For the transition period from _______________ to _______________ Commission File No. 001-00123 Brown-Forman Corporation (Exact name of Registrant as specified in its Charter) United States Securities and Exchange Commission Washington, D.C. 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended January 31, 2025 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Delaware 61-0143150 (Stat ...

Financial Performance - Third quarter reported net sales decreased 3% to $1.0 billion, with a 6% increase on an organic basis compared to the prior-year period[1] - Year-to-date reported net sales decreased 4% to $3.1 billion, with a 2% increase on an organic basis compared to the prior-year period[1] - Operating income for the nine months decreased 13% to $902 million, with a 5% increase on an organic basis[1] - Net sales for the nine months ended January 31, 2025, decreased by 4% to $3,081 million compared to $3,214 million in the prior year[21] - Operating income for the same period fell by 13% to $902 million, down from $1,039 million[21] - Net income decreased by 5% to $723 million, compared to $758 million in the previous year[21] - Earnings per share (diluted) for the nine months ended January 31, 2025, decreased by 4% to $1.53 from $1.58[21] - Gross margin for the nine months ended January 31, 2025, was 59.4%, down from 60.9% in the prior year[21] Cost and Profitability - Gross profit declined 6% (-1% organic), with gross margin contracting 150 basis points to 59.4% due to higher costs and negative foreign exchange effects[3] - The company recognized a $78 million gain on the sale of its investment in Duckhorn, impacting diluted earnings per share by $0.14[3] - Operating income increased by 7% year-over-year, reflecting improved cost management[36] - The company approved a plan to reduce its structural cost base, resulting in a workforce reduction of approximately 12% and a $33 million impact on operating expenses and income[47] Future Outlook - Organic net sales growth is forecasted in the range of 2% to 4% for fiscal 2025[14] - Organic operating income growth is also expected in the range of 2% to 4% for fiscal 2025[14] - The company anticipates a return to organic net sales and operating income growth for fiscal 2025 despite ongoing external uncertainties[11] Cash Flow and Assets - Cash provided by operating activities increased to $446 million, up from $362 million[25] - Total current assets increased to $4,279 million from $4,036 million[23] - Total liabilities decreased to $4,248 million from $4,649 million[23] - Cash dividends paid per common share increased to $0.6621 from $0.6288[21] Market Performance - Total portfolio net sales decreased by 4% compared to the prior-year period, with organic growth at 2%[33] - Whiskey category depletions declined by 3%, while shipments increased by 1%[30] - Woodford Reserve saw a significant increase in shipments, up 6% year-over-year, with a 2% organic growth[30] - Ready-to-Drink segment reported a 2% increase in depletions and a 4% increase in shipments[30] - Tequila category experienced a 14% decline in both depletions and shipments[30] - The United States market reported a 5% decrease in net sales, with a 1% organic growth[33] - Emerging markets showed a 4% decline in net sales but achieved an 8% organic growth[33] Inventory and Demand Metrics - The company uses non-GAAP measures like "organic change" to assess performance consistently, excluding foreign exchange fluctuations, which can significantly affect GAAP income statement measures[47] - Estimated fluctuations in distributor inventories are provided to understand performance trends, particularly in the U.S. market, which operates under a regulated three-tier system[48] - The company defines "depletions" as a key metric reflecting consumer demand, which may differ from shipments to distributors[57] - A positive difference in estimated net change in distributor inventories suggests a potential decrease in organic trends as distributors reduce inventories[57] - The company emphasizes the importance of consumer takeaway data as a leading indicator of demand trends, derived from external sources like Nielsen[57] Market Segmentation - The company aggregates markets by economic development stage as defined by the IMF, with top developed international markets including Germany, Australia, and the UK[50] - The company’s top emerging markets include Mexico, Poland, and Brazil, contributing to net sales of branded products[54] - The company has adjusted its product category definitions, aggregating "Wine" and "Vodka" with "Rest of Portfolio" due to recent divestitures[52] - The company recognizes revenue upon shipment, which may not align with actual consumer demand reflected in distributor depletions[57]

