|
|
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Currency derivatives
|
—
|
|
|
18
|
|
|
—
|
|
|
18
|
|
||||
Short-term borrowings
|
—
|
|
|
190
|
|
|
—
|
|
|
190
|
|
||||
Current portion of long-term debt
|
—
|
|
|
253
|
|
|
—
|
|
|
253
|
|
||||
Long-term debt
|
—
|
|
|
735
|
|
|
—
|
|
|
735
|
|
||||
April 30, 2016:
|
|
|
|
|
|
|
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Currency derivatives
|
—
|
|
|
19
|
|
|
—
|
|
|
19
|
|
||||
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Currency derivatives
|
—
|
|
|
10
|
|
|
—
|
|
|
10
|
|
||||
Short-term borrowings
|
—
|
|
|
271
|
|
|
—
|
|
|
271
|
|
||||
Long-term debt
|
—
|
|
|
1,293
|
|
|
—
|
|
|
1,293
|
|
|
2015
|
|
2016
|
||||||||||||
April 30,
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
$
|
370
|
|
|
$
|
370
|
|
|
$
|
263
|
|
|
$
|
263
|
|
Currency derivatives
|
59
|
|
|
59
|
|
|
19
|
|
|
19
|
|
||||
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Currency derivatives
|
18
|
|
|
18
|
|
|
10
|
|
|
10
|
|
||||
Short-term borrowings
|
190
|
|
|
190
|
|
|
271
|
|
|
271
|
|
||||
Current portion of long-term debt
|
250
|
|
|
253
|
|
|
—
|
|
|
—
|
|
||||
Long-term debt
|
743
|
|
|
735
|
|
|
1,230
|
|
|
1,293
|
|
|
Classification in Statement of Operations
|
|
2015
|
|
2016
|
||||
Currency derivatives designated as cash flow hedges:
|
|
|
|
|
|
||||
Net gain (loss) recognized in AOCI
|
n/a
|
|
$
|
96
|
|
|
$
|
22
|
|
Net gain (loss) reclassified from AOCI into earnings
|
Net sales
|
|
41
|
|
|
60
|
|
||
Interest rate derivatives designated as cash flow hedges:
|
|
|
|
|
|
||||
Net gain (loss) recognized in AOCI
|
n/a
|
|
—
|
|
|
8
|
|
||
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
||||
Currency derivatives – net gain (loss) recognized in earnings
|
Net sales
|
|
26
|
|
|
1
|
|
||
Currency derivatives – net gain (loss) recognized in earnings
|
Other income
|
|
4
|
|
|
(5
|
)
|
|
Balance Sheet Classification
|
|
Fair Value of
Derivatives in a
Gain Position
|
|
Fair Value of
Derivatives in a
Loss Position
|
||||
April 30, 2015:
|
|
|
|
|
|
||||
Designated as cash flow hedges:
|
|
|
|
|
|
||||
Currency derivatives
|
Other current assets
|
|
$
|
42
|
|
|
$
|
(2
|
)
|
Currency derivatives
|
Other assets
|
|
20
|
|
|
(3
|
)
|
||
Currency derivatives
|
Accrued expenses
|
|
—
|
|
|
(6
|
)
|
||
Currency derivatives
|
Other liabilities
|
|
—
|
|
|
(6
|
)
|
||
Not designated as hedges:
|
|
|
|
|
|
||||
Currency derivatives
|
Other current assets
|
|
3
|
|
|
(1
|
)
|
||
Currency derivatives
|
Accrued expenses
|
|
1
|
|
|
(7
|
)
|
||
April 30, 2016:
|
|
|
|
|
|
||||
Designated as cash flow hedges:
|
|
|
|
|
|
||||
Currency derivatives
|
Other current assets
|
|
23
|
|
|
(2
|
)
|
||
Currency derivatives
|
Other assets
|
|
3
|
|
|
(2
|
)
|
||
Currency derivatives
|
Accrued expenses
|
|
4
|
|
|
(8
|
)
|
||
