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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 | |
---|---|---|---|---|---|---|---|---|
0.39 | 0.83% | 47.31 | 47.49 | 46.90 | 47.30 | 440,376 | 19:33:25 |
☑
|
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
|
169,091,412
|
|
Class B Common Stock (nonvoting), $0.15 par value
|
309,360,023
|
|
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
|
||||||
|
July 31,
|
||||||
|
2019
|
|
2020
|
||||
Sales
|
$
|
978
|
|
|
$
|
987
|
|
Excise taxes
|
212
|
|
|
234
|
|
||
Net sales
|
766
|
|
|
753
|
|
||
Cost of sales
|
268
|
|
|
288
|
|
||
Gross profit
|
498
|
|
|
465
|
|
||
Advertising expenses
|
92
|
|
|
62
|
|
||
Selling, general, and administrative expenses
|
164
|
|
|
148
|
|
||
Gain on sale of business
|
—
|
|
|
(127
|
)
|
||
Other expense (income), net
|
(6
|
)
|
|
(5
|
)
|
||
Operating income
|
248
|
|
|
387
|
|
||
Non-operating postretirement expense
|
1
|
|
|
1
|
|
||
Interest income
|
(2
|
)
|
|
—
|
|
||
Interest expense
|
21
|
|
|
20
|
|
||
Income before income taxes
|
228
|
|
|
366
|
|
||
Income taxes
|
42
|
|
|
42
|
|
||
Net income
|
$
|
186
|
|
|
$
|
324
|
|
Earnings per share:
|
|
|
|
||||
Basic
|
$
|
0.39
|
|
|
$
|
0.68
|
|
Diluted
|
$
|
0.39
|
|
|
$
|
0.67
|
|
|
Three Months Ended
|
||||||
|
July 31,
|
||||||
|
2019
|
|
2020
|
||||
Net income
|
$
|
186
|
|
|
$
|
324
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
||||
Currency translation adjustments
|
(13
|
)
|
|
62
|
|
||
Cash flow hedge adjustments
|
9
|
|
|
(45
|
)
|
||
Postretirement benefits adjustments
|
3
|
|
|
7
|
|
||
Net other comprehensive income (loss)
|
(1
|
)
|
|
24
|
|
||
Comprehensive income
|
$
|
185
|
|
|
$
|
348
|
|
|
April 30,
2020 |
|
July 31,
2020 |
||||
Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
675
|
|
|
$
|
908
|
|
Accounts receivable, less allowance for doubtful accounts of $11 and $12 at April 30 and July 31, respectively
|
570
|
|
|
721
|
|
||
Inventories:
|
|
|
|
||||
Barreled whiskey
|
1,092
|
|
|
1,074
|
|
||
Finished goods
|
320
|
|
|
352
|
|
||
Work in process
|
172
|
|
|
189
|
|
||
Raw materials and supplies
|
101
|
|
|
126
|
|
||
Total inventories
|
1,685
|
|
|
1,741
|
|
||
Other current assets
|
335
|
|
|
276
|
|
||
Total current assets
|
3,265
|
|
|
3,646
|
|
||
Property, plant and equipment, net
|
848
|
|
|
834
|
|
||
Goodwill
|
756
|
|
|
760
|
|
||
Other intangible assets
|
635
|
|
|
657
|
|
||
Deferred tax assets
|
15
|
|
|
58
|
|
||
Other assets
|
247
|
|
|
236
|
|
||
Total assets
|
$
|
5,766
|
|
|
$
|
6,191
|
|
Liabilities
|
|
|
|
||||
Accounts payable and accrued expenses
|
$
|
517
|
|
|
$
|
545
|
|
Dividends payable
|
—
|
|
|
84
|
|
||
Accrued income taxes
|
30
|
|
|
73
|
|
||
Short-term borrowings
|
333
|
|
|
389
|
|
||
Total current liabilities
|
880
|
|
|
1,091
|
|
||
Long-term debt
|
2,269
|
|
|
2,316
|
|
||
Deferred tax liabilities
|
177
|
|
|
156
|
|
||
Accrued pension and other postretirement benefits
|
297
|
|
|
297
|
|
||
Other liabilities
|
168
|
|
|
181
|
|
||
Total liabilities
|
3,791
|
|
|
4,041
|
|
||
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
|
2,708
|
|
|
2,849
|
|
||
Accumulated other comprehensive income (loss), net of tax
|
(547
|
)
|
|
(523
|
)
|
||
Treasury stock, at cost (6,323,000 and 6,089,000 shares at April 30 and July 31, respectively)
|
(258
|
)
|
|
(248
|
)
|
||
Total stockholders’ equity
|
1,975
|
|
|
2,150
|
|
||
Total liabilities and stockholders’ equity
|
$
|
5,766
|
|
|
$
|
6,191
|
|
|
Three Months Ended
|
||||||
|
July 31,
|
||||||
|
2019
|
|
2020
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
186
|
|
|
$
|
324
|
|
Adjustments to reconcile net income to net cash provided by operations:
|
|
|
|
||||
Gain on sale of business
|
—
|
|
|
(127
|
)
|
||
Depreciation and amortization
|
18
|
|
|
19
|
|
||
Stock-based compensation expense
|
3
|
|
|
3
|
|
||
Deferred income tax provision
|
(9
|
)
|
|
(43
|
)
|
||
Other, net
|
1
|
|
|
(9
|
)
|
||
Changes in assets and liabilities, net of business acquisitions and dispositions:
|
|
|
|
||||
Accounts receivable
|
(20
|
)
|
|
(133
|
)
|
||
Inventories
|
(100
|
)
|
|
(57
|
)
|
||
Other current assets
|
(4
|
)
|
|
31
|
|
||
Accounts payable and accrued expenses
|
(34
|
)
|
|
26
|
|
||
Accrued income taxes
|
35
|
|
|
45
|
|
||
Other operating assets and liabilities
|
(4
|
)
|
|
12
|
|
||
Cash provided by operating activities
|
72
|
|
|
91
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Proceeds from sale of business
|
—
|
|
|
177
|
|
||
Acquisition of business, net of cash acquired
|
(22
|
)
|
|
—
|
|
||
Additions to property, plant, and equipment
|
(21
|
)
|
|
(15
|
)
|
||
Cash provided by (used for) investing activities
|
(43
|
)
|
|
162
|
|
||
Cash flows from financing activities:
|
|
|
|
||||
Proceeds from short-term borrowings, maturities greater than 90 days
|
—
|
|
|
159
|
|
||
Repayments of short-term borrowings, maturities greater than 90 days
|
—
|
|
|
(70
|
)
|
||
Net change in short-term borrowings, maturities of 90 days or less
|
67
|
|
|
(34
|
)
|
||
Payments of withholding taxes related to stock-based awards
|
(13
|
)
|
|
(9
|
)
|
||
Acquisition of treasury stock
|
(1
|
)
|
|
—
|
|
||
Dividends paid
|
(79
|
)
|
|
(83
|
)
|
||
Cash used for financing activities
|
(26
|
)
|
|
(37
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(3
|
)
|
|
17
|
|
||
Net increase in cash and cash equivalents
|
—
|
|
|
233
|
|
||
Cash and cash equivalents, beginning of period
|
307
|
|
|
675
|
|
||
Cash and cash equivalents, end of period
|
$
|
307
|
|
|
$
|
908
|
|
|
Three Months Ended
|
||||||
|
July 31,
|
||||||
(Dollars in millions, except per share amounts)
|
2019
|
|
2020
|
||||
Net income available to common stockholders
|
$
|
186
|
|
|
$
|
324
|
|
|
|
|
|
||||
Share data (in thousands):
|
|
|
|
||||
Basic average common shares outstanding
|
477,369
|
|
|
478,327
|
|
||
Dilutive effect of stock-based awards
|
2,719
|
|
|
2,102
|
|
||
Diluted average common shares outstanding
|
480,088
|
|
|
480,429
|
|
||
|
|
|
|
||||
Basic earnings per share
|
$
|
0.39
|
|
|
$
|
0.68
|
|
Diluted earnings per share
|
$
|
0.39
|
|
|
$
|
0.67
|
|
(Dollars in millions)
|
Goodwill
|
|
Other Intangible Assets
|
||||
Balance at April 30, 2020
|
$
|
756
|
|
|
$
|
635
|
|
Sale of business (Note 14)
|
(4
|
)
|
|
(1
|
)
|
||
Foreign currency translation adjustment
|
8
|
|
|
23
|
|
||
Balance at July 31, 2020
|
$
|
760
|
|
|
$
|
657
|
|
(Principal and carrying amounts in millions)
|
April 30,
2020 |
|
July 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
|
324
|
|
|
352
|
|
||
2.60% senior notes, £300 principal amount, due July 7, 2028
|
369
|
|
|
388
|
|
||
4.00% senior notes, $300 principal amount, due April 15, 2038
|
294
|
|
|
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
|
488
|
|
|
488
|
|
||
|
$
|
2,269
|
|
|
$
|
2,316
|
|
(Dollars in millions)
|
April 30,
2020 |
|
July 31,
2020 |
Commercial paper
|
$333
|
|
$377
|
Average interest rate
|
1.29%
|
|
0.54%
|
Average remaining days to maturity
|
73
|
|
66
|
(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
|
|
|
|
|
|
|
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
|
|
(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, 2020
|
$
|
25
|
|
|
$
|
47
|
|
|
$
|
—
|
|
|
$
|
2,708
|
|
|
$
|
(547
|
)
|
|
$
|
(258
|
)
|
|
$
|
1,975
|
|
Net income
|
|
|
|
|
|
|
324
|
|
|
|
|
|
|
324
|
|
||||||||||||
Net other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
24
|
|
|
|
|
24
|
|
||||||||||||
Declaration of cash dividends
|
|
|
|
|
|
|
(167
|
)
|
|
|
|
|
|
(167
|
)
|
||||||||||||
Stock-based compensation expense
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
3
|
|
||||||||||||
Stock issued under compensation plans
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
10
|
|
||||||||||||
Loss on issuance of treasury stock issued under compensation plans
|
|
|
|
|
(3
|
)
|
|
(16
|
)
|
|
|
|
|
|
(19
|
)
|
|||||||||||
Balance at July 31, 2020
|
$
|
25
|
|
|
$
|
47
|
|
|
$
|
—
|
|
|
$
|
2,849
|
|
|
$
|
(523
|
)
|
|
$
|
(248
|
)
|
|
$
|
2,150
|
|
(Dollars in millions)
|
Currency Translation Adjustments
|
|
Cash Flow Hedge Adjustments
|
|
Postretirement Benefits Adjustments
|
|
Total AOCI
|
||||||||
Balance at April 30, 2020
|
$
|
(302
|
)
|
|
$
|
60
|
|
|
$
|
(305
|
)
|
|
$
|
(547
|
)
|
Net other comprehensive income (loss)
|
62
|
|
|
(45
|
)
|
|
7
|
|
|
24
|
|
||||
Balance at July 31, 2020
|
$
|
(240
|
)
|
|
$
|
15
|
|
|
$
|
(298
|
)
|
|
$
|
(523
|
)
|
Declaration Date
|
|
Record Date
|
|
Payable Date
|
|
Amount per Share
|
May 21, 2020
|
|
June 8, 2020
|
|
July 1, 2020
|
|
$0.1743
|
July 23, 2020
|
|
September 4, 2020
|
|
October 1, 2020
|
|
$0.1743
|
|
Three Months Ended
|
||||||
|
July 31,
|
||||||
(Dollars in millions)
|
2019
|
|
2020
|
||||
United States
|
$
|
374
|
|
|
$
|
387
|
|
Developed International1
|
205
|
|
|
231
|
|
||
Emerging2
|
133
|
|
|
107
|
|
||
Travel Retail3
|
32
|
|
|
13
|
|
||
Non-branded and bulk4
|
22
|
|
|
15
|
|
||
Total
|
$
|
766
|
|
|
$
|
753
|
|
|
|
|
Three Months Ended
|
||||||
|
July 31,
|
||||||
(Dollars in millions)
|
2019
|
|
2020
|
||||
Whiskey1
|
$
|
600
|
|
|
$
|
595
|
|
Tequila2
|
68
|
|
|
68
|
|
||
Wine3
|
39
|
|
|
41
|
|
||
Vodka4
|
26
|
|
|
19
|
|
||
Rest of portfolio
|
11
|
|
|
15
|
|
||
Non-branded and bulk5
|
22
|
|
|
15
|
|
||
Total
|
$
|
766
|
|
|
$
|
753
|
|
|
|
|
Three Months Ended
|
||||||
|
July 31,
|
||||||
(Dollars in millions)
|
2019
|
|
2020
|
||||
Pension Benefits:
|
|
|
|
||||
Service cost
|
$
|
6
|
|
|
$
|
7
|
|
Interest cost
|
8
|
|
|
6
|
|
||
Expected return on plan assets
|
(12
|
)
|
|
(12
|
)
|
||
Amortization of net actuarial loss
|
5
|
|
|
7
|
|
||
Net cost
|
$
|
7
|
|
|
$
|
8
|
|
|
|
|
|
||||
Other Postretirement Benefits:
|
|
|
|
||||
Interest cost
|
$
|
1
|
|
|
$
|
1
|
|
Amortization of prior service cost (credit)
|
(1
|
)
|
|
(1
|
)
|
||
Net cost
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
April 30, 2020
|
|
July 31, 2020
|
||||||||||||
(Dollars in millions)
|
Classification
|
|
Derivative Assets
|
|
Derivative Liabilities
|
|
Derivative Assets
|
|
Derivative Liabilities
|
||||||||
Designated as cash flow hedges:
|
|
|
|
|
|
|
|
|
|
||||||||
Currency derivatives
|
Other current assets
|
|
$
|
49
|
|
|
$
|
(1
|
)
|
|
$
|
19
|
|
|
$
|
(2
|
)
|
Currency derivatives
|
Other assets
|
|
30
|
|
|
—
|
|
|
4
|
|
|
(1
|
)
|
||||
Currency derivatives
|
Accrued expenses
|
|
—
|
|
|
—
|
|
|
2
|
|
|
(3
|
)
|
||||
Currency derivatives
|
Other liabilities
|
|
—
|
|
|
—
|
|
|
3
|
|
|
(8
|
)
|
||||
Not designated as hedges:
|
|
|
|
|
|
|
|
|
|
||||||||
Currency derivatives
|
Other current assets
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
||||
Currency derivatives
|
Other assets
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Currency derivatives
|
Accrued expenses
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
||||
Currency derivatives
|
Other liabilities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
(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, 2020
|
|
|
|
|
|
|
|
|
|
||||||||||
Derivative assets
|
$
|
79
|
|
|
$
|
(1
|
)
|
|
$
|
78
|
|
|
$
|
—
|
|
|
$
|
78
|
|
Derivative liabilities
|
(3
|
)
|
|
1
|
|
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
|||||
July 31, 2020
|
|
|
|
|
|
|
|
|
|
||||||||||
Derivative assets
|
32
|
|
|
(8
|
)
|
|
24
|
|
|
(1
|
)
|
|
23
|
|
|||||
Derivative liabilities
|
(14
|
)
|
|
8
|
|
|
(6
|
)
|
|
1
|
|
|
(5
|
)
|
|
April 30, 2020
|
|
July 31, 2020
|
||||||||||||
|
Carrying
|
|
Fair
|
|
Carrying
|
|
Fair
|
||||||||
(Dollars in millions)
|
Amount
|
|
Value
|
|
Amount
|
|
Value
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
$
|
675
|
|
|
$
|
675
|
|
|
$
|
908
|
|
|
$
|
908
|
|
Currency derivatives
|
78
|
|
|
78
|
|
|
24
|
|
|
24
|
|
||||
Liabilities
|
|
|
|
|
|
|
|
||||||||
Currency derivatives
|
2
|
|
|
2
|
|
|
6
|
|
|
6
|
|
||||
Short-term borrowings
|
333
|
|
|
333
|
|
|
389
|
|
|
389
|
|
||||
Long-term debt
|
2,269
|
|
|
2,486
|
|
|
2,316
|
|
|
2,757
|
|
•
|
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.
|
|
Three Months Ended
|
|
Three Months Ended
|
||||||||||||||||||||
|
July 31, 2019
|
|
July 31, 2020
|
||||||||||||||||||||
(Dollars in millions)
|
Pre-Tax
|
|
Tax
|
|
Net
|
|
Pre-Tax
|
|
Tax
|
|
Net
|
||||||||||||
Currency translation adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net gain (loss) on currency translation
|
$
|
(8
|
)
|
|
$
|
(5
|
)
|
|
$
|
(13
|
)
|
|
$
|
53
|
|
|
$
|
9
|
|
|
$
|
62
|
|
Reclassification to earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Other comprehensive income (loss), net
|
(8
|
)
|
|
(5
|
)
|
|
(13
|
)
|
|
53
|
|
|
9
|
|
|
62
|
|
||||||
Cash flow hedge adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net gain (loss) on hedging instruments
|
15
|
|
|
(3
|
)
|
|
12
|
|
|
(49
|
)
|
|
12
|
|
|
(37
|
)
|
||||||
Reclassification to earnings1
|
(4
|
)
|
|
1
|
|
|
(3
|
)
|
|
(11
|
)
|
|
3
|
|
|
(8
|
)
|
||||||
Other comprehensive income (loss), net
|
11
|
|
|
(2
|
)
|
|
9
|
|
|
(60
|
)
|
|
15
|
|
|
(45
|
)
|
||||||
Postretirement benefits adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net actuarial gain (loss) and prior service cost
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Reclassification to earnings2
|
4
|
|
|
(1
|
)
|
|
3
|
|
|
10
|
|
|
(3
|
)
|
|
7
|
|
||||||
Other comprehensive income (loss), net
|
4
|
|
|
(1
|
)
|
|
3
|
|
|
10
|
|
|
(3
|
)
|
|
7
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total other comprehensive income (loss), net
|
$
|
7
|
|
|
$
|
(8
|
)
|
|
$
|
(1
|
)
|
|
$
|
3
|
|
|
$
|
21
|
|
|
$
|
24
|
|
•
|
“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, Germany, Australia, and France. 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, and Russia. 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, the Woodford Reserve family of brands (Woodford Reserve), GlenDronach, BenRiach, Glenglassaugh, the Old Forester family of brands (Old Forester), Slane Irish Whiskey, and Coopers’ Craft. Also includes the Early Times, Canadian Mist, and Collingwood brands, which we divested on July 31, 2020. See Note 14 to the Condensed Consolidated Financial Statements for details.
|
•
|
“American whiskey” includes the Jack Daniel’s family of brands, premium bourbons (defined below), super-premium American whiskey (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 Tennessee Apple (JDTA), 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, and Jack Daniel’s Bottled-in-Bond.
|
•
|
“Jack Daniel’s RTD and RTP” products include Jack Daniel’s & Cola, Jack Daniel’s Country Cocktails, Jack Daniel’s & Diet Cola, Jack & Ginger, Jack Daniel’s Double Jack, Gentleman Jack & Cola, Jack Daniel’s Lynchburg Lemonade, Jack Daniel’s American Serve, Jack Daniel’s Tennessee Honey RTD, Jack Daniel’s Berry, Jack Daniel’s Cider, Jack Daniel’s Whiskey & Seltzer, 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, Gentleman Jack, JDSB, JDTR, Jack Daniel’s Sinatra Select, and Jack Daniel’s No. 27 Gold Tennessee Whiskey.
|
•
|
“Tequila” includes el Jimador, the Herradura family of brands (Herradura), New Mix, Pepe Lopez, and Antiguo.
|
•
|
“Wine” includes Korbel Champagnes and Sonoma-Cutrer wines.
|
•
|
“Vodka” includes Finlandia.
|
•
|
“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, including products purchased through e-premise channels, 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.
|
•
|
Impact of health epidemics and pandemics, including the COVID-19 pandemic, and the resulting negative economic impact and related governmental actions
|
•
|
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; terrorism; and health pandemics
|
•
|
Failure to comply with anti-corruption laws, trade sanctions and restrictions, or similar laws or regulations
|
•
|
Fluctuations in foreign currency exchange rates, particularly a stronger U.S. dollar
|
•
|
Changes in laws, regulatory measures, or governmental 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
|
•
|
Unfavorable global or regional economic conditions, particularly related to the COVID-19 pandemic, and related economic slowdowns or recessions, 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
|
•
|
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
|
•
|
Significant additional labeling or warning requirements or limitations on availability of our beverage alcohol products
|
•
|
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
|
•
|
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
|
•
|
Risks associated with acquisitions, dispositions, business partnerships, or investments – such as acquisition integration, termination difficulties or costs, or impairment in recorded value
|
•
|
Counterfeiting and inadequate protection of our intellectual property rights
|
•
|
Product recalls or other product liability claims, product tampering, contamination, or quality issues
|
•
|
Significant legal disputes and proceedings, or government investigations
|
•
|
Cyber breach or failure or corruption of key information technology systems, or failure to comply with personal data protection laws
|
•
|
Negative publicity related to our company, products, brands, marketing, executive leadership, employees, board of directors, family stockholders, 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 $753 million, a decrease of 2% compared to the same period last year. Excluding an estimated net decrease in distributor inventories, we grew underlying net sales 3%. Net sales for our markets and brands were affected by COVID-19 during the first quarter of fiscal 2021. Underlying growth was driven by (a) JD RTDs, (b) the continued launch of JDTA, (c) our tequila brands, and (d) our premium bourbon brands, led by Woodford Reserve. Declines of JDTW due to the adverse affect of COVID-19 partially offset this underlying growth. From a geographic perspective, the United States led the underlying net sales growth with developed international markets also contributing. These gains were partially offset by a decline in the underlying net sales in our Travel Retail channel, our used barrel sales, and emerging markets.
|
•
|
We delivered reported operating income of $387 million, an increase of 56% compared to the same period of last year. Excluding (a) the gain on sale of Early Times, Canadian Mist, and Collingwood, (b) an estimated net decrease in distributor inventories, and (c) the positive effect of foreign exchange, underlying operating income grew 15%.
|
•
|
We delivered diluted earnings per share of $0.67, an increase of 73% compared to the same period last year, including an estimated $0.19 per share benefit from the gain on sale of Early Times, Canadian Mist, and Collingwood and an $0.08 per share benefit from a discrete tax item recognized during the quarter related to an intercompany transfer of assets.
|
Summary of Operating Performance
|
|||||||||||||
|
Three Months Ended July 31,
|
||||||||||||
(Dollars in millions)
|
2019
|
|
2020
|
|
Reported Change
|
|
Underlying Change1
|
||||||
Net sales
|
$
|
766
|
|
|
$
|
753
|
|
|
(2
|
%)
|
|
3
|
%
|
Cost of sales
|
268
|
|
|
288
|
|
|
7
|
%
|
|
12
|
%
|
||
Gross profit
|
498
|
|
|
465
|
|
|
(7
|
%)
|
|
(1
|
%)
|
||
Advertising
|
92
|
|
|
62
|
|
|
(33
|
%)
|
|
(34
|
%)
|
||
SG&A
|
164
|
|
|
148
|
|
|
(10
|
%)
|
|
(10
|
%)
|
||
Gain on sale of business
|
—
|
|
|
(127
|
)
|
|
NA
|
|
|
—
|
%
|
||
Other expense (income), net
|
(6
|
)
|
|
(5
|
)
|
|
(26
|
%)
|
|
(66
|
%)
|
||
Operating income
|
248
|
|
|
387
|
|
|
56
|
%
|
|
15
|
%
|
||
|
|
|
|
|
|
|
|
||||||
Total operating expenses2
|
$
|
250
|
|
|
$
|
205
|
|
|
(18
|
%)
|
|
(17
|
%)
|
|
|
|
|
|
|
|
|
||||||
As a percentage of net sales3
|
|
|
|
|
|
|
|
||||||
Gross profit
|
64.9
|
%
|
|
61.7
|
%
|
|
(3.2
|
)pp
|
|
|
|||
Operating income
|
32.4
|
%
|
|
51.4
|
%
|
|
19.0
|
pp
|
|
|
|||
Non-operating postretirement expense
|
$
|
1
|
|
|
$
|
1
|
|
|
28
|
%
|
|
|
|
Interest expense, net
|
$
|
19
|
|
|
$
|
20
|
|
|
4
|
%
|
|
|
|
Effective tax rate
|
18.2
|
%
|
|
11.6
|
%
|
|
(6.6
|
)pp
|
|
|
|||
Diluted earnings per share
|
$
|
0.39
|
|
|
$
|
0.67
|
|
|
73
|
%
|
|
|
|
Note: Totals may differ due to rounding
|
|
|
|
|
|
|
|
|
|
Top Markets1
|
|||||||||
|
|
||||||||
Three months ended July 31, 2020
|
Net Sales % Change vs. 2020
|
||||||||
Geographic area2
|
Reported
|
Foreign Exchange
|
Est. Net Chg in Distributor Inventories
|
|
Underlying3
|
||||
United States
|
3
|
%
|
—
|
%
|
5
|
%
|
|
9
|
%
|
Developed International
|
13
|
%
|
(5
|
%)
|
5
|
%
|
|
12
|
%
|
United Kingdom
|
46
|
%
|
(25
|
%)
|
2
|
%
|
|
24
|
%
|
Germany
|
20
|
%
|
(3
|
%)
|
—
|
%
|
|
17
|
%
|
Australia
|
29
|
%
|
—
|
%
|
—
|
%
|
|
28
|
%
|
France
|
22
|
%
|
(3
|
%)
|
—
|
%
|
|
19
|
%
|
Rest of Developed International
|
(24
|
%)
|
—
|
%
|
13
|
%
|
|
(10
|
%)
|
Emerging
|
(20
|
%)
|
10
|
%
|
7
|
%
|
|
(3
|
%)
|
Mexico
|
9
|
%
|
21
|
%
|
—
|
%
|
|
29
|
%
|
Poland
|
1
|
%
|
5
|
%
|
—
|
%
|
|
6
|
%
|
Russia
|
(33
|
%)
|
6
|
%
|
(11
|
%)
|
|
(38
|
%)
|
Rest of Emerging
|
(36
|
%)
|
7
|
%
|
15
|
%
|
|
(14
|
%)
|
Travel Retail
|
(59
|
%)
|
—
|
%
|
(5
|
%)
|
|
(63
|
%)
|
Non-branded and bulk
|
(31
|
%)
|
(1
|
%)
|
—
|
%
|
|
(32
|
%)
|
Total
|
(2
|
%)
|
—
|
%
|
5
|
%
|
|
3
|
%
|
Note: Results may differ due to rounding
|
|
|
|
|
|
|
|
•
|
United States. Reported net sales increased 3%, while underlying net sales grew 9% after adjusting for an estimated net decrease in distributor inventories (following the April 2020 distributor inventory build due to the uncertainty around potential supply chain disruptions resulting from COVID-19). The underlying net sales gains were led by (a) JD RTDs, fueled by strong consumer demand for Jack Daniel’s Country Cocktails and the launch of new spirit-based RTD products; (b) our premium bourbons, led by Woodford Reserve and Old Forester, supported by strong consumer takeaway trends; (c) the continued launch of JDTA; (d) volumetric growth of JDTH; (e) volumetric growth and higher prices of Korbel Champagne; and (f) our tequilas, due to higher prices and volumes of el Jimador and Herradura. This growth was partially offset by lower net sales of JDTW reflecting unfavorable channel mix resulting from COVID-19 related restrictions in the on-premise channel.
|
•
|
Developed International. Reported net sales increased 13%, while underlying net sales grew 12% after adjusting for the positive effect of foreign exchange and an estimated net decrease in distributor inventories. Underlying net sales growth was led by Australia, the United Kingdom, Germany, and France, partially offset by declines in Spain.
|
◦
|
The United Kingdom’s underlying net sales growth was driven by the launch of JDTA and volumetric growth of JDTH and JDTW. Favorable comparisons to the first quarter of fiscal 2020 also affected the current-year growth rate.
|
◦
|
Germany’s underlying net sales growth was fueled by the volumetric gains of JD RTDs due to strong consumer demand along with the launch of JDTA, partially offset by JDTW declines. Favorable comparisons to the first quarter of fiscal 2020 also affected the current year growth rate.
|
◦
|
Australia’s underlying net sales growth was driven by higher volumes of JD RTDs fueled by strong consumer demand.
|
◦
|
France’s underlying net sales growth was driven by higher volumes of JDTW and JDTH along with the launch of JDTA.
|
◦
|
Underlying net sales in the Rest of Developed International declined led by lower JDTW volumes in Spain reflecting COVID-19 related closures in this heavily on-premise focused market.
|
•
|
Emerging. Reported net sales decreased 20%, while underlying net sales declined 3% after adjusting for the negative effect of foreign exchange and an estimated net decrease in distributor inventories. Underlying net sales declines were led by Russia, Southeast Asia, sub-Saharan Africa, and India as COVID-19 had an adverse effect on results in the first quarter. These declines were partially offset by growth in Mexico and Brazil.
|
◦
|
Mexico’s underlying net sales growth was fueled by higher volumes of New Mix supported by increased demand and shelf space as a result of the temporary supply disruption of the beer industry due to COVID-19 related shutdowns. This growth was partially offset by lower volumes and unfavorable mix of Herradura.
|
◦
|
Poland’s underlying net sales growth was driven by higher volumes of Finlandia and the launch of JDTA. Favorable comparisons to the first quarter of fiscal 2020 also affected the current year growth rate.
|
◦
|
Russia’s underlying net sales declines were driven by lower volumes of Finlandia and JDTW. Difficult comparisons to the first quarter of fiscal 2020 coupled with the adverse affect of COVID-19 also affected the current year results.
|
◦
|
Underlying net sales in the Rest of Emerging declined due to broad-based volume declines of JDTW, partially offset by growth of JDTW in Brazil.
|
•
|
Travel Retail. Reported net sales declined 59%, while underlying net sales were down 63% after adjusting for an estimated net increase in distributor inventories. The underlying net sales decline was driven by lower volumes of JDTW, Woodford Reserve, and Finlandia due to the unprecedented implementation of travel bans and other restrictions resulting from COVID-19.
|
•
|
Non-branded and bulk reported net sales declined 31%, while underlying net sales decreased 32% after adjusting for the positive effect of foreign exchange. Lower volumes and prices for used barrels drove the reduction compared to the same period last year.
|
Major Brands
|
||||||||||||||
|
|
|||||||||||||
Three months ended July 31, 2020
|
Volumes
|
|
Net Sales % Change vs 2020
|
|||||||||||
Product category / brand family / brand1
|
9L Depletions1
|
|
Reported
|
Acquisitions and Divestitures
|
Foreign Exchange
|
Est. Net Chg in Distributor Inventories
|
|
Underlying2
|
||||||
Whiskey
|
14
|
%
|
|
(1
|
%)
|
—
|
%
|
—
|
%
|
5
|
%
|
|
4
|
%
|
Jack Daniel’s family of brands
|
15
|
%
|
|
(2
|
%)
|
—
|
%
|
—
|
%
|
5
|
%
|
|
3
|
%
|
JDTW
|
(7
|
%)
|
|
(17
|
%)
|
—
|
%
|
—
|
%
|
7
|
%
|
|
(10
|
%)
|
Jack Daniel’s RTD/RTP
|
38
|
%
|
|
35
|
%
|
—
|
%
|
2
|
%
|
—
|
%
|
|
37
|
%
|
JDTH
|
17
|
%
|
|
21
|
%
|
—
|
%
|
(2
|
%)
|
(3
|
%)
|
|
16
|
%
|
Gentleman Jack
|
17
|
%
|
|
17
|
%
|
—
|
%
|
—
|
%
|
(3
|
%)
|
|
14
|
%
|
JDTF
|
—
|
%
|
|
(10
|
%)
|
—
|
%
|
—
|
%
|
7
|
%
|
|
(3
|
%)
|
Other Jack Daniel’s whiskey brands
|
157
|
%
|
|
83
|
%
|
—
|
%
|
(4
|
%)
|
18
|
%
|
|
97
|
%
|
Woodford Reserve
|
15
|
%
|
|
11
|
%
|
—
|
%
|
—
|
%
|
4
|
%
|
|
14
|
%
|
Tequila
|
69
|
%
|
|
—
|
%
|
—
|
%
|
8
|
%
|
8
|
%
|
|
16
|
%
|
el Jimador
|
3
|
%
|
|
(2
|
%)
|
—
|
%
|
3
|
%
|
10
|
%
|
|
11
|
%
|
Herradura
|
(22
|
%)
|
|
(25
|
%)
|
—
|
%
|
2
|
%
|
7
|
%
|
|
(16
|
%)
|
Wine
|
7
|
%
|
|
3
|
%
|
—
|
%
|
—
|
%
|
7
|
%
|
|
10
|
%
|
Vodka (Finlandia)
|
(20
|
%)
|
|
(27
|
%)
|
—
|
%
|
3
|
%
|
(1
|
%)
|
|
(24
|
%)
|
Rest of Portfolio
|
(5
|
%)
|
|
38
|
%
|
(4
|
%)
|
(30
|
%)
|
(7
|
%)
|
|
(4
|
%)
|
Non-branded and bulk
|
NA
|
|
|
(31
|
%)
|
—
|
%
|
(1
|
%)
|
—
|
%
|
|
(32
|
%)
|
Note: Results may differ due to rounding
|
|
|
|
|
|
|
|
|
|
|
•
|
Whiskey brand’s reported net sales declined 1%, while underlying net sales grew 4% after adjusting for an estimated net decrease in distributor inventories. The underlying net sales gain was driven by the growth of JD RTDs, the continued launch of JDTA, and higher volumes of JDTH and Woodford Reserve, partially offset by declines of JDTW.
|
◦
|
The Jack Daniel’s family of brands grew underlying net sales driven by JD RTDs, the continued launch of JDTA, and higher volumes of JDTH, partially offset by declines of JDTW.
|
▪
|
The underlying net sales decline for JDTW was driven by (a) lower volumes in emerging markets and Travel Retail reflecting the unprecedented implementation of travel bans and other restrictions related to COVID-19 and (b) unfavorable channel mix in the United States and our international developed markets resulting from COVID-19 related restrictions in the on-premise channel.
|
▪
|
The increase in underlying net sales growth for Jack Daniel’s RTD/RTP was fueled by volumetric gains in the United States (including the launch of new spirit-based RTD products), Australia, and Germany.
|
▪
|
JDTH increased underlying net sales fueled by higher volumes in the United States, the United Kingdom, and France. This growth was partially offset by declines in Travel Retail due to the unprecedented implementation of travel bans and other restrictions resulting from COVID-19.
|
▪
|
Gentleman Jack increased underlying net sales with volumetric growth, partially offset by unfavorable channel mix in the United States resulting from COVID-19 related restrictions in the on-premise channel.
|
▪
|
The underlying net sales decline of JDTF was driven by unfavorable mix in the United States resulting from COVID-19 related restrictions in the on-premise channel.
|
▪
|
The underlying net sales growth of Other Jack Daniel’s whiskey brands was fueled by the continued launch of JDTA led by the United States, the United Kingdom, France, and Germany.
|
◦
|
Woodford Reserve grew underlying net sales fueled by volumetric growth in the United States, partially offset by lower volumes in Travel Retail reflecting the unprecedented implementation of travel bans and other restrictions related to COVID-19.
|
•
|
Tequila brands reported net sales were flat, while underlying net sales grew 16% after adjusting for the negative effect of foreign exchange and an estimated net decrease in distributor inventories. Underlying net sales growth was fueled by higher volumes of New Mix supported by increased demand and shelf space as a result of the temporary supply disruption of the beer industry due to COVID-19 related shutdowns in Mexico.
|
◦
|
el Jimador grew underlying net sales driven by volumetric growth and higher prices in the United States and Mexico.
|
◦
|
The underlying net sales decline of Herradura was driven by lower volumes and unfavorable mix in Mexico, partially offset by higher prices, favorable product mix, and higher volumes in the United States.
|
•
|
Reported net sales for our Wine business grew 3%, while underlying net sales grew 10% after adjusting for an estimated net decrease in distributor inventories. The increase in underlying net sales was driven by volumetric growth and higher prices of Korbel Champagne in the United States, partially offset by declines of Sonoma-Cutrer in the United States reflecting COVID-19 related restrictions in the on-premise channel where this brand is focused.
|
•
|
Reported net sales for Finlandia declined 27%, while underlying net sales decreased 24% after adjusting for the negative effect of foreign exchange and an estimated net increase in distributor inventories. The decrease in underlying net sales was due to the adverse effect of COVID-19, which drove volume declines in Russia and Travel Retail.
|
•
|
Rest of portfolio reported net sales increased 38%, while underlying net sales declined 4% after adjusting for (a) the positive effect of foreign exchange, (b) an estimated net increase in distributor inventories, and (c) the effect of our acquisition of The 86 Company (Fords Gin). The decrease in underlying net sales was driven primarily by declines in the United Kingdom for Chambord.
|
•
|
Non-branded and bulk reported net sales declined 31%, while underlying net sales decreased 32% after adjusting for the positive effect of foreign exchange. Lower volumes and prices for used barrels drove the reduction compared to the same period last year.
|
Net Sales
|
||
Percentage change versus the prior year period ended July 31
|
3 Months
|
|
Change in reported net sales
|
(2
|
%)
|
Estimated net change in distributor inventories
|
5
|
%
|
Change in underlying net sales
|
3
|
%
|
|
|
|
Change in underlying net sales attributed to:
|
|
|
Volume
|
22
|
%
|
Price/mix
|
(19
|
%)
|
Note: Results may differ due to rounding
|
|
Cost of Sales
|
||
Percentage change versus the prior year period ended July 31
|
3 Months
|
|
Change in reported cost of sales
|
7
|
%
|
Foreign exchange
|
1
|
%
|
Estimated net change in distributor inventories
|
4
|
%
|
Change in underlying cost of sales
|
12
|
%
|
|
|
|
Change in underlying cost of sales attributed to:
|
|
|
Volume
|
22
|
%
|
Cost/mix
|
(10
|
%)
|
Note: Results may differ due to rounding
|
|
Gross Margin
|
||
For the period ended July 31
|
3 months
|
|
Prior year gross margin
|
64.9
|
%
|
Price/mix
|
(1.1
|
%)
|
Cost
|
(2.4
|
%)
|
Foreign exchange
|
0.3
|
%
|
Change in gross margin
|
(3.2
|
%)
|
Current year gross margin
|
61.7
|
%
|
Note: Results may differ due to rounding
|
0.00
|
|
•
|
Reported advertising expense declined 33% for the three months ended July 31, 2020, while underlying advertising expense decreased 34% after adjusting for the effect of our acquisition of The 86 Company (Fords Gin). The decrease in underlying advertising expense was driven by a change in the timing of spend and a reduction in our investment behind on-premise channel activities and various events and sponsorships that were canceled in the first quarter of fiscal 2021 due to COVID-19.
|
•
|
Reported SG&A expense declined 10% for the three months ended July 31, 2020, and underlying SG&A expense also declined 10% after adjusting for the positive effect of foreign exchange. The decrease in underlying SG&A expense was driven by lower discretionary spend (including hiring and travel freezes) as COVID-19 continued to affect our results.
|
Operating Income
|
||
Percentage change versus the prior year period ended July 31
|
3 Months
|
|
Change in reported operating income
|
56
|
%
|
Acquisitions and divestitures
|
(51
|
%)
|
Foreign exchange
|
(1
|
%)
|
Estimated net change in distributor inventories
|
11
|
%
|
Change in underlying operating income
|
15
|
%
|
Note: Results may differ due to rounding
|
|
|
Three Months Average
|
||
|
July 31,
|
||
(Dollars in millions)
|
2019
|
|
2020
|
Commercial paper outstanding
|
$336
|
|
$360
|
Interest rate
|
2.56%
|
|
0.93%
|
Average days to maturity at issuance
|
32
|
|
103
|
10.1
|
|
|
10.2
|
|
|
31.1
|
|
|
31.2
|
|
|
32
|
|
|
101
|
|
The following materials from Brown-Forman Corporation's Quarterly Report on Form 10-Q for the quarter ended July 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:
|
September 2, 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)
|
1 Year Brown Forman Chart |
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