Divestitures and Gains - In fiscal 2024, the company sold the Sonoma-Cutrer wine business for a pre-tax gain of $175 million, receiving $50 million in cash and a 21.4% ownership in The Duckhorn Portfolio Inc.[86] - The divestiture of the Finlandia vodka business resulted in a pre-tax gain of $92 million during fiscal 2024[87]. - The company sold the Finlandia vodka business for $196 million and the Sonoma-Cutrer wine business for $50 million cash, impacting net sales and operating income negatively[121][122]. Financial Performance - Net sales for the six months ended October 31, 2024, were $2.0 billion, a decrease of 5% compared to the same period last year, driven by divestitures, lower volumes, and foreign exchange impacts[123]. - Gross profit for the same period was $1.2 billion, reflecting an 8% decrease, with gross margin declining by 2.4 percentage points to 59.2%[123]. - Operating income decreased by 7% to $622 million for the six months ended October 31, 2024, primarily due to input cost fluctuations and the negative effects of acquisitions and divestitures[123]. - Diluted earnings per share for the six months ended October 31, 2024, were $0.96, a decrease of 3% from $0.98 in the same period last year[123]. - The overall organic change in net sales for the six months was flat, reflecting a challenging market environment[153]. - For the three months ended October 31, 2024, net sales were $1.1 billion, a decrease of $13 million, or 1%, impacted by acquisitions and divestitures[152]. - Operating income for the three months ended October 31, 2024, totaled $341 million, an increase of $2 million, or 1%, with an operating margin of 31.1%[169]. - Diluted earnings per share for the three months ended October 31, 2024, increased by 9% to $0.55, compared to $0.50 in the same period last year[173]. Market Trends and Challenges - The company faced challenges from substantial competition, changes in consumer preferences, and disruptions in the distribution network[120][118]. - The company measures consumer takeaway as a leading indicator of demand trends, using data from external sources like Nielsen[112]. - The company experienced declines in net sales across geographic aggregations, with specific brands like Finlandia and Sonoma-Cutrer contributing to the downturn[123]. Tax and Refunds - The company recognized a $13 million franchise tax refund in the first quarter of fiscal 2025 due to a change in tax calculation methodology[93]. - The effective tax rate for the six months ended October 31, 2024, was 20.1%, down from 22.4% in the same period last year[125]. - The effective tax rate for the three months ended October 31, 2024, was 17.6%, down from 22.0% in the prior year[171]. Cash Flow and Liquidity - Cash and cash equivalents were $446 million at April 30, 2024, and $416 million at October 31, 2024, with approximately 48% held by foreign subsidiaries[178]. - Cash provided by operations was $129 million for the six months ended October 31, 2024, an increase of $32 million from the same period last year[183]. - The company expects to meet short-term liquidity needs through cash generated from operations and borrowings under its commercial paper program[181]. - The company has a strong liquidity position supported by positive cash flows from operations and ample debt capacity[182]. Future Outlook - The company anticipates organic net sales growth in the range of 2% to 4% for fiscal 2025, along with organic operating income growth in the same range[175]. - The estimated capital expenditure range for fiscal 2025 has been updated to $180 to $190 million from a previous range of $195 to $205 million[175]. Advertising and Expenses - Advertising expenses decreased by 7% to $252 million for the six months ended October 31, 2024[125]. - Operating expenses for the three months ended October 31, 2024, totaled $305 million, a decrease of $27 million, or 8%, driven by lower advertising and SG&A expenses[164]. Inventory and Sales Trends - Estimated net changes in distributor inventories are calculated to understand the impact on organic trends, indicating potential increases or decreases in distributor inventories[115]. - The company aggregates its product categories, with "Rest of Portfolio" now including brands like Gin Mare and Korbel California Champagnes following recent divestitures[102]. - Brazil's net sales increased 31%, driven by higher volumes across the portfolio, particularly JDTW, JDTA, and JDTH[133]. - The United States' net sales declined 7%, primarily due to lower volumes of JDTW and Korbel California Champagnes, partially offset by higher volumes of Woodford Reserve and Old Forester[128]. - The United Kingdom's net sales declined 8%, led by lower volumes of JDTW, partially offset by the positive effect of foreign exchange[129]. - Mexico's net sales declined 11%, driven by lower volumes of the Tequila portfolio and the negative effect of foreign exchange[133]. - Canada's net sales declined 2%, driven by the divestitures of Finlandia and Sonoma-Cutrer, as well as the negative effect of foreign exchange[129]. - Spain's net sales declined 12%, primarily due to lower volumes of JDTW, partially offset by the positive contribution from Diplomático[131]. Market Risks - The company faces market risks from foreign currency exchange rates, commodity prices, and interest rates, managed through procurement strategies and financial instruments[188].