Currency derivatives
|
Other liabilities
|
|
3
|
|
|
(9
|
)
|
||
Not designated as hedges:
|
|
|
|
|
|
||||
Currency derivatives
|
Other current assets
|
|
1
|
|
|
(4
|
)
|
|
Gross Amounts of Recognized Assets
(Liabilities)
|
|
Gross Amounts Offset in
Balance Sheet
|
|
Net Amounts Presented in
Balance Sheet
|
|
Gross Amounts Not Offset in
Balance Sheet
|
|
Net Amounts
|
||||||||||
April 30, 2015:
|
|
|
|
|
|
|
|
|
|
||||||||||
Derivative assets
|
$
|
65
|
|
|
$
|
(6
|
)
|
|
$
|
59
|
|
|
$
|
—
|
|
|
$
|
59
|
|
Derivative liabilities
|
(24
|
)
|
|
6
|
|
|
(18
|
)
|
|
—
|
|
|
(18
|
)
|
|||||
April 30, 2016:
|
|
|
|
|
|
|
|
|
|
||||||||||
Derivative assets
|
34
|
|
|
(15
|
)
|
|
19
|
|
|
(6
|
)
|
|
13
|
|
|||||
Derivative liabilities
|
(25
|
)
|
|
15
|
|
|
(10
|
)
|
|
6
|
|
|
(4
|
)
|
|
Pension Benefits
|
|
Medical and Life
Insurance Benefits
|
||||||||||||
|
2015
|
|
2016
|
|
2015
|
|
2016
|
||||||||
Obligation at beginning of year
|
$
|
785
|
|
|
$
|
887
|
|
|
$
|
69
|
|
|
$
|
57
|
|
Service cost
|
22
|
|
|
26
|
|
|
1
|
|
|
1
|
|
||||
Interest cost
|
34
|
|
|
35
|
|
|
3
|
|
|
2
|
|
||||
Net actuarial loss (gain)
|
91
|
|
|
8
|
|
|
3
|
|
|
(1
|
)
|
||||
Plan amendments
|
—
|
|
|
—
|
|
|
(16
|
)
|
|
—
|
|
||||
Retiree contributions
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
||||
Benefits paid
|
(45
|
)
|
|
(58
|
)
|
|
(4
|
)
|
|
(4
|
)
|
||||
Obligation at end of year
|
$
|
887
|
|
|
$
|
898
|
|
|
$
|
57
|
|
|
$
|
56
|
|
|
Pension Benefits
|
|
Medical and Life
Insurance Benefits
|
||||
2017
|
$
|
51
|
|
|
$
|
3
|
|
2018
|
52
|
|
|
3
|
|
||
2019
|
53
|
|
|
3
|
|
||
2020
|
54
|
|
|
3
|
|
||
2021
|
56
|
|
|
3
|
|
||
2022 – 2026
|
303
|
|
|
18
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
April 30, 2015:
|
|
|
|
|
|
|
|
||||||||
Commingled trust funds
1
:
|
|
|
|
|
|
|
|
||||||||
Equity funds
|
$
|
—
|
|
|
$
|
248
|
|
|
$
|
—
|
|
|
$
|
248
|
|
Fixed income funds
|
—
|
|
|
185
|
|
|
—
|
|
|
185
|
|
||||
Real estate funds
|
—
|
|
|
20
|
|
|
36
|
|
|
56
|
|
||||
Short-term investments
|
—
|
|
|
4
|
|
|
—
|
|
|
4
|
|
||||
Total commingled trust funds
|
—
|
|
|
457
|
|
|
36
|
|
|
493
|
|
||||
Hedge funds
2
|
—
|
|
|
—
|
|
|
31
|
|
|
31
|
|
||||
Private equity
3
|
—
|
|
|
—
|
|
|
26
|
|
|
26
|
|
||||
Equity securities
|
76
|
|
|
—
|
|
|
—
|
|
|
76
|
|
||||
Total
|
$
|
76
|
|
|
$
|
457
|
|
|
$
|
93
|
|
|
$
|
626
|
|
April 30, 2016:
|
|
|
|
|
|
|
|
||||||||
Commingled trust funds
1
:
|
|
|
|
|
|
|
|
||||||||
Equity funds
|
$
|
—
|
|
|
$
|
197
|
|
|
$
|
—
|
|
|
$
|
197
|
|
Fixed income funds
|
—
|
|
|
197
|
|
|
—
|
|
|
197
|
|
||||
Real estate funds
|
—
|
|
|
—
|
|
|
59
|
|
|
59
|
|
||||
Short-term investments
|
—
|
|
|
4
|
|
|
—
|
|
|
4
|
|
||||
Total commingled trust funds
|
—
|
|
|
398
|
|
|
59
|
|
|
457
|
|
||||
Hedge funds
2
|
—
|
|
|
—
|
|
|
30
|
|
|
30
|
|
||||
Private equity
3
|
—
|
|
|
—
|
|
|
29
|
|
|
29
|
|
||||
Equity securities
|
78
|
|
|
—
|
|
|
—
|
|
|
78
|
|
||||
Total
|
$
|
78
|
|
|
$
|
398
|
|
|
$
|
118
|
|
|
$
|
594
|
|
|
|
|
Real Estate
Funds
|
|
Hedge
Funds
|
|
Private
Equity
|
|
Total
|
||||||||
Balance as of April 30, 2014
|
$
|
32
|
|
|
$
|
30
|
|
|
$
|
25
|
|
|
$
|
87
|
|
Return on assets held at end of year
|
4
|
|
|
1
|
|
|
1
|
|
|
6
|
|
||||
Purchases and settlements
|
—
|
|
|
—
|
|
|
4
|
|
|
4
|
|
||||
Sales and settlements
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
(4
|
)
|
||||
Balance as of April 30, 2015
|
36
|
|
|
31
|
|
|
26
|
|
|
93
|
|
||||
Return on assets held at end of year
|
4
|
|
|
(1
|
)
|
|
1
|
|
|
4
|
|
||||
Purchases and settlements
|
19
|
|
|
—
|
|
|
5
|
|
|
24
|
|
||||
Sales and settlements
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
(3
|
)
|
||||
Balance as of April 30, 2016
|
$
|
59
|
|
|
$
|
30
|
|
|
$
|
29
|
|
|
$
|
118
|
|
|
Pension Benefits
|
|
Medical and Life
Insurance Benefits
|
||||||||||||
|
2015
|
|
2016
|
|
2015
|
|
2016
|
||||||||
Assets at beginning of year
|
$
|
605
|
|
|
$
|
626
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Actual return on assets
|
52
|
|
|
2
|
|
|
—
|
|
|
—
|
|
||||
Retiree contributions
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
||||
Company contributions
|
14
|
|
|
24
|
|
|
3
|
|
|
3
|
|
||||
Benefits paid
|
(45
|
)
|
|
(58
|
)
|
|
(4
|
)
|
|
(4
|
)
|
||||
Assets at end of year
|
$
|
626
|
|
|
$
|
594
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Pension Benefits
|
|
Medical and Life
Insurance Benefits
|
||||||||||||
April 30,
|
2015
|
|
2016
|
|
2015
|
|
2016
|
||||||||
Assets
|
$
|
626
|
|
|
$
|
594
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Obligations
|
(887
|
)
|
|
(898
|
)
|
|
(57
|
)
|
|
(56
|
)
|
||||
Funded status
|
$
|
(261
|
)
|
|
$
|
(304
|
)
|
|
$
|
(57
|
)
|
|
$
|
(56
|
)
|
|
|
Pension Benefits
|
|
Medical and Life
Insurance Benefits
|
||||||||||||
April 30,
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
||||||||
Accounts payable and accrued expenses
|
|
(4
|
)
|
|
(4
|
)
|
|
(3
|
)
|
|
(3
|
)
|
||||
Accrued postretirement benefits
|
|
(257
|
)
|
|
(300
|
)
|
|
(54
|
)
|
|
(53
|
)
|
||||
Net liability
|
|
$
|
(261
|
)
|
|
$
|
(304
|
)
|
|
$
|
(57
|
)
|
|
$
|
(56
|
)
|
Accumulated other comprehensive income (loss), before tax:
|
|
|
|
|
|
|
|
|
||||||||
Net actuarial gain (loss)
|
|
$
|
(353
|
)
|
|
$
|
(372
|
)
|
|
$
|
(16
|
)
|
|
$
|
(13
|
)
|
Prior service credit (cost)
|
|
(4
|
)
|
|
(4
|
)
|
|
18
|
|
|
15
|
|
||||
|
|
$
|
(357
|
)
|
|
$
|
(376
|
)
|
|
$
|
2
|
|
|
$
|
2
|
|
|
Plan Assets
|
|
Accumulated
Benefit Obligation
|
|
Projected
Benefit Obligation
|
||||||||||||||||||
April 30,
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
||||||||||||
Plans with assets in excess of accumulated benefit obligation
|
$
|
53
|
|
|
$
|
—
|
|
|
$
|
50
|
|
|
$
|
—
|
|
|
$
|
52
|
|
|
$
|
—
|
|
Plans with accumulated benefit obligation in excess of assets
|
573
|
|
|
594
|
|
|
710
|
|
|
776
|
|
|
835
|
|
|
898
|
|
||||||
Total
|
$
|
626
|
|
|
$
|
594
|
|
|
$
|
760
|
|
|
$
|
776
|
|
|
$
|
887
|
|
|
$
|
898
|
|
|
Pension Benefits
|
||||||||||
|
2014
|
|
2015
|
|
2016
|
||||||
Service cost
|
$
|
21
|
|
|
$
|
22
|
|
|
$
|
26
|
|
Interest cost
|
31
|
|
|
34
|
|
|
35
|
|
|||
Expected return on assets
|
(40
|
)
|
|
(41
|
)
|
|
(40
|
)
|
|||
Amortization of:
|
|
|
|
|
|
||||||
Prior service cost (credit)
|
1
|
|
|
1
|
|
|
1
|
|
|||
Net actuarial loss (gain)
|
31
|
|
|
22
|
|
|
27
|
|
|||
Net expense
|
$
|
44
|
|
|
$
|
38
|
|
|
$
|
49
|
|
|
Medical and Life Insurance Benefits
|
||||||||||
|
2014
|
|
2015
|
|
2016
|
||||||
Service cost
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
1
|
|
Interest cost
|
3
|
|
|
3
|
|
|
2
|
|
|||
Amortization of:
|
|
|
|
|
|
||||||
Prior service cost (credit)
|
—
|
|
|
(2
|
)
|
|
(2
|
)
|
|||
Net actuarial loss (gain)
|
—
|
|
|
1
|
|
|
1
|
|
|||
Net expense
|
$
|
5
|
|
|
$
|
3
|
|
|
$
|
2
|
|
|
Pension Benefits
|
|
Medical and Life
Insurance Benefits
|
||||||||||||||||||||
|
2014
|
|
2015
|
|
2016
|
|
2014
|
|
2015
|
|
2016
|
||||||||||||
Prior service credit (cost)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10
|
|
|
$
|
16
|
|
|
$
|
—
|
|
Net actuarial gain (loss)
|
9
|
|
|
(80
|
)
|
|
(46
|
)
|
|
(3
|
)
|
|
(3
|
)
|
|
1
|
|
||||||
Amortization reclassified to earnings:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Prior service cost (credit)
|
1
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
(2
|
)
|
|
(2
|
)
|
||||||
Net actuarial loss (gain)
|
31
|
|
|
22
|
|
|
27
|
|
|
—
|
|
|
1
|
|
|
1
|
|
||||||
Net amount recognized in OCI
|
$
|
41
|
|
|
$
|
(57
|
)
|
|
$
|
(18
|
)
|
|
$
|
7
|
|
|
$
|
12
|
|
|
$
|
—
|
|
|
Pension Benefits
|
|
Medical and Life
Insurance Benefits
|
||||||||
|
2015
|
|
2016
|
|
2015
|
|
2016
|
||||
Discount rate
|
4.09
|
%
|
|
4.02
|
%
|
|
4.09
|
%
|
|
3.96
|
%
|
Rate of salary increase
|
4.00
|
%
|
|
4.00
|
%
|
|
n/a
|
|
|
n/a
|
|
|
Medical and Life
Insurance Benefits
|
||||
|
2015
|
|
2016
|
||
Health care cost trend rate assumed for next year
|
7.50
|
%
|
|
7.25
|
%
|
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)
|
5.00
|
%
|
|
5.00
|
%
|
Year that the rate reaches the ultimate trend rate
|
2023
|
|
|
2024
|
|
|
Number of
Underlying
Shares
(in thousands)
|
|
Weighted
Average
Exercise Price
per Award
|
|
Weighted
Average
Remaining
Contractual
Term (years)
|
|
Aggregate
Intrinsic Value
|
|||||
Outstanding at April 30, 2015
|
3,817
|
|
|
$
|
48.46
|
|
|
|
|
|
||
Granted
|
378
|
|
|
102.25
|
|
|
|
|
|
|||
Exercised
|
(758
|
)
|
|
36.88
|
|
|
|
|
|
|||
Forfeited or expired
|
(11
|
)
|
|
87.71
|
|
|
|
|
|
|||
Outstanding at April 30, 2016
|
3,426
|
|
|
$
|
56.83
|
|
|
5.0
|
|
$
|
138
|
|
Exercisable at April 30, 2016
|
2,293
|
|
|
$
|
41.24
|
|
|
3.6
|
|
$
|
126
|
|
|
2014
|
|
2015
|
|
2016
|
|||
Risk-free interest rate
|
1.9
|
%
|
|
2.2
|
%
|
|
2.1
|
%
|
Expected volatility
|
22.5
|
%
|
|
22.3
|
%
|
|
19.1
|
%
|
Expected dividend yield
|
1.8
|
%
|
|
1.7
|
%
|
|
1.6
|
%
|
Expected term (years)
|
6.75
|
|
|
6.75
|
|
|
6.75
|
|
|
Number of
Underlying Shares
(in thousands)
|
|
Weighted
Average
Fair Value at
Grant Date
|
|||
Nonvested at April 30, 2015
|
319
|
|
|
$
|
72.25
|
|
Granted
|
55
|
|
|
119.37
|
|
|
Adjusted for dividends or performance
|
(1
|
)
|
|
68.43
|
|
|
Vested
|
(98
|
)
|
|
62.59
|
|
|
Forfeited
|
(1
|
)
|
|
79.36
|
|
|
Nonvested at April 30, 2016
|
274
|
|
|
$
|
85.22
|
|
|
2014
|
|
2015
|
|
2016
|
||||||
United States
|
$
|
797
|
|
|
$
|
912
|
|
|
$
|
1,184
|
|
Foreign
|
150
|
|
|
90
|
|
|
305
|
|
|||
|
$
|
947
|
|
|
$
|
1,002
|
|
|
$
|
1,489
|
|
|
2015
|
|
2016
|
||||
April 30,
|
|
|
|
||||
Deferred tax assets:
|
|
|
|
||||
Postretirement and other benefits
|
$
|
164
|
|
|
$
|
183
|
|
Accrued liabilities and other
|
22
|
|
|
10
|
|
||
Inventories
|
12
|
|
|
26
|
|
||
Loss and credit carryforwards
|
46
|
|
|
39
|
|
||
Valuation allowance
|
(27
|
)
|
|
(25
|
)
|
||
Total deferred tax assets, net
|
217
|
|
|
233
|
|
||
Deferred tax liabilities:
|
|
|
|
||||
Intangible assets
|
(207
|
)
|
|
(225
|
)
|
||
Property, plant, and equipment
|
(61
|
)
|
|
(83
|
)
|
||
Other
|
(31
|
)
|
|
(9
|
)
|
||
Total deferred tax liabilities
|
(299
|
)
|
|
(317
|
)
|
||
Net deferred tax liability
|
$
|
(82
|
)
|
|
$
|
(84
|
)
|
|
2014
|
|
2015
|
|
2016
|
||||||
Current:
|
|
|
|
|
|
||||||
U.S. federal
|
$
|
243
|
|
|
$
|
259
|
|
|
$
|
347
|
|
Foreign
|
49
|
|
|
42
|
|
|
47
|
|
|||
State and local
|
1
|
|
|
11
|
|
|
18
|
|
|||
|
293
|
|
|
312
|
|
|
412
|
|
|||
Deferred:
|
|
|
|
|
|
||||||
U.S. federal
|
$
|
3
|
|
|
$
|
15
|
|
|
$
|
24
|
|
Foreign
|
(6
|
)
|
|
(11
|
)
|
|
(17
|
)
|
|||
State and local
|
(2
|
)
|
|
2
|
|
|
3
|
|
|||
|
(5
|
)
|
|
6
|
|
|
10
|
|
|||
|
$
|
288
|
|
|
$
|
318
|
|
|
$
|
422
|
|
|
Percent of Income Before Taxes
|
|||||||
|
2014
|
|
2015
|
|
2016
|
|||
U.S. federal statutory rate
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
State taxes, net of U.S. federal tax benefit
|
0.7
|
%
|
|
1.0
|
%
|
|
1.0
|
%
|
Income taxed at other than U.S. federal statutory rate
|
(2.2
|
)%
|
|
(0.5
|
)%
|
|
(2.5
|
)%
|
Tax benefit from U.S. manufacturing
|
(2.8
|
)%
|
|
(2.5
|
)%
|
|
(2.4
|
)%
|
Tax impact of sale of business
|
—
|
%
|
|
—
|
%
|
|
(1.1
|
)%
|
Amortization of deferred tax benefit from intercompany transactions
|
(0.4
|
)%
|
|
(1.6
|
)%
|
|
(1.6
|
)%
|
Other, net
|
0.2
|
%
|
|
0.3
|
%
|
|
(0.1
|
)%
|
Effective rate
|
30.5
|
%
|
|
31.7
|
%
|
|
28.3
|
%
|
|
2014
|
|
2015
|
|
2016
|
||||||
Unrecognized tax benefits at beginning of year
|
$
|
11
|
|
|
$
|
11
|
|
|
$
|
13
|
|
Additions for tax positions provided in prior periods
|
1
|
|
|
2
|
|
|
1
|
|
|||
Additions for tax positions provided in current period
|
1
|
|
|
1
|
|
|
—
|
|
|||
Decreases for tax positions provided in prior years
|
(1
|
)
|
|
(1
|
)
|
|
(4
|
)
|
|||
Settlements of tax positions in the current period
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|||
Lapse of statutes of limitations
|
—
|
|
|
—
|
|
|
—
|
|
|||
Unrecognized tax benefits at end of year
|
$
|
11
|
|
|
$
|
13
|
|
|
$
|
9
|
|
|
2014
|
|
2015
|
|
2016
|
||||||
Net income available to common stockholders
|
$
|
659
|
|
|
$
|
684
|
|
|
$
|
1,067
|
|
Share data (in thousands):
|
|
|
|
|
|
||||||
Basic average common shares outstanding
|
213,454
|
|
|
211,593
|
|
|
202,977
|
|
|||
Dilutive effect of stock-based awards
|
1,628
|
|
|
1,490
|
|
|
1,303
|
|
|||
Diluted average common shares outstanding
|
215,082
|
|
|
213,083
|
|
|
204,280
|
|
|||
|
|
|
|
|
|
||||||
Basic earnings per share
|
$
|
3.08
|
|
|
$
|
3.23
|
|
|
$
|
5.26
|
|
Diluted earnings per share
|
$
|
3.06
|
|
|
$
|
3.21
|
|
|
$
|
5.22
|
|
|
Currency Translation
Adjustments
|
|
Cash Flow Hedge
Adjustments
|
|
Postretirement Benefits
Adjustments
|
|
Total AOCI
|
||||||||
Balance at April 30, 2015
|
$
|
(108
|
)
|
|
$
|
28
|
|
|
$
|
(220
|
)
|
|
$
|
(300
|
)
|
Net other comprehensive income (loss)
|
(23
|
)
|
|
(17
|
)
|
|
(10
|
)
|
|
(50
|
)
|
||||
Balance at April 30, 2016
|
$
|
(131
|
)
|
|
$
|
11
|
|
|
$
|
(230
|
)
|
|
$
|
(350
|
)
|
|
Pre-Tax
|
|
Tax
|
|
Net
|
||||||
Year Ended April 30, 2014
|
|
|
|
|
|
||||||
Currency translation adjustments
|
$
|
(2
|
)
|
|
$
|
(2
|
)
|
|
$
|
(4
|
)
|
Cash flow hedge adjustments:
|
|
|
|
|
|
||||||
Net gain (loss) on hedging instruments
|
(7
|
)
|
|
3
|
|
|
(4
|
)
|
|||
Reclassification to earnings
1
|
—
|
|
|
—
|
|
|
—
|
|
|||
Postretirement benefits adjustments:
|
|
|
|
|
|
||||||
Net actuarial gain (loss) and prior service cost
|
18
|
|
|
(7
|
)
|
|
11
|
|
|||
Reclassification to earnings
2
|
32
|
|
|
(12
|
)
|
|
20
|
|
|||
Net other comprehensive income (loss)
|
$
|
41
|
|
|
$
|
(18
|
)
|
|
$
|
23
|
|
|
|
|
|
|
|
||||||
Year Ended April 30, 2015
|
|
|
|
|
|
||||||
Currency translation adjustments
|
$
|
(120
|
)
|
|
$
|
6
|
|
|
$
|
(114
|
)
|
Cash flow hedge adjustments:
|
|
|
|
|
|
||||||
Net gain (loss) on hedging instruments
|
96
|
|
|
(40
|
)
|
|
56
|
|
|||
Reclassification to earnings
1
|
(41
|
)
|
|
17
|
|
|
(24
|
)
|
|||
Postretirement benefits adjustments:
|
|
|
|
|
|
||||||
Net actuarial gain (loss) and prior service cost
|
(70
|
)
|
|
26
|
|
|
(44
|
)
|
|||
Reclassification to earnings
2
|
22
|
|
|
(8
|
)
|
|
14
|
|
|||
Net other comprehensive income (loss)
|
$
|
(113
|
)
|
|
$
|
1
|
|
|
$
|
(112
|
)
|
|
|
|
|
|
|
||||||
Year Ended April 30, 2016
|
|
|
|
|
|
||||||
Currency translation adjustments
|
$
|
(22
|
)
|
|
$
|
(1
|
)
|
|
$
|
(23
|
)
|
Cash flow hedge adjustments:
|
|
|
|
|
|
||||||
Net gain (loss) on hedging instruments
|
30
|
|
|
(10
|
)
|
|
20
|
|
|||
Reclassification to earnings
1
|
(60
|
)
|
|
23
|
|
|
(37
|
)
|
|||
Postretirement benefits adjustments:
|
|
|
|
|
|
||||||
Net actuarial gain (loss) and prior service cost
|
(47
|
)
|
|
19
|
|
|
(28
|
)
|
|||
Reclassification to earnings
2
|
30
|
|
|
(12
|
)
|
|
18
|
|
|||
Net other comprehensive income (loss)
|
$
|
(69
|
)
|
|
$
|
19
|
|
|
$
|
(50
|
)
|
|
2014
|
|
2015
|
|
2016
|
||||||
Net sales:
|
|
|
|
|
|
||||||
United States
|
$
|
1,624
|
|
|
$
|
1,780
|
|
|
$
|
1,838
|
|
Europe
|
1,264
|
|
|
1,270
|
|
|
1,242
|
|
|||
Australia
|
469
|
|
|
431
|
|
|
379
|
|
|||
Other
|
589
|
|
|
615
|
|
|
552
|
|
|||
|
$
|
3,946
|
|
|
$
|
4,096
|
|
|
$
|
4,011
|
|
|
|
Fiscal 2015
|
|
Fiscal 2016
|
||||||||||||||||||||||||||||||||||||
|
|
First
Quarter |
|
Second
Quarter |
|
Third
Quarter |
|
Fourth
Quarter |
|
Year
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Year
|
||||||||||||||||||||
Net sales
|
|
$
|
921
|
|
|
$
|
1,135
|
|
|
$
|
1,093
|
|
|
$
|
947
|
|
|
$
|
4,096
|
|
|
$
|
900
|
|
|
$
|
1,096
|
|
|
$
|
1,083
|
|
|
$
|
933
|
|
|
$
|
4,011
|
|
Gross profit
|
|
495
|
|
|
609
|
|
|
553
|
|
|
527
|
|
|
2,183
|
|
|
491
|
|
|
586
|
|
|
555
|
|
|
513
|
|
|
2,144
|
|
||||||||||
Net income
|
|
150
|
|
|
208
|
|
|
186
|
|
|
140
|
|
|
684
|
|
|
156
|
|
|
200
|
|
|
190
|
|
|
522
|
|
|
1,067
|
|
||||||||||
Basic EPS
|
|
0.70
|
|
|
0.98
|
|
|
0.88
|
|
|
0.67
|
|
|
3.23
|
|
|
0.75
|
|
|
0.98
|
|
|
0.94
|
|
|
2.62
|
|
|
5.26
|
|
||||||||||
Diluted EPS
|
|
0.70
|
|
|
0.97
|
|
|
0.87
|
|
|
0.66
|
|
|
3.21
|
|
|
0.75
|
|
|
0.97
|
|
|
0.94
|
|
|
2.60
|
|
|
5.22
|
|
||||||||||
Cash dividends per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
Declared
|
|
0.580
|
|
|
—
|
|
|
0.630
|
|
|
—
|
|
|
1.210
|
|
|
0.630
|
|
|
—
|
|
|
0.680
|
|
|
—
|
|
|
1.310
|
|
||||||||||
Paid
|
|
0.290
|
|
|
0.290
|
|
|
0.315
|
|
|
0.315
|
|
|
1.210
|
|
|
0.315
|
|
|
0.315
|
|
|
0.340
|
|
|
0.340
|
|
|
1.310
|
|
||||||||||
Market price per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
Class A high
|
|
95.29
|
|
|
93.09
|
|
|
98.00
|
|
|
95.23
|
|
|
98.00
|
|
|
119.49
|
|
|
122.30
|
|
|
117.53
|
|
|
112.24
|
|
|
122.30
|
|
||||||||||
Class A low
|
|
85.98
|
|
|
81.38
|
|
|
85.33
|
|
|
86.85
|
|
|
81.38
|
|
|
93.09
|
|
|
105.87
|
|
|
99.50
|
|
|
100.40
|
|
|
93.09
|
|
||||||||||
Class B high
|
|
97.15
|
|
|
93.62
|
|
|
97.97
|
|
|
93.99
|
|
|
97.97
|
|
|
108.41
|
|
|
110.81
|
|
|
106.88
|
|
|
103.39
|
|
|
110.81
|
|
||||||||||
Class B low
|
|
86.48
|
|
|
81.89
|
|
|
85.43
|
|
|
86.71
|
|
|
81.89
|
|
|
90.65
|
|
|
95.21
|
|
|
90.60
|
|
|
93.25
|
|
|
90.60
|
|
1.
|
Quarterly amounts may not add to amounts for the year due to rounding. Further, quarterly earnings per share (EPS) amounts may not add to amounts for the year because quarterly and annual EPS calculations are performed separately.
|
2.
|
Results for the fourth quarter of fiscal 2016 include a gain of $485 million on the divestiture of our Southern Comfort and Tuaca brands.
|
|
|
Page
|
(a)(1)
|
Financial Statements
|
|
|
The following documents are included in Item 8 of this report:
|
|
|
||
|
||
|
||
|
||
|
||
|
||
|
||
(a)(2)
|
Financial Statement Schedule:
|
|
|
|
|
*
|
Indicates management contract, compensatory plan, or arrangement.
|
|
|
BROWN-FORMAN CORPORATION
(Registrant)
|
|
|
/s/ Paul C. Varga
|
|
By:
|
Paul C. Varga
|
|
|
Chief Executive Officer and
Chairman of the Company
|
/s/ Geo. Garvin Brown IV
|
|
|
By:
|
Geo. Garvin Brown IV
|
|
|
Director, Chairman of the Board
|
|
/s/ Paul C. Varga
|
|
|
By:
|
Paul C. Varga
|
|
|
Director, Chief Executive Officer,
and Chairman of the Company
|
|
/s/ Joan C. Lordi Amble
|
|
|
By:
|
Joan C. Lordi Amble
|
|
|
Director
|
|
/s/ Patrick Bousquet-Chavanne
|
|
|
By:
|
Patrick Bousquet-Chavanne
|
|
|
Director
|
|
/s/ Campbell P. Brown
|
|
|
By:
|
Campbell P. Brown
|
|
|
Director
|
|
/s/ Martin S. Brown, Jr.
|
|
|
By:
|
Martin S. Brown, Jr.
|
|
|
Director
|
|
/s/ Stuart R. Brown
|
|
|
By:
|
Stuart R. Brown
|
|
|
Director
|
|
/s/ Bruce L. Byrnes
|
|
|
By:
|
Bruce L. Byrnes
|
|
|
Director
|
|
/s/ John D. Cook
|
|
|
By:
|
John D. Cook
|
|
|
Director
|
|
/s/ Marshall B. Farrer
|
|
|
By:
|
Marshall B. Farrer
|
|
|
Director
|
|
/s/ Laura L. Frazier
|
|
|
By:
|
Laura L. Frazier
|
|
|
Director
|
|
/s/ Sandra A. Frazier
|
|
|
By:
|
Sandra A. Frazier
|
|
|
Director
|
|
/s/ Augusta Brown Holland
|
|
|
By:
|
Augusta Brown Holland
|
|
|
Director
|
|
/s/ Michael J. Roney
|
|
|
By:
|
Michael J. Roney
|
|
|
Director
|
|
/s/ Michael A. Todman
|
|
|
By:
|
Michael A. Todman
|
|
|
Director
|
|
/s/ James S. Welch, Jr.
|
|
|
By:
|
James S. Welch, Jr.
|
|
|
Director
|
|
/s/ Jane C. Morreau
|
|
|
By:
|
Jane C. Morreau
|
|
|
Executive Vice President and Chief Financial Officer (Principal Financial Officer)
|
|
/s/ Brian P. Fitzgerald
|
|
|
By:
|
Brian P. Fitzgerald
|
|
|
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
|
|
Col. A
|
Col. B
|
|
Col. C(1)
|
|
Col. C(2)
|
|
Col. D
|
|
Col. E
|
||||||||||
Description
|
Balance at
Beginning
of Period
|
|
Additions
Charged to
Costs and
Expenses
|
|
Additions
Charged to
Other
Accounts
|
|
Deductions
|
|
Balance
at End
of Period
|
||||||||||
2014
|
|
|
|
|
|
|
|
|
|
||||||||||
Allowance for Doubtful Accounts
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9
|
|
2015
|
|
|
|
|
|
|
|
|
|
||||||||||
Allowance for Doubtful Accounts
|
$
|
9
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
1
|
|
(1)
|
$
|
10
|
|
2016
|
|
|
|
|
|
|
|
|
|
||||||||||
Allowance for Doubtful Accounts
|
$
|
10
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
2
|
|
(1)
|
$
|
9
|
|
|
|
(1)
|
Doubtful accounts written off, net of recoveries.
|
1 Year Brown Forman Chart |
1 Month Brown Forman Chart |
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