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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 | |
---|---|---|---|---|---|---|---|---|
-0.515 | -1.17% | 43.405 | 44.22 | 43.3617 | 43.73 | 466,650 | 16:04:02 |
☑
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
61-0143150
|
|
(State or other jurisdiction of
|
(IRS Employer
|
|
incorporation or organization)
|
Identification No.)
|
|
|
|
|
850 Dixie Highway
|
|
|
Louisville,
|
Kentucky
|
40210
|
(Address of principal executive offices)
|
(Zip Code)
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
Class A Common Stock (voting), $0.15 par value
|
BFA
|
New York Stock Exchange
|
Class B Common Stock (nonvoting), $0.15 par value
|
BFB
|
New York Stock Exchange
|
1.200% Notes due 2026
|
BF26
|
New York Stock Exchange
|
2.600% Notes due 2028
|
BF28
|
New York Stock Exchange
|
Large accelerated filer
|
☑
|
|
Accelerated filer
|
☐
|
Non-accelerated filer
|
☐
|
|
Smaller reporting company
|
☐
|
|
|
|
Emerging growth company
|
☐
|
Class A Common Stock (voting), $0.15 par value
|
169,039,764
|
|
Class B Common Stock (nonvoting), $0.15 par value
|
309,100,414
|
|
BROWN-FORMAN CORPORATION
|
||
Index to Quarterly Report Form 10-Q
|
||
|
|
|
|
|
Page
|
|
|
|
Item 1.
|
||
|
|
|
Item 2.
|
||
|
|
|
Item 3.
|
||
|
|
|
Item 4.
|
||
|
|
|
|
|
|
Item 1.
|
||
|
|
|
Item 1A.
|
||
|
|
|
Item 2.
|
||
|
|
|
Item 3.
|
||
|
|
|
Item 4.
|
||
|
|
|
Item 5.
|
||
|
|
|
Item 6.
|
||
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
January 31,
|
|
January 31,
|
||||||||||||
|
2019
|
|
2020
|
|
2019
|
|
2020
|
||||||||
Sales
|
$
|
1,181
|
|
|
$
|
1,178
|
|
|
$
|
3,329
|
|
|
$
|
3,404
|
|
Excise taxes
|
277
|
|
|
279
|
|
|
749
|
|
|
750
|
|
||||
Net sales
|
904
|
|
|
899
|
|
|
2,580
|
|
|
2,654
|
|
||||
Cost of sales
|
333
|
|
|
342
|
|
|
896
|
|
|
980
|
|
||||
Gross profit
|
571
|
|
|
557
|
|
|
1,684
|
|
|
1,674
|
|
||||
Advertising expenses
|
103
|
|
|
104
|
|
|
303
|
|
|
308
|
|
||||
Selling, general, and administrative expenses
|
149
|
|
|
153
|
|
|
478
|
|
|
475
|
|
||||
Other expense (income), net
|
(1
|
)
|
|
(4
|
)
|
|
(13
|
)
|
|
(13
|
)
|
||||
Operating income
|
320
|
|
|
304
|
|
|
916
|
|
|
904
|
|
||||
Non-operating postretirement expense
|
15
|
|
|
1
|
|
|
19
|
|
|
3
|
|
||||
Interest income
|
(2
|
)
|
|
(1
|
)
|
|
(6
|
)
|
|
(4
|
)
|
||||
Interest expense
|
23
|
|
|
20
|
|
|
67
|
|
|
62
|
|
||||
Income before income taxes
|
284
|
|
|
284
|
|
|
836
|
|
|
843
|
|
||||
Income taxes
|
57
|
|
|
53
|
|
|
160
|
|
|
144
|
|
||||
Net income
|
$
|
227
|
|
|
$
|
231
|
|
|
$
|
676
|
|
|
$
|
699
|
|
Earnings per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.47
|
|
|
$
|
0.48
|
|
|
$
|
1.41
|
|
|
$
|
1.46
|
|
Diluted
|
$
|
0.47
|
|
|
$
|
0.48
|
|
|
$
|
1.40
|
|
|
$
|
1.45
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
January 31,
|
|
January 31,
|
||||||||||||
|
2019
|
|
2020
|
|
2019
|
|
2020
|
||||||||
Net income
|
$
|
227
|
|
|
$
|
231
|
|
|
$
|
676
|
|
|
$
|
699
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
||||||||
Currency translation adjustments
|
18
|
|
|
6
|
|
|
(21
|
)
|
|
3
|
|
||||
Cash flow hedge adjustments
|
(8
|
)
|
|
(1
|
)
|
|
37
|
|
|
1
|
|
||||
Postretirement benefits adjustments
|
(5
|
)
|
|
3
|
|
|
2
|
|
|
10
|
|
||||
Net other comprehensive income (loss)
|
5
|
|
|
8
|
|
|
18
|
|
|
14
|
|
||||
Comprehensive income
|
$
|
232
|
|
|
$
|
239
|
|
|
$
|
694
|
|
|
$
|
713
|
|
|
April 30,
2019 |
|
January 31,
2020 |
||||
Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
307
|
|
|
$
|
276
|
|
Accounts receivable, less allowance for doubtful accounts of $7 at April 30 and January 31
|
609
|
|
|
732
|
|
||
Inventories:
|
|
|
|
||||
Barreled whiskey
|
1,004
|
|
|
1,067
|
|
||
Finished goods
|
279
|
|
|
314
|
|
||
Work in process
|
152
|
|
|
191
|
|
||
Raw materials and supplies
|
85
|
|
|
96
|
|
||
Total inventories
|
1,520
|
|
|
1,668
|
|
||
Other current assets
|
283
|
|
|
318
|
|
||
Total current assets
|
2,719
|
|
|
2,994
|
|
||
Property, plant and equipment, net
|
816
|
|
|
840
|
|
||
Goodwill
|
753
|
|
|
765
|
|
||
Other intangible assets
|
645
|
|
|
654
|
|
||
Deferred tax assets
|
16
|
|
|
19
|
|
||
Other assets
|
190
|
|
|
246
|
|
||
Total assets
|
$
|
5,139
|
|
|
$
|
5,518
|
|
Liabilities
|
|
|
|
||||
Accounts payable and accrued expenses
|
$
|
544
|
|
|
$
|
558
|
|
Dividends payable
|
—
|
|
|
83
|
|
||
Accrued income taxes
|
9
|
|
|
19
|
|
||
Short-term borrowings
|
150
|
|
|
4
|
|
||
Total current liabilities
|
703
|
|
|
664
|
|
||
Long-term debt
|
2,290
|
|
|
2,293
|
|
||
Deferred tax liabilities
|
145
|
|
|
187
|
|
||
Accrued pension and other postretirement benefits
|
197
|
|
|
198
|
|
||
Other liabilities
|
157
|
|
|
171
|
|
||
Total liabilities
|
3,492
|
|
|
3,513
|
|
||
Commitments and contingencies
|
|
|
|
||||
Stockholders’ Equity
|
|
|
|
||||
Common stock:
|
|
|
|
||||
Class A, voting, $0.15 par value (170,000,000 shares authorized; 170,000,000 shares issued)
|
25
|
|
|
25
|
|
||
Class B, nonvoting, $0.15 par value (400,000,000 shares authorized; 314,532,000 shares issued)
|
47
|
|
|
47
|
|
||
Retained earnings
|
2,238
|
|
|
2,588
|
|
||
Accumulated other comprehensive income (loss), net of tax
|
(363
|
)
|
|
(392
|
)
|
||
Treasury stock, at cost (7,360,000 and 6,457,000 shares at April 30 and January 31, respectively)
|
(300
|
)
|
|
(263
|
)
|
||
Total stockholders’ equity
|
1,647
|
|
|
2,005
|
|
||
Total liabilities and stockholders’ equity
|
$
|
5,139
|
|
|
$
|
5,518
|
|
|
Nine Months Ended
|
||||||
|
January 31,
|
||||||
|
2019
|
|
2020
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
676
|
|
|
$
|
699
|
|
Adjustments to reconcile net income to net cash provided by operations:
|
|
|
|
||||
Depreciation and amortization
|
52
|
|
|
55
|
|
||
Stock-based compensation expense
|
12
|
|
|
8
|
|
||
Deferred income tax provision
|
13
|
|
|
30
|
|
||
U.S Tax Act repatriation tax benefit
|
(4
|
)
|
|
—
|
|
||
Other, net
|
7
|
|
|
6
|
|
||
Changes in assets and liabilities, excluding the effects of acquisition of business:
|
|
|
|
||||
Accounts receivable
|
(102
|
)
|
|
(125
|
)
|
||
Inventories
|
(109
|
)
|
|
(142
|
)
|
||
Other current assets
|
19
|
|
|
(33
|
)
|
||
Accounts payable and accrued expenses
|
(1
|
)
|
|
(6
|
)
|
||
Accrued income taxes
|
(3
|
)
|
|
10
|
|
||
Other operating assets and liabilities
|
17
|
|
|
7
|
|
||
Cash provided by operating activities
|
577
|
|
|
509
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Acquisition of business, net of cash acquired
|
—
|
|
|
(22
|
)
|
||
Additions to property, plant, and equipment
|
(84
|
)
|
|
(84
|
)
|
||
Payments for corporate-owned life insurance
|
(2
|
)
|
|
—
|
|
||
Proceeds from corporate-owned life insurance
|
2
|
|
|
—
|
|
||
Computer software expenditures
|
(2
|
)
|
|
(5
|
)
|
||
Cash used for investing activities
|
(86
|
)
|
|
(111
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Net change in short-term borrowings
|
(13
|
)
|
|
(150
|
)
|
||
Payments of withholding taxes related to stock-based awards
|
(8
|
)
|
|
(33
|
)
|
||
Acquisition of treasury stock
|
(206
|
)
|
|
(1
|
)
|
||
Dividends paid
|
(231
|
)
|
|
(242
|
)
|
||
Cash used for financing activities
|
(458
|
)
|
|
(426
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(12
|
)
|
|
(3
|
)
|
||
Net increase (decrease) in cash and cash equivalents
|
21
|
|
|
(31
|
)
|
||
Cash and cash equivalents, beginning of period
|
239
|
|
|
307
|
|
||
Cash and cash equivalents, end of period
|
$
|
260
|
|
|
$
|
276
|
|
•
|
ASU 2016-02: Leases. This update, codified along with various amendments as Accounting Standards Codification Topic 842 (ASC 842), replaces previous lease accounting guidance. Under ASC 842, a lessee should recognize on its balance sheet a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. ASC 842 permits an entity to make an accounting policy election not to recognize lease assets and liabilities for leases with a term of 12 months or less. It also requires additional quantitative and qualitative disclosures about leasing arrangements.
|
•
|
ASU 2018-02: Reclassification of Certain Effects from Accumulated Other Comprehensive Income (AOCI). This new guidance allows a reclassification from AOCI to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act enacted by the U.S. government in December 2017. We elected to make the reclassification, which increased retained earnings and decreased AOCI as of May 1, 2019, by $43 million.
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
January 31,
|
|
January 31,
|
||||||||||||
(Dollars in millions, except per share amounts)
|
2019
|
|
2020
|
|
2019
|
|
2020
|
||||||||
Net income available to common stockholders
|
$
|
227
|
|
|
$
|
231
|
|
|
$
|
676
|
|
|
$
|
699
|
|
|
|
|
|
|
|
|
|
||||||||
Share data (in thousands):
|
|
|
|
|
|
|
|
||||||||
Basic average common shares outstanding
|
477,301
|
|
|
477,898
|
|
|
479,522
|
|
|
477,643
|
|
||||
Dilutive effect of stock-based awards
|
2,798
|
|
|
2,859
|
|
|
3,143
|
|
|
2,793
|
|
||||
Diluted average common shares outstanding
|
480,099
|
|
|
480,757
|
|
|
482,665
|
|
|
480,436
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Basic earnings per share
|
$
|
0.47
|
|
|
$
|
0.48
|
|
|
$
|
1.41
|
|
|
$
|
1.46
|
|
Diluted earnings per share
|
$
|
0.47
|
|
|
$
|
0.48
|
|
|
$
|
1.40
|
|
|
$
|
1.45
|
|
(Dollars in millions)
|
Goodwill
|
|
Other Intangible Assets
|
||||
Balance at April 30, 2019
|
$
|
753
|
|
|
$
|
645
|
|
Acquisition (Note 15)
|
11
|
|
|
12
|
|
||
Foreign currency translation adjustment
|
1
|
|
|
(3
|
)
|
||
Balance at January 31, 2020
|
$
|
765
|
|
|
$
|
654
|
|
(Principal and carrying amounts in millions)
|
April 30,
2019 |
|
January 31,
2020 |
||||
2.25% senior notes, $250 principal amount, due January 15, 2023
|
$
|
249
|
|
|
$
|
249
|
|
3.50% senior notes, $300 principal amount, due April 15, 2025
|
297
|
|
|
297
|
|
||
1.20% senior notes, €300 principal amount, due July 7, 2026
|
333
|
|
|
329
|
|
||
2.60% senior notes, £300 principal amount, due July 7, 2028
|
383
|
|
|
389
|
|
||
4.00% senior notes, $300 principal amount, due April 15, 2038
|
293
|
|
|
294
|
|
||
3.75% senior notes, $250 principal amount, due January 15, 2043
|
248
|
|
|
248
|
|
||
4.50% senior notes, $500 principal amount, due July 15, 2045
|
487
|
|
|
487
|
|
||
|
$
|
2,290
|
|
|
$
|
2,293
|
|
(Dollars in millions)
|
April 30,
2019 |
|
January 31,
2020 |
Commercial paper
|
$150
|
|
$1
|
Average interest rate
|
2.60%
|
|
1.63%
|
Average remaining days to maturity
|
18
|
|
3
|
(Dollars in millions)
|
Class A Common Stock
|
|
Class B Common Stock
|
|
Additional Paid-in Capital
|
|
Retained Earnings
|
|
AOCI
|
|
Treasury Stock
|
|
Total
|
||||||||||||||
Balance at April 30, 2018
|
$
|
25
|
|
|
$
|
47
|
|
|
$
|
4
|
|
|
$
|
1,730
|
|
|
$
|
(378
|
)
|
|
$
|
(112
|
)
|
|
$
|
1,316
|
|
Cumulative effect of changes in accounting standards
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
|
|
(5
|
)
|
||||||||||||
Net income
|
|
|
|
|
|
|
200
|
|
|
|
|
|
|
200
|
|
||||||||||||
Net other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
14
|
|
|
|
|
14
|
|
||||||||||||
Declaration of cash dividends
|
|
|
|
|
|
|
(152
|
)
|
|
|
|
|
|
(152
|
)
|
||||||||||||
Acquisition of treasury stock
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
(6
|
)
|
||||||||||||
Stock-based compensation expense
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
5
|
|
||||||||||||
Stock issued under compensation plans
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
9
|
|
||||||||||||
Loss on issuance of treasury stock issued under compensation plans
|
|
|
|
|
(7
|
)
|
|
(6
|
)
|
|
|
|
|
|
(13
|
)
|
|||||||||||
Balance at July 31, 2018
|
25
|
|
|
47
|
|
|
2
|
|
|
1,767
|
|
|
(364
|
)
|
|
(109
|
)
|
|
1,368
|
|
|||||||
Net income
|
|
|
|
|
|
|
249
|
|
|
|
|
|
|
249
|
|
||||||||||||
Net other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
(1
|
)
|
||||||||||||
Acquisition of treasury stock
|
|
|
|
|
|
|
|
|
|
|
(122
|
)
|
|
(122
|
)
|
||||||||||||
Stock-based compensation expense
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
4
|
|
||||||||||||
Stock issued under compensation plans
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
1
|
|
||||||||||||
Loss on issuance of treasury stock issued under compensation plans
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
(2
|
)
|
||||||||||||
Balance at October 31, 2018
|
25
|
|
|
47
|
|
|
4
|
|
|
2,016
|
|
|
(365
|
)
|
|
(230
|
)
|
|
1,497
|
|
|||||||
Net income
|
|
|
|
|
|
|
227
|
|
|
|
|
|
|
227
|
|
||||||||||||
Net other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
5
|
|
||||||||||||
Declaration of cash dividends
|
|
|
|
|
|
|
(158
|
)
|
|
|
|
|
|
(158
|
)
|
||||||||||||
Acquisition of treasury stock
|
|
|
|
|
|
|
|
|
|
|
(78
|
)
|
|
(78
|
)
|
||||||||||||
Stock-based compensation expense
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
3
|
|
||||||||||||
Stock issued under compensation plans
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
1
|
|
||||||||||||
Loss on issuance of treasury stock issued under compensation plans
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
(4
|
)
|
||||||||||||
Balance at January 31, 2019
|
$
|
25
|
|
|
$
|
47
|
|
|
$
|
3
|
|
|
$
|
2,085
|
|
|
$
|
(360
|
)
|
|
$
|
(307
|
)
|
|
$
|
1,493
|
|
(Dollars in millions)
|
Class A Common Stock
|
|
Class B Common Stock
|
|
Additional Paid-in Capital
|
|
Retained Earnings
|
|
AOCI
|
|
Treasury Stock
|
|
Total
|
||||||||||||||
Balance at April 30, 2019
|
$
|
25
|
|
|
$
|
47
|
|
|
$
|
—
|
|
|
$
|
2,238
|
|
|
$
|
(363
|
)
|
|
$
|
(300
|
)
|
|
$
|
1,647
|
|
Adoption of ASU 2018-02 (Note 1)
|
|
|
|
|
|
|
43
|
|
|
(43
|
)
|
|
|
|
—
|
|
|||||||||||
Net income
|
|
|
|
|
|
|
186
|
|
|
|
|
|
|
186
|
|
||||||||||||
Net other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
(1
|
)
|
||||||||||||
Declaration of cash dividends
|
|
|
|
|
|
|
(158
|
)
|
|
|
|
|
|
(158
|
)
|
||||||||||||
Acquisition of treasury stock
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
(1
|
)
|
||||||||||||
Stock-based compensation expense
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
3
|
|
||||||||||||
Stock issued under compensation plans
|
|
|
|
|
|
|
|
|
|
|
16
|
|
|
16
|
|
||||||||||||
Loss on issuance of treasury stock issued under compensation plans
|
|
|
|
|
(2
|
)
|
|
(27
|
)
|
|
|
|
|
|
(29
|
)
|
|||||||||||
Balance at July 31, 2019
|
25
|
|
|
47
|
|
|
1
|
|
|
2,282
|
|
|
(407
|
)
|
|
(285
|
)
|
|
1,663
|
|
|||||||
Net income
|
|
|
|
|
|
|
282
|
|
|
|
|
|
|
282
|
|
||||||||||||
Net other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
7
|
|
||||||||||||
Stock-based compensation expense
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
3
|
|
||||||||||||
Stock issued under compensation plans
|
|
|
|
|
|
|
|
|
|
|
11
|
|
|
11
|
|
||||||||||||
Loss on issuance of treasury stock issued under compensation plans
|
|
|
|
|
(4
|
)
|
|
(20
|
)
|
|
|
|
|
|
(24
|
)
|
|||||||||||
Balance at October 31, 2019
|
25
|
|
|
47
|
|
|
—
|
|
|
2,544
|
|
|
(400
|
)
|
|
(274
|
)
|
|
1,942
|
|
|||||||
Net income
|
|
|
|
|
|
|
231
|
|
|
|
|
|
|
231
|
|
||||||||||||
Net other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
8
|
|
|
|
|
8
|
|
||||||||||||
Declaration of cash dividends
|
|
|
|
|
|
|
(167
|
)
|
|
|
|
|
|
(167
|
)
|
||||||||||||
Stock-based compensation expense
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
2
|
|
||||||||||||
Stock issued under compensation plans
|
|
|
|
|
|
|
|
|
|
|
11
|
|
|
11
|
|
||||||||||||
Loss on issuance of treasury stock issued under compensation plans
|
|
|
|
|
(2
|
)
|
|
(20
|
)
|
|
|
|
|
|
(22
|
)
|
|||||||||||
Balance at January 31, 2020
|
$
|
25
|
|
|
$
|
47
|
|
|
$
|
—
|
|
|
$
|
2,588
|
|
|
$
|
(392
|
)
|
|
$
|
(263
|
)
|
|
$
|
2,005
|
|
(Dollars in millions)
|
Currency Translation Adjustments
|
|
Cash Flow Hedge Adjustments
|
|
Postretirement Benefits Adjustments
|
|
Total AOCI
|
||||||||
Balance at April 30, 2019
|
$
|
(207
|
)
|
|
$
|
31
|
|
|
$
|
(187
|
)
|
|
$
|
(363
|
)
|
Adoption of ASU 2018-02 (Note 1)
|
(1
|
)
|
|
(1
|
)
|
|
(41
|
)
|
|
(43
|
)
|
||||
Net other comprehensive income (loss)
|
3
|
|
|
1
|
|
|
10
|
|
|
14
|
|
||||
Balance at January 31, 2020
|
$
|
(205
|
)
|
|
$
|
31
|
|
|
$
|
(218
|
)
|
|
$
|
(392
|
)
|
Declaration Date
|
|
Record Date
|
|
Payable Date
|
|
Amount per Share
|
May 23, 2019
|
|
June 6, 2019
|
|
July 1, 2019
|
|
$0.1660
|
July 25, 2019
|
|
September 6, 2019
|
|
October 1, 2019
|
|
$0.1660
|
November 21, 2019
|
|
December 5, 2019
|
|
January 2, 2020
|
|
$0.1743
|
January 28, 2020
|
|
March 9, 2020
|
|
April 1, 2020
|
|
$0.1743
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
January 31,
|
|
January 31,
|
||||||||||||
(Dollars in millions)
|
2019
|
|
2020
|
|
2019
|
|
2020
|
||||||||
United States
|
$
|
411
|
|
|
$
|
416
|
|
|
$
|
1,209
|
|
|
$
|
1,296
|
|
Developed International1
|
269
|
|
|
263
|
|
|
718
|
|
|
716
|
|
||||
Emerging2
|
165
|
|
|
171
|
|
|
460
|
|
|
477
|
|
||||
Travel Retail3
|
33
|
|
|
34
|
|
|
109
|
|
|
104
|
|
||||
Non-branded and bulk4
|
26
|
|
|
15
|
|
|
84
|
|
|
61
|
|
||||
Total
|
$
|
904
|
|
|
$
|
899
|
|
|
$
|
2,580
|
|
|
$
|
2,654
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
January 31,
|
|
January 31,
|
||||||||||||
(Dollars in millions)
|
2019
|
|
2020
|
|
2019
|
|
2020
|
||||||||
Whiskey1
|
$
|
707
|
|
|
$
|
701
|
|
|
$
|
2,007
|
|
|
$
|
2,086
|
|
Tequila2
|
68
|
|
|
74
|
|
|
200
|
|
|
219
|
|
||||
Vodka3
|
36
|
|
|
32
|
|
|
98
|
|
|
89
|
|
||||
Wine4
|
51
|
|
|
62
|
|
|
153
|
|
|
159
|
|
||||
Rest of portfolio
|
16
|
|
|
15
|
|
|
38
|
|
|
40
|
|
||||
Non-branded and bulk5
|
26
|
|
|
15
|
|
|
84
|
|
|
61
|
|
||||
Total
|
$
|
904
|
|
|
$
|
899
|
|
|
$
|
2,580
|
|
|
$
|
2,654
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
January 31,
|
|
January 31,
|
||||||||||||
(Dollars in millions)
|
2019
|
|
2020
|
|
2019
|
|
2020
|
||||||||
Pension Benefits:
|
|
|
|
|
|
|
|
||||||||
Service cost
|
$
|
6
|
|
|
$
|
6
|
|
|
$
|
18
|
|
|
$
|
18
|
|
Interest cost
|
9
|
|
|
8
|
|
|
26
|
|
|
24
|
|
||||
Expected return on plan assets
|
(12
|
)
|
|
(12
|
)
|
|
(35
|
)
|
|
(35
|
)
|
||||
Amortization of:
|
|
|
|
|
|
|
|
||||||||
Prior service cost (credit)
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
||||
Net actuarial loss
|
5
|
|
|
5
|
|
|
15
|
|
|
14
|
|
||||
Settlement charge
|
13
|
|
|
—
|
|
|
13
|
|
|
—
|
|
||||
Net cost
|
$
|
21
|
|
|
$
|
7
|
|
|
$
|
38
|
|
|
$
|
22
|
|
|
|
|
|
|
|
|
|
||||||||
Other Postretirement Benefits:
|
|
|
|
|
|
|
|
||||||||
Service cost
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
1
|
|
Interest cost
|
1
|
|
|
1
|
|
|
1
|
|
|
1
|
|
||||
Amortization of prior service cost (credit)
|
(1
|
)
|
|
(1
|
)
|
|
(2
|
)
|
|
(2
|
)
|
||||
Net cost
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
April 30, 2019
|
|
January 31, 2020
|
||||||||||||
(Dollars in millions)
|
Classification
|
|
Derivative Assets
|
|
Derivative Liabilities
|
|
Derivative Assets
|
|
Derivative Liabilities
|
||||||||
Designated as cash flow hedges:
|
|
|
|
|
|
|
|
|
|
||||||||
Currency derivatives
|
Other current assets
|
|
$
|
21
|
|
|
$
|
(2
|
)
|
|
$
|
32
|
|
|
$
|
(2
|
)
|
Currency derivatives
|
Other assets
|
|
22
|
|
|
(1
|
)
|
|
18
|
|
|
(2
|
)
|
||||
Currency derivatives
|
Accrued expenses
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
(7
|
)
|
||||
Currency derivatives
|
Other liabilities
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(2
|
)
|
||||
Not designated as hedges:
|
|
|
|
|
|
|
|
|
|
||||||||
Currency derivatives
|
Other current assets
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
(Dollars in millions)
|
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, 2019
|
|
|
|
|
|
|
|
|
|
||||||||||
Derivative assets
|
$
|
43
|
|
|
$
|
(3
|
)
|
|
$
|
40
|
|
|
$
|
—
|
|
|
$
|
40
|
|
Derivative liabilities
|
(9
|
)
|
|
3
|
|
|
(6
|
)
|
|
—
|
|
|
(6
|
)
|
|||||
January 31, 2020
|
|
|
|
|
|
|
|
|
|
||||||||||
Derivative assets
|
54
|
|
|
(4
|
)
|
|
50
|
|
|
(4
|
)
|
|
46
|
|
|||||
Derivative liabilities
|
(13
|
)
|
|
4
|
|
|
(9
|
)
|
|
4
|
|
|
(5
|
)
|
|
April 30, 2019
|
|
January 31, 2020
|
||||||||||||
|
Carrying
|
|
Fair
|
|
Carrying
|
|
Fair
|
||||||||
(Dollars in millions)
|
Amount
|
|
Value
|
|
Amount
|
|
Value
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
$
|
307
|
|
|
$
|
307
|
|
|
$
|
276
|
|
|
$
|
276
|
|
Currency derivatives
|
40
|
|
|
40
|
|
|
50
|
|
|
50
|
|
||||
Liabilities
|
|
|
|
|
|
|
|
||||||||
Currency derivatives
|
6
|
|
|
6
|
|
|
9
|
|
|
9
|
|
||||
Short-term borrowings
|
150
|
|
|
150
|
|
|
4
|
|
|
4
|
|
||||
Long-term debt
|
2,290
|
|
|
2,399
|
|
|
2,293
|
|
|
2,621
|
|
•
|
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.
|
|
|
January 31,
|
||
(Dollars in millions)
|
Classification
|
2020
|
||
Right-of-use assets
|
Other assets
|
$
|
55
|
|
|
|
|
||
Lease liabilities:
|
|
|
||
Current
|
Accounts payable and accrued expenses
|
$
|
17
|
|
Non-current
|
Other liabilities
|
39
|
|
|
Total
|
|
$
|
56
|
|
|
Three Months
|
|
Nine Months
|
||||
|
Ended
|
|
Ended
|
||||
(Dollars in millions)
|
January 31, 2020
|
|
January 31, 2020
|
||||
Total lease cost1
|
$
|
8
|
|
|
$
|
21
|
|
Cash paid for amounts included in the measurement of lease liabilities2
|
5
|
|
|
16
|
|
||
Right-of-use assets obtained in exchange for new lease liabilities
|
3
|
|
|
19
|
|
|
January 31,
|
||
(Dollars in millions)
|
2020
|
||
Fiscal 2020 (three months remaining)
|
$
|
3
|
|
Fiscal 2021
|
18
|
|
|
Fiscal 2022
|
12
|
|
|
Fiscal 2023
|
8
|
|
|
Fiscal 2024
|
5
|
|
|
Thereafter
|
13
|
|
|
Total lease payments
|
59
|
|
|
Less: Present value discount
|
(3
|
)
|
|
Lease liabilities
|
$
|
56
|
|
|
|
||
Weighted-average discount rate
|
3.0%
|
||
Weighted-average remaining term
|
5.1 years
|
|
April 30,
|
||
(Dollars in millions)
|
2019
|
||
Fiscal 2020
|
$
|
23
|
|
Fiscal 2021
|
16
|
|
|
Fiscal 2022
|
10
|
|
|
Fiscal 2023
|
5
|
|
|
Fiscal 2024
|
3
|
|
|
Thereafter
|
2
|
|
|
Total lease payments
|
$
|
59
|
|
|
Three Months Ended
|
|
Three Months Ended
|
||||||||||||||||||||
|
January 31, 2019
|
|
January 31, 2020
|
||||||||||||||||||||
(Dollars in millions)
|
Pre-Tax
|
|
Tax
|
|
Net
|
|
Pre-Tax
|
|
Tax
|
|
Net
|
||||||||||||
Currency translation adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net gain (loss) on currency translation
|
$
|
16
|
|
|
$
|
2
|
|
|
$
|
18
|
|
|
$
|
5
|
|
|
$
|
1
|
|
|
$
|
6
|
|
Reclassification to earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Other comprehensive income (loss), net
|
16
|
|
|
2
|
|
|
18
|
|
|
5
|
|
|
1
|
|
|
6
|
|
||||||
Cash flow hedge adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net gain (loss) on hedging instruments
|
(5
|
)
|
|
1
|
|
|
(4
|
)
|
|
4
|
|
|
(1
|
)
|
|
3
|
|
||||||
Reclassification to earnings1
|
(5
|
)
|
|
1
|
|
|
(4
|
)
|
|
(5
|
)
|
|
1
|
|
|
(4
|
)
|
||||||
Other comprehensive income (loss), net
|
(10
|
)
|
|
2
|
|
|
(8
|
)
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
||||||
Postretirement benefits adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net actuarial gain (loss) and prior service cost
|
(25
|
)
|
|
6
|
|
|
(19
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Reclassification to earnings2
|
18
|
|
|
(4
|
)
|
|
14
|
|
|
4
|
|
|
(1
|
)
|
|
3
|
|
||||||
Other comprehensive income (loss), net
|
(7
|
)
|
|
2
|
|
|
(5
|
)
|
|
4
|
|
|
(1
|
)
|
|
3
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total other comprehensive income (loss), net
|
$
|
(1
|
)
|
|
$
|
6
|
|
|
$
|
5
|
|
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Nine Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||||
|
January 31, 2019
|
|
January 31, 2020
|
||||||||||||||||||||
(Dollars in millions)
|
Pre-Tax
|
|
Tax
|
|
Net
|
|
Pre-Tax
|
|
Tax
|
|
Net
|
||||||||||||
Currency translation adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net gain (loss) on currency translation
|
$
|
(12
|
)
|
|
$
|
(9
|
)
|
|
$
|
(21
|
)
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
3
|
|
Reclassification to earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Other comprehensive income (loss), net
|
(12
|
)
|
|
(9
|
)
|
|
(21
|
)
|
|
3
|
|
|
—
|
|
|
3
|
|
||||||
Cash flow hedge adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net gain (loss) on hedging instruments
|
51
|
|
|
(12
|
)
|
|
39
|
|
|
17
|
|
|
(4
|
)
|
|
13
|
|
||||||
Reclassification to earnings1
|
(3
|
)
|
|
1
|
|
|
(2
|
)
|
|
(16
|
)
|
|
4
|
|
|
(12
|
)
|
||||||
Other comprehensive income (loss), net
|
48
|
|
|
(11
|
)
|
|
37
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||||
Postretirement benefits adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net actuarial gain (loss) and prior service cost
|
(25
|
)
|
|
6
|
|
|
(19
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Reclassification to earnings2
|
27
|
|
|
(6
|
)
|
|
21
|
|
|
13
|
|
|
(3
|
)
|
|
10
|
|
||||||
Other comprehensive income (loss), net
|
2
|
|
|
—
|
|
|
2
|
|
|
13
|
|
|
(3
|
)
|
|
10
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total other comprehensive income (loss), net
|
$
|
38
|
|
|
$
|
(20
|
)
|
|
$
|
18
|
|
|
$
|
17
|
|
|
$
|
(3
|
)
|
|
$
|
14
|
|
|
|
•
|
“Acquisitions and divestitures.” This adjustment removes (a) any non-recurring effects related to our acquisitions and divestitures (e.g., transaction costs and integration costs), and (b) the effects of operating activity related to acquired and divested brands for periods not comparable year over year (non-comparable periods). By excluding non-comparable periods, we therefore include the effects of acquired and divested brands only to the extent that results are comparable year over year.
|
•
|
“Foreign exchange.” We calculate the percentage change in certain line items of the statements of operations 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 and remove transactional and hedging foreign exchange gains and losses from current- and prior-year periods.
|
•
|
“Estimated net change in distributor inventories.” This adjustment refers to the estimated net effect of changes in distributor inventories on changes in certain line items of the statements of operations. For each period compared, we use volume information from our distributors to estimate the effect of distributor inventory changes in certain line items of the statements of operations. We believe that this adjustment reduces the effect of varying levels of distributor inventories on changes in certain line items of the statements of operations and allows us to understand better our underlying results and trends.
|
|
|
•
|
“Developed International” markets are “advanced economies” as defined by the IMF, excluding the United States. Our largest developed international markets are the United Kingdom, Australia, Germany, France, and Japan. This aggregation represents our net sales of branded products to these markets.
|
•
|
“Emerging” markets are “emerging and developing economies” as defined by the IMF. Our largest emerging markets are Mexico, Poland, Russia, and Brazil. This aggregation represents our net sales of branded products to these markets.
|
•
|
“Travel Retail” represents our net sales of branded products to global duty-free customers, other travel retail customers, and the U.S. military regardless of customer location.
|
•
|
“Non-branded and bulk” includes our net sales of used barrels, bulk whiskey and wine, and contract bottling regardless of customer location.
|
•
|
“Whiskey” includes all whiskey spirits and whiskey-based flavored liqueurs, ready-to-drink (RTD), and ready-to-pour products (RTP). The brands included in this category are the Jack Daniel’s family of brands, Woodford Reserve, Canadian Mist, GlenDronach, BenRiach, Glenglassaugh, Old Forester, Early Times, Slane Irish Whiskey, and Coopers’ Craft.
|
•
|
“American whiskey” includes the Jack Daniel’s family of brands, premium bourbons (defined below), and Early Times.
|
•
|
“Jack Daniel’s family of brands” includes Jack Daniel’s Tennessee Whiskey (JDTW), Jack Daniel’s RTD and RTP products (JD RTD/RTP), Jack Daniel’s Tennessee Honey (JDTH), Gentleman Jack, Jack Daniel’s Tennessee Fire (JDTF), Jack Daniel’s Single Barrel Collection (JDSB), Jack Daniel’s Tennessee Rye Whiskey (JDTR), Jack Daniel’s Sinatra Select, Jack Daniel’s No. 27 Gold Tennessee Whiskey, Jack Daniel’s Bottled-in-Bond, and Jack Daniel’s Tennessee Apple (JDTA).
|
•
|
“Jack Daniel’s RTD and RTP” products include all RTD line extensions of Jack Daniel’s, such as Jack Daniel’s & Cola, Jack Daniel’s & Diet Cola, Jack & Ginger, Jack Daniel’s Country Cocktails, Gentleman Jack & Cola, Jack Daniel’s Double Jack, Jack Daniel’s American Serve, Jack Daniel’s Tennessee Honey RTD, Jack Daniel’s Cider, Jack Daniel’s Lynchburg Lemonade (JD Lynchburg Lemonade), and the seasonal Jack Daniel’s Winter Jack RTP.
|
•
|
“Premium bourbons” includes Woodford Reserve, Old Forester, and Coopers’ Craft.
|
•
|
“Super-premium American whiskey” includes Woodford Reserve, JDSB, Gentleman Jack, Jack Daniel’s Sinatra Select, and Jack Daniel’s No. 27 Gold Tennessee Whiskey.
|
•
|
“Tequila” includes el Jimador, Herradura, New Mix, Pepe Lopez, and Antiguo.
|
•
|
“Vodka” includes Finlandia.
|
•
|
“Wine” includes Korbel Champagne and Sonoma-Cutrer wines.
|
•
|
“Non-branded and bulk” includes our net sales of used barrels, bulk whiskey and wine, and contract bottling regardless of customer location.
|
•
|
“Depletions.” We generally record revenues when we ship our products to our customers. Depletions is a term commonly used in the beverage alcohol industry to describe volume. Depending on the context, depletions means either (a) our shipments directly to retail or wholesale customers for owned distribution markets or (b) shipments from our distributor customers to retailers and wholesalers in other markets. We believe that depletions measure volume in a way that more closely reflects consumer demand than our shipments to distributor customers do. In this document, unless otherwise specified, we refer to depletions when discussing volume.
|
•
|
“Consumer takeaway.” When discussing trends in the market, we refer to consumer takeaway, a term commonly used in the beverage alcohol industry. Consumer takeaway refers to the purchase of product by consumers from retail outlets as measured by volume or retail sales value. This information is provided by third parties, such as Nielsen and the National Alcohol Beverage Control Association (NABCA). Our estimates of market share or changes in market share are derived from consumer takeaway data using the retail sales value metric. We believe consumer takeaway is a leading indicator of how consumer demand is trending.
|
•
|
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, including additional retaliatory tariffs on American spirits and the effectiveness of our actions to mitigate the negative impact on our margins, sales, and distributors; compliance with local trade practices and other regulations, including anti-corruption laws; terrorism; and health pandemics (such as the COVID-19 (coronavirus) outbreak)
|
•
|
Fluctuations in foreign currency exchange rates, particularly a stronger U.S. dollar
|
•
|
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
|
•
|
Tax rate changes (including excise, sales, VAT, tariffs, duties, corporate, individual income, dividends, or capital gains) or changes in related reserves, changes in tax rules or accounting standards, and the unpredictability and suddenness with which they can occur
|
•
|
The impact of U.S. tax reform legislation, including as a result of future clarifications and guidance interpreting the statute
|
•
|
Dependence upon the continued growth of the Jack Daniel’s family of brands
|
•
|
Changes in consumer preferences, consumption, or purchase patterns – particularly away from larger producers in favor of small distilleries or local producers, or away from brown spirits, our premium products, or spirits generally, and our ability to anticipate or react to them; legalization of marijuana use on a more widespread basis; shifts in consumer purchase practices from traditional to e-commerce retailers; bar, restaurant, travel, or other on-premise declines; shifts in demographic or health and wellness trends; or unfavorable consumer reaction to new products, line extensions, package changes, product reformulations, or other product innovation
|
•
|
Decline in the social acceptability of beverage alcohol in significant markets
|
•
|
Production facility, aging warehouse, or supply chain disruption
|
•
|
Imprecision in supply/demand forecasting
|
•
|
Higher costs, lower quality, or unavailability of energy, water, raw materials, product ingredients, labor, or finished goods
|
•
|
Route-to-consumer changes that affect the timing of our sales, temporarily disrupt the marketing or sale of our products, or result in higher fixed costs
|
•
|
Inventory fluctuations in our products by distributors, wholesalers, or retailers
|
•
|
Competitors’ and retailers’ 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
|
•
|
Risks associated with acquisitions, dispositions, business partnerships, or investments – such as acquisition integration, termination difficulties or costs, or impairment in recorded value
|
•
|
Inadequate protection of our intellectual property rights
|
•
|
Product recalls or other product liability claims, product counterfeiting, tampering, contamination, or 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, and our dual-class share structure
|
•
|
We delivered reported net sales of $2.7 billion, an increase of 3% on both a reported and underlying basis compared to the same period last year.
|
◦
|
From a brand perspective, our underlying net sales growth was driven by (a) the Jack Daniel’s family of brands, (b) our premium bourbon brands, led by Woodford Reserve, and (c) our tequila brands. Lower used barrel sales partially offset this growth.
|
◦
|
From a geographic perspective, the United States led the underlying net sales growth with emerging and developed international markets also contributing. These gains were partially offset by a decline in the underlying net sales in our Travel Retail channel.
|
•
|
We delivered reported operating income of $904 million, a decrease of 1% on both a reported and underlying basis compared to the same period last year reflecting higher input and tariff-related costs.
|
•
|
We delivered diluted earnings per share of $1.45, an increase of 4% compared to the same period last year due to a lower effective tax rate and a reduction in non-operating postretirement expense.
|
|
|
•
|
Lower net sales. Certain customers paid the incremental costs of tariffs, and we compensated these customers for these incremental costs by reducing our net prices, which lowered our net sales.
|
•
|
Higher cost of sales. In markets where we own inventory, we paid the incremental cost of tariffs, which increased our cost of sales.
|
•
|
Business environment. Our full-year outlook has been adjusted to reflect tempered expectations in some of our international markets due to both short-term disruptions and an increasingly uncertain global economic and geopolitical environment.
|
•
|
COVID-19 (coronavirus). Our full-year outlook has also been adjusted for an estimated impact of the coronavirus on our results particularly in Asia, most notably China, and Travel Retail. However, the extent to which the coronavirus impacts our results will ultimately depend on future developments, which are uncertain and cannot be predicted.
|
Top 10 Markets1 - Fiscal 2020 Net Sales Growth by Geographic Area
|
|||||||||||
|
Percentage change versus prior year period
|
||||||||||
Nine months ended January 31, 2020
|
Net Sales
|
||||||||||
Geographic area2
|
Reported
|
Acquisitions and Divestitures
|
Foreign Exchange
|
Est. Net Chg in Distributor Inventories
|
|
Underlying3
|
|||||
United States
|
7
|
%
|
—
|
%
|
—
|
%
|
(2
|
%)
|
|
6
|
%
|
Developed International
|
—
|
%
|
—
|
%
|
1
|
%
|
1
|
%
|
|
2
|
%
|
United Kingdom
|
(9
|
%)
|
—
|
%
|
1
|
%
|
—
|
%
|
|
(7
|
%)
|
Australia
|
(2
|
%)
|
—
|
%
|
3
|
%
|
—
|
%
|
|
1
|
%
|
Germany
|
6
|
%
|
—
|
%
|
(1
|
%)
|
—
|
%
|
|
5
|
%
|
France
|
3
|
%
|
—
|
%
|
—
|
%
|
—
|
%
|
|
3
|
%
|
Japan
|
3
|
%
|
—
|
%
|
(2
|
%)
|
—
|
%
|
|
1
|
%
|
Rest of Developed International
|
2
|
%
|
—
|
%
|
2
|
%
|
5
|
%
|
|
8
|
%
|
Emerging
|
4
|
%
|
—
|
%
|
—
|
%
|
2
|
%
|
|
6
|
%
|
Mexico
|
1
|
%
|
—
|
%
|
(1
|
%)
|
1
|
%
|
|
2
|
%
|
Poland
|
3
|
%
|
—
|
%
|
3
|
%
|
—
|
%
|
|
6
|
%
|
Russia
|
14
|
%
|
—
|
%
|
3
|
%
|
(1
|
%)
|
|
15
|
%
|
Brazil
|
12
|
%
|
—
|
%
|
6
|
%
|
(11
|
%)
|
|
6
|
%
|
Rest of Emerging
|
2
|
%
|
—
|
%
|
(2
|
%)
|
7
|
%
|
|
7
|
%
|
Travel Retail
|
(4
|
%)
|
—
|
%
|
1
|
%
|
1
|
%
|
|
(3
|
%)
|
Non-branded and bulk
|
(28
|
%)
|
—
|
%
|
—
|
%
|
—
|
%
|
|
(27
|
%)
|
Total
|
3
|
%
|
—
|
%
|
—
|
%
|
—
|
%
|
|
3
|
%
|
Note: Totals may differ due to rounding
|
|
|
|
|
|
|
|
|
•
|
United States. Reported net sales increased 7%, while underlying net sales grew 6% after adjusting for an estimated net increase in distributor inventories driven by the October launch of JDTA. The underlying net sales gains were driven by (a) our premium bourbons, led by Woodford Reserve and Old Forester, supported by strong consumer takeaway trends; (b) the launch of JDTA; and (c) our tequila brands, fueled by volume gains of Herradura.
|
•
|
Developed International. Reported net sales were flat, while underlying net sales grew 2% after adjusting for the negative effect of foreign exchange and an estimated net decrease in distributor inventories. Underlying net sales growth was led by Germany, Czechia, France, Spain, Korea, and Taiwan, partially offset by declines in the United Kingdom.
|
◦
|
The United Kingdom’s underlying net sales decline was driven by a planned reduction in promotional activities for JDTW resulting in lower volumes and an unfavorable channel and size mix compared to the same period last year.
|
◦
|
Australia’s underlying net sales growth was driven by higher volumes of our super-premium American whiskey portfolio, partially offset by declines of JD RTDs.
|
◦
|
Germany’s underlying net sales growth was fueled by continued volumetric gains of JD RTDs.
|
◦
|
France’s underlying net sales growth was driven by higher volumes of JDTH and the launch of JD RTDs, partially offset by lower prices of JDTW.
|
◦
|
Japan’s underlying net sales growth was driven by higher volumes, partially offset by unfavorable price/mix.
|
◦
|
Underlying net sales in the Rest of Developed International increased due to (a) volume growth of JDTH in Czechia, (b) JDTW volume gains in Spain and Korea, and (c) volumetric increases of GlenDronach in Taiwan.
|
•
|
Emerging. Reported net sales increased 4%, while underlying net sales grew 6% after adjusting for an estimated net decrease in distributor inventories. Underlying net sales growth was led by Turkey, Russia, China, and Poland.
|
◦
|
Mexico’s underlying net sales growth was fueled by higher prices and volumes of Herradura, largely offset by volume declines of New Mix.
|
◦
|
Poland’s underlying net sales growth was driven by volumetric growth of the Jack Daniel’s family of brands led by JDTW, Gentleman Jack, and JDTH, partially offset by lower volumes and net prices of Finlandia.
|
◦
|
Russia’s underlying net sales growth was driven by higher volumes of JDTW supported by strong consumer demand.
|
◦
|
Brazil’s underlying net sales growth was fueled by higher volumes of JDTW and JDTF.
|
◦
|
Underlying net sales in the Rest of Emerging increased as growth of JDTW in Turkey and China was partially offset by declines of the brand in sub-Saharan Africa.
|
•
|
Travel Retail. Reported net sales declined 4%, while underlying net sales were down 3% after adjusting for the negative effect of foreign exchange and an estimated net decrease in distributor inventories. The underlying net sales decline was driven by lower volumes of JDTW, partially offset by volumetric growth of Woodford Reserve.
|
•
|
Non-branded and bulk. Reported net sales declined 28%, while underlying net sales declined 27% after adjusting for the negative effect of foreign exchange. Lower volumes and prices for used barrels along with a decrease in bulk whiskey sales drove the reduction compared to the same period last year.
|
Major Brands Worldwide Results
|
||||||||||||||
|
Percentage change versus prior year period
|
|||||||||||||
Nine months ended January 31, 2020
|
Volumes
|
|
Net Sales
|
|||||||||||
Product category / brand family / brand1
|
9L Depletions1
|
|
Reported
|
Acquisitions and Divestitures
|
Foreign Exchange
|
Est. Net Chg in Distributor Inventories
|
|
Underlying2
|
||||||
Whiskey
|
4
|
%
|
|
4
|
%
|
—
|
%
|
—
|
%
|
—
|
%
|
|
5
|
%
|
Jack Daniel's family of brands
|
3
|
%
|
|
2
|
%
|
—
|
%
|
—
|
%
|
—
|
%
|
|
3
|
%
|
JDTW
|
—
|
%
|
|
(2
|
%)
|
—
|
%
|
—
|
%
|
1
|
%
|
|
—
|
%
|
Jack Daniel’s RTD/RTP
|
4
|
%
|
|
6
|
%
|
—
|
%
|
1
|
%
|
(1
|
%)
|
|
7
|
%
|
JDTH
|
7
|
%
|
|
4
|
%
|
—
|
%
|
1
|
%
|
2
|
%
|
|
7
|
%
|
Gentleman Jack
|
7
|
%
|
|
3
|
%
|
—
|
%
|
—
|
%
|
3
|
%
|
|
7
|
%
|
JDTF
|
2
|
%
|
|
(2
|
%)
|
—
|
%
|
1
|
%
|
2
|
%
|
|
1
|
%
|
Other Jack Daniel's whiskey brands
|
67
|
%
|
|
65
|
%
|
—
|
%
|
—
|
%
|
(24
|
%)
|
|
41
|
%
|
Woodford Reserve
|
21
|
%
|
|
22
|
%
|
—
|
%
|
—
|
%
|
(3
|
%)
|
|
19
|
%
|
Tequila
|
(6
|
%)
|
|
9
|
%
|
—
|
%
|
—
|
%
|
1
|
%
|
|
10
|
%
|
el Jimador
|
2
|
%
|
|
8
|
%
|
—
|
%
|
—
|
%
|
3
|
%
|
|
11
|
%
|
Herradura
|
10
|
%
|
|
20
|
%
|
—
|
%
|
—
|
%
|
(1
|
%)
|
|
20
|
%
|
Vodka (Finlandia)
|
(6
|
%)
|
|
(8
|
%)
|
—
|
%
|
—
|
%
|
1
|
%
|
|
(7
|
%)
|
Wine
|
—
|
%
|
|
4
|
%
|
—
|
%
|
—
|
%
|
(3
|
%)
|
|
1
|
%
|
Rest of Portfolio
|
—
|
%
|
|
5
|
%
|
(4
|
%)
|
(1
|
%)
|
(3
|
%)
|
|
(3
|
%)
|
Non-branded and bulk
|
NA
|
|
|
(28
|
%)
|
—
|
%
|
—
|
%
|
—
|
%
|
|
(27
|
%)
|
Note: Totals may differ due to rounding
|
|
|
|
|
|
|
|
|
|
|
•
|
Whiskey brands grew reported net sales 4%, while underlying net sales grew 5% after adjusting for the negative effect of foreign exchange. The underlying net sales gain was driven by the growth of the Jack Daniel’s family of brands and Woodford Reserve.
|
◦
|
The Jack Daniel’s family of brands underlying net sales growth was driven by (a) the launch of JDTA in the United States, (b) JD RTDs in Germany and the United States, and (c) broad-based growth of JDTH.
|
▪
|
JDTW underlying net sales were flat as growth in emerging markets led by Turkey, Russia, China, and Poland was offset by declines in the United Kingdom, Travel Retail, and the United States.
|
▪
|
The increase in underlying net sales growth for Jack Daniel’s RTD/RTP was driven by volumetric gains in Germany and the United States along with the launch of RTDs in France.
|
▪
|
JDTH increased underlying net sales with broad-based volume growth led by France, Czechia, Poland, and the United States.
|
▪
|
Gentleman Jack increased underlying net sales with broad-based international volumetric growth led by Poland, Germany, and the United Kingdom.
|
▪
|
The growth in underlying net sales of JDTF was led by increased volumes in Poland and Brazil, partially offset by lower volumes in Travel Retail.
|
▪
|
The underlying net sales growth of Other Jack Daniel’s whiskey brands was fueled by the launch of JDTA in the United States.
|
◦
|
Woodford Reserve grew underlying net sales fueled by volumetric growth in the United States supported by strong consumer takeaway trends.
|
•
|
Tequila brands grew reported net sales 9%, while underlying net sales grew 10% after adjusting for an estimated net decrease in distributor inventories.
|
◦
|
el Jimador grew underlying net sales reflecting volumetric growth in the United States as consumer takeaway trends remain strong.
|
◦
|
Herradura grew underlying net sales driven by higher volumes, favorable product mix, and higher prices in the United States and Mexico.
|
•
|
Reported net sales for Finlandia declined 8%, while underlying net sales decreased 7% after adjusting for an estimated net decrease in distributor inventories. The decrease in underlying net sales was driven by lower volumes and net prices in Poland along with a decrease in volumes in Travel Retail and the United States.
|
•
|
Reported net sales of our wine brands grew 4%, while underlying net sales increased 1% after adjusting for an estimated net increase in distributor inventories. The increase in underlying net sales was driven by volume growth of Sonoma-Cutrer in the United States.
|
•
|
Rest of portfolio reported net sales increased 5%, while underlying net sales declined 3% after adjusting for (a) the effect of our acquisition of The 86 Company (Fords Gin), (b) an estimated net increase in distributor inventories, and (c) the positive effect of foreign exchange. The decrease in underlying net sales was driven by lower volumes of Chambord in the United Kingdom.
|
•
|
Non-branded and bulk. Reported net sales declined 28%, while underlying net sales declined 27% after adjusting for the negative effect of foreign exchange. Lower volumes and prices for used barrels along with a decrease in bulk whiskey sales drove the reduction compared to the same period last year
|
Net Sales
|
|||||
Percentage change versus the prior year period ended January 31
|
3 Months
|
|
9 Months
|
||
Change in reported net sales
|
—
|
%
|
|
3
|
%
|
Acquisitions and divestitures
|
—
|
%
|
|
—
|
%
|
Foreign exchange
|
1
|
%
|
|
—
|
%
|
Estimated net change in distributor inventories
|
3
|
%
|
|
—
|
%
|
Change in underlying net sales
|
3
|
%
|
|
3
|
%
|
|
|
|
|
||
Change in underlying net sales attributed to:
|
|
|
|
||
Volume
|
1
|
%
|
|
2
|
%
|
Price/mix
|
1
|
%
|
|
1
|
%
|
Note: Totals may differ due to rounding
|
|
|
|
•
|
broad-based international growth of JDTW led by Poland, Turkey, Germany, Russia, China, and Italy;
|
•
|
continued growth of our premium bourbon brands led by higher volumes of Woodford Reserve in the United States, Travel Retail, and the United Kingdom along with volumetric gains and favorable product mix of Old Forester in the United States;
|
•
|
the launch of JDTA in the United States;
|
•
|
growth of our tequila brands led by (a) volumetric growth of Herradura and el Jimador in the United States, (b) favorable price/mix of Herradura in Mexico, and (c) growth of Herradura in Travel Retail;
|
•
|
higher volumes of JD RTDs in Germany and the United States;
|
•
|
broad-based growth of JDTH led by Czechia and France; and
|
•
|
broad-based volumetric growth of Gentleman Jack led by the United States and Poland.
|
•
|
JDTW declines due to (a) lower volumes in the United Kingdom, Australia, Mexico, and Chile; (b) lower net pricing in the United States; and (c) lower volumes and unfavorable price/mix in sub-Saharan Africa;
|
•
|
lower volumes and prices for used barrel sales along with decreased bulk whiskey and contract bottling sales;
|
•
|
declines of Chambord, GlenDronach, and JDSB in the United Kingdom;
|
•
|
lower volumes of New Mix in Mexico;
|
•
|
volumetric declines of Finlandia in Russia; and
|
•
|
lower volumes of Canadian Mist in the United States.
|
Cost of Sales
|
||||
Percentage change versus the prior year period ended January 31
|
3 Months
|
9 Months
|
||
Change in reported cost of sales
|
3
|
%
|
9
|
%
|
Acquisitions and divestitures
|
—
|
%
|
—
|
%
|
Foreign exchange
|
(1
|
%)
|
—
|
%
|
Estimated net change in distributor inventories
|
1
|
%
|
—
|
%
|
Change in underlying cost of sales
|
3
|
%
|
10
|
%
|
|
|
|
||
Change in underlying cost of sales attributed to:
|
|
|
||
Volume
|
1
|
%
|
2
|
%
|
Cost/mix
|
2
|
%
|
8
|
%
|
Note: Totals may differ due to rounding
|
|
|
Gross Margin
|
||||
For the period ended January 31
|
3 months
|
9 Months
|
||
Prior year gross margin
|
63.1
|
%
|
65.3
|
%
|
Price/mix
|
(0.2
|
%)
|
0.3
|
%
|
Cost
|
(0.9
|
%)
|
(1.5
|
%)
|
Tariffs1
|
0.3
|
%
|
(1.0
|
%)
|
Acquisitions and divestitures
|
—
|
%
|
—
|
%
|
Foreign exchange
|
(0.4
|
%)
|
—
|
%
|
Change in gross margin
|
(1.2
|
%)
|
(2.2
|
%)
|
Current year gross margin
|
61.9
|
%
|
63.1
|
%
|
Note: Totals may differ due to rounding
|
0.00
|
|
0.000
|
|
|
|
•
|
Reported and underlying advertising expense were both flat for the three months ended January 31, 2020. Higher investment related to the launch of JDTA was offset by lower spend on the rest of the Jack Daniel’s family of brands.
|
•
|
Reported SG&A expense increased 2% for the three months ended January 31, 2020, while underlying SG&A also increased 2% after adjusting for the effect of our acquisition of Fords Gin. The increase in underlying SG&A expense was largely related to lower compensation-related costs during the same period last year.
|
•
|
Reported advertising expense grew 1% for the nine months ended January 31, 2020, while underlying advertising expense increased 3% after adjusting for the positive effect of foreign exchange. Higher underlying advertising expense reflected the investment related to the launch of JDTA as well as increased spending on Woodford Reserve, partially offset by lower spend on the rest of the Jack Daniel’s family of brands.
|
•
|
Reported SG&A expense decreased 1% for the nine months ended January 31, 2020, while underlying SG&A expense was flat after adjusting for the positive effect of foreign exchange and the effect of our acquisition of Fords Gin. The decrease in underlying SG&A expense was driven by lower compensation-related costs.
|
Operating Income
|
||||
Percentage change versus the prior year period ended January 31
|
3 Months
|
9 Months
|
||
Change in reported operating income
|
(5
|
%)
|
(1
|
%)
|
Acquisitions and divestitures
|
—
|
%
|
—
|
%
|
Foreign exchange
|
3
|
%
|
—
|
%
|
Estimated net change in distributor inventories
|
7
|
%
|
—
|
%
|
Change in underlying operating income
|
5
|
%
|
(1
|
%)
|
Note: Totals may differ due to rounding
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||
|
January 31,
|
|
January 31,
|
||||
(Dollars in millions)
|
2019
|
|
2020
|
|
2019
|
|
2020
|
Average daily commercial paper
|
$443
|
|
$164
|
|
$462
|
|
$270
|
Average interest rate
|
2.55%
|
|
1.84%
|
|
2.27%
|
|
2.31%
|
Average days to maturity
|
31
|
|
31
|
|
31
|
|
33
|
31.1
|
|
|
31.2
|
|
|
32
|
|
|
101
|
|
The following materials from Brown-Forman Corporation's Quarterly Report on Form 10-Q for the quarter ended January 31, 2020, in Inline XBRL (eXtensible Business Reporting Language) format: (a) Condensed Consolidated Statements of Operations, (b) Condensed Consolidated Statements of Comprehensive Income, (c) Condensed Consolidated Balance Sheets, (d) Condensed Consolidated Statements of Cash Flows, and (e) Notes to the Condensed Consolidated Financial Statements.
|
104
|
|
Cover Page Interactive Data File in Inline XBRL format (included in Exhibit 101).
|
|
|
BROWN-FORMAN CORPORATION
|
|
|
|
(Registrant)
|
|
|
|
|
|
Date:
|
March 4, 2020
|
By:
|
/s/ Jane C. Morreau
|
|
|
|
Jane C. Morreau
|
|
|
|
Executive Vice President
and Chief Financial Officer
|
|
|
|
(On behalf of the Registrant and
as Principal Financial Officer)
|
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