Financial Performance - Second quarter reported net sales decreased 1% to $1.1 billion, with a 3% increase on an organic basis compared to the prior-year period[1] - For the first half of fiscal 2025, reported net sales decreased 5% to $2.0 billion, remaining flat on an organic basis[2] - First half reported operating income decreased 7% to $622 million, with a 3% decrease on an organic basis[2] - Diluted earnings per share for the first half decreased 3% to $0.96[2] - Gross profit declined 8% to $1.2 billion, with a gross margin contraction of 240 basis points to 59.2%[5][14] - Net sales for the Tequila portfolio declined 17% on an organic basis, primarily due to lower volumes in the United States and Mexico[7] - Net sales for 2023 were $1,107 million, a decrease of 1% compared to 2024's projected $1,095 million[28] - Gross profit for 2023 was $671 million, down 4% from 2024's projected $646 million[28] - Net income increased by 7% from $242 million in 2023 to $258 million in 2024[28] - Earnings per share (diluted) rose by 9% from $0.50 in 2023 to $0.55 in 2024[28] - The company reported a 5% decline in net sales for the six months ended October 31, 2024, compared to the same period in 2023[30] - Total portfolio depletions decreased by 5% and shipments decreased by 2% compared to the prior year period[39] - Whiskey category depletions were 10.4 million, down 4%, with net sales down 1%[39] - Ready-to-drink segment depletions were 10.3 million, down 4%, with net sales down 6%[39] Future Outlook - The company anticipates organic net sales growth in the range of 2% to 4% for fiscal 2025[20] - The company expects a return to growth in fiscal 2025, driven by gains in international markets and normalizing inventory trends[20] - The effective tax rate is expected to be in the range of approximately 21% to 23%[21] Dividends and Tax - The Board of Directors approved a 4% increase in the quarterly cash dividend to $0.2265 per share[18] - The effective tax rate for 2023 was 22.0%, projected to decrease to 17.6% in 2024[28] - A $13 million franchise tax refund was recognized in the first quarter of fiscal 2025 due to a change in franchise tax calculation methodology in Tennessee, retroactively applied to fiscal 2020 through fiscal 2023[57] Market Trends and Strategies - Emerging markets saw a 6% organic net sales increase, while developed international markets experienced a 5% decline[41] - The company reported a 39% increase in non-branded and bulk sales, with a 2% organic growth[41] - The company plans to continue focusing on market expansion and new product development strategies[39] - Top developed international markets include Germany, Australia, the UK, France, Canada, and Spain, while top emerging markets are Mexico, Poland, and Brazil[63] Inventory and Sales Metrics - Estimated net change in distributor inventories for the United States was 3%, while travel retail saw a decrease of 1%[43] - The company recognized a pre-tax gain of $175 million from the sale of the Sonoma-Cutrer wine business[51] - The company reported a 3% increase in net sales, cost of sales, and gross profit due to inventory changes[43] - Organic net sales decreased by 3% in the United States, with a 2% increase from acquisitions and divestitures[41] - Depletions are used to measure volume more closely reflecting consumer demand than shipments to distributors[75] - Consumer takeaway data, provided by external parties, serves as a leading indicator of consumer demand trends[77] - The estimated net change in distributor inventories is calculated to understand the impact of inventory changes on organic trends[79] Advertising and Expenses - Advertising expenses decreased by 9% from $140 million in 2023 to $126 million in 2024[28] Non-GAAP Measures - The company uses non-GAAP measures like "organic change" to assess performance consistently, compare with competitors, and communicate financial performance, excluding items like foreign exchange fluctuations[59] - Estimated fluctuations in distributor inventories are provided to understand performance trends, particularly in the U.S. market, which operates under a three-tier distribution system[60] - The company aggregates markets by economic development stage and brands by beverage alcohol category to explain operational results and highlight trends[61] Production Changes - In fiscal 2024, production of Jack Daniel's Country Cocktails fully transitioned to Pabst Brewing Company, removing non-comparable operating activity from the first and second quarters of fiscal 2024 and fiscal 2025[55]

Divestitures and Gains - In fiscal 2024, the company sold the Sonoma-Cutrer wine business for a pre-tax gain of $175 million and received $50 million in cash along with a 21.4% ownership in The Duckhorn Portfolio Inc.[57] - The divestiture of the Finlandia vodka business resulted in a pre-tax gain of $92 million during fiscal 2024[58]. - The company sold the Finlandia vodka business for $196 million and the Sonoma-Cutrer wine business for $50 million plus a 21.4% stake in Duckhorn[74]. Financial Performance - For the three months ended July 31, 2024, net sales were $951 million, a decrease of 8% compared to $1.038 billion in the same period last year[75]. - Gross profit for the same period was $565 million, down $86 million or 13%, with gross margin decreasing to 59.4% from 62.7%[75]. - Operating income decreased by 14% to $281 million, primarily due to input cost fluctuations and the impact of divestitures[75]. - Diluted earnings per share were $0.41, a decrease of 14% from $0.48 in the prior year[75]. - For the three months ended July 31, 2024, net sales were $1.0 billion, a decrease of $87 million, or 8%, primarily due to lower volumes and negative foreign exchange effects[95]. - Operating expenses totaled $284 million, a decrease of $40 million, or 12%, primarily due to lower SG&A and advertising expenses[102]. - Gross profit was $565 million, a decrease of $86 million, or 13%, with a gross margin of 59.4%, down 3.3 percentage points from the prior year[100]. - Operating income totaled $281 million, a decrease of $46 million, or 14%, with an operating margin of 29.6%, down 1.9 percentage points from the prior year[104]. - Diluted earnings per share were $0.41, a decrease of 14% from $0.48 reported for the same period last year[105]. Market Trends and Sales - The company reported organic net sales growth, excluding the effects of acquisitions, divestitures, and foreign exchange fluctuations, to better understand performance trends[56][60]. - Net sales in the United States declined by 5%, driven by lower volumes, particularly from JDTW and el Jimador[80]. - In the Developed International segment, net sales declined by 9%, with significant drops in the United Kingdom (21%) and Germany (6%)[81]. - Emerging markets saw a decline of 16% in net sales, with Mexico down 18% and Poland down 21% due to divestitures and lower volumes[83]. - Brazil experienced a net sales increase of 18%, driven by higher volumes across the portfolio[83]. - Travel Retail's net sales declined 11%, impacted by lower volumes of super-premium Jack Daniel's expressions and the divestiture of Finlandia[84]. - Woodford Reserve's net sales increased 3% due to higher volumes in the United States[89]. - Old Forester's net sales increased 16% driven by higher prices and volumes in the United States[89]. Future Projections - The company anticipates continued challenges from foreign exchange fluctuations and competitive pressures in the market[71]. - The company anticipates organic net sales growth in the range of 2% to 4% for fiscal 2025[106]. - Organic operating income is also expected to grow in the range of 2% to 4% for fiscal 2025[106]. - The effective tax rate is projected to be approximately 21% to 23%[106]. - Planned capital expenditures are estimated to be between $195 million and $205 million[106]. Cash and Financing - Cash and cash equivalents were $446 million as of April 30, 2024, and decreased to $416 million by July 31, 2024[109]. - Cash provided by operations for the three months ended July 31, 2024, was $17 million, a decline of $21 million from the same period last year[112]. - Cash used for financing activities was $51 million during the three months ended July 31, 2024, compared to $50 million provided in the same prior-year period[113]. - The company has a $900 million commercial paper program to fund short-term operational needs[110]. - Average interest rate on commercial paper increased from 5.27% in 2023 to 5.52% in 2024[107]. - Approximately 41% of cash and cash equivalents were held by foreign subsidiaries, with plans to potentially repatriate additional cash[109]. Tax and Refunds - The company recognized a $13 million franchise tax refund in the first quarter of fiscal 2025 due to a change in tax calculation methodology[59]. - The effective tax rate for the three months ended July 31, 2024, was 23.1%, compared to 22.9% for the same period last year[104].

Financial Performance - Net sales for the first quarter of fiscal 2025 decreased 8% to $1.0 billion, with a 4% decline on an organic basis compared to the prior year[1]. - Operating income decreased 14% to $281 million, reflecting a 13% decline on an organic basis[1]. - Diluted earnings per share decreased 14% to $0.41[1]. - Gross profit declined 13% (-8% organic) with a gross margin reduction of 330 basis points to 59.4%[9]. - Net sales decreased by 8% from $1,038 million in 2023 to $951 million in 2024[19]. - Gross profit declined by 13%, from $651 million in 2023 to $565 million in 2024[19]. - Operating income fell by 14%, from $327 million in 2023 to $281 million in 2024[19]. - Net income decreased by 16%, from $231 million in 2023 to $195 million in 2024[19]. - Basic and diluted earnings per share both dropped by 14%, from $0.48 in 2023 to $0.41 in 2024[19]. - Cash provided by operating activities decreased significantly from $38 million in 2023 to $17 million in 2024[22]. - Cash and cash equivalents at the end of the period decreased from $426 million in 2023 to $416 million in 2024[22]. - The effective tax rate slightly improved from 22.9% in 2023 to 23.1% in 2024[19]. Sales and Market Trends - Net sales for the Tequila portfolio declined 23% (-23% organic), with el Jimador's net sales down 26% (-26% organic)[4]. - The decline in net sales was partially offset by growth from brands like Woodford Reserve and Old Forester, which continued to outperform the US Whiskey category[5]. - Total portfolio depletions decreased by 9% compared to the prior year, with net sales down 8%[26]. - Whiskey category depletions were 5 million cases, reflecting a 7% decline year-over-year, while net sales decreased by 5%[26]. - Ready-to-drink segment saw depletions of 4.9 million cases, down 9%, with net sales down 12%[26]. - Developed international markets experienced a 9% decline in net sales, while emerging markets saw a 16% decrease[28]. - The United States reported a 5% decline in net sales, with a 2% organic growth adjustment[28]. - The company reported a 1% increase in net sales for the overall portfolio, with a 2% increase in cost of sales[30]. - The top developed international markets for net sales include Germany, Australia, the United Kingdom, France, Canada, and Spain, while top emerging markets include Mexico, Poland, and Brazil[43]. Future Outlook - Organic net sales growth is expected to be in the range of 2% to 4% for fiscal 2025[13]. - Organic operating income growth is also anticipated to be in the range of 2% to 4% for fiscal 2025[13]. - The company reaffirmed its full-year fiscal 2025 guidance, including organic top and bottom line growth[2]. Capital and Investments - Capital expenditures are planned to be between $195 million and $205 million[13]. - The divestiture of Finlandia vodka resulted in a pre-tax gain of $92 million, impacting overall financial performance positively[36]. - The sale of Sonoma-Cutrer wine business generated a pre-tax gain of $175 million, contributing to the company's financial results[37]. Performance Measurement - The company uses non-GAAP measures like "organic change" to assess performance consistently across periods, which excludes the impact of foreign exchange fluctuations[40]. - Estimated fluctuations in distributor inventories are provided to understand performance trends, particularly in the U.S. market, which operates under a three-tier distribution system[41]. - Consumer takeaway data, which reflects retail purchases, is used to estimate market share and consumer demand trends, sourced from external parties like Nielsen[50]. - The estimated net change in distributor inventories is calculated to provide insights into actual consumer demand versus shipments, indicating potential trends in organic sales[51]. Other Financial Adjustments - A $13 million franchise tax refund was recognized in the first quarter of fiscal 2025 due to a change in franchise tax calculation methodology in Tennessee, retroactively applied to fiscal 2020 through fiscal 2023[38]. - The partnership with Pabst Brewing Company for the supply, sales, and distribution of Jack Daniel's Country Cocktails fully transitioned in fiscal 2024, removing non-comparable operating activity from the first quarter of fiscal 2024 and fiscal 2025[38]. - Organic net sales growth was adjusted to reflect a 2% increase, excluding acquisitions and divestitures[34]. - The "Rest of Portfolio" category now aggregates the "Wine" and "Vodka" product categories due to divestitures, with fiscal 2024 amounts adjusted for comparison[45].

Financial Performance - Reported net sales for fiscal 2024 were $4.2 billion, a decrease of 1% or $50 million compared to fiscal 2023, primarily due to lower volumes offset by favorable price/mix and acquisitions[76]. - Reported cost of sales decreased by $82 million, or 5%, to $1.7 billion in fiscal 2024, driven by lower volumes and partially offset by cost/mix factors[77]. - Gross profit increased by 1% year-over-year, with a current gross margin of 60.5%, up from 59.0% in the prior year[86]. - Operating income rose to $1.4 billion, an increase of 25% compared to fiscal 2023, with an operating margin of 33.8%, up 7.2 percentage points[90]. - Diluted earnings per share increased by 32% to $2.14 in fiscal 2024, driven primarily by the increase in reported operating income[92]. Future Projections - The company anticipates organic net sales growth in the range of 2% to 4% for fiscal 2025, along with organic operating income growth in the same range[94]. Cash Flow and Dividends - Cash and cash equivalents increased from $374 million in April 2023 to $446 million in April 2024[95]. - Cash flows from operating activities were $647 million in fiscal 2024, a slight increase from $640 million in fiscal 2023[100]. - The Board of Directors approved a 6% increase in the quarterly cash dividend, raising it from $0.2055 to $0.2178 per share, effective January 2, 2024[102]. - Cash used for financing activities was $618 million in fiscal 2024, a significant change from $239 million in cash provided during fiscal 2023, largely due to increased share repurchases[101]. - The Board of Directors authorized a share repurchase program of up to $400 million from October 2, 2023, through October 1, 2024[104]. Pension and Retirement Benefits - The estimated pension and other postretirement benefit cost for fiscal 2025 is approximately $18 million, down from $21 million for fiscal 2024[114]. - The discount rate for service cost is projected to increase from 4.98% in 2024 to 5.75% in 2025[120]. - The company estimates that a 50 basis points decrease in assumed discount rates would increase the total fiscal 2025 cost by approximately $4 million[114]. Brand Valuation and Risks - A 15% decline in projected net sales could result in an impairment charge of $25 million for the Gin Mare brand name and $35 million for the Diplomático brand name[109]. - The company believes none of its brand names are impaired as of April 30, 2024, with fair values substantially exceeding carrying amounts[110]. Currency and Commodity Risks - As of April 30, 2024, the company had outstanding currency derivatives with notional amounts totaling $566 million[124]. - A hypothetical 10% weakening of the dollar would decrease the fair value of existing foreign currency derivative contracts by approximately $45 million[125]. - The company manages commodity price risks through forward purchase contracts for significant commodities like wood, corn, and agave[119]. - As of April 30, 2024, cash and cash equivalents were $446 million, with short-term commercial paper borrowings of $429 million exposed to interest rate changes[127].

Financial Performance - For fiscal 2024, the company reported net sales of $4.2 billion, a decrease of 1% (-1% organic) compared to the prior year[17]. - Operating income for the full year increased by 25% to $1.4 billion (-2% organic), while diluted earnings per share rose by 32% to $2.14[17]. - In the fourth quarter, reported net sales decreased 8% to $1.0 billion (-5% organic), with operating income increasing 26% to $375 million (-16% organic) and diluted earnings per share increasing 31% to $0.56[18]. - Reported net sales change was (1%) for the 12 months ended April 30, 2024, with organic change at (1%)[63]. - Operating income reported a change of 26% for the 3 months ended April 30, 2024, and 25% for the 12 months[63]. - Net sales for 2023 were $1,046 million, a decrease of 8% compared to $964 million in 2024[82]. - Gross profit for 2023 was $635 million, down 10% from $569 million in 2024[82]. - Operating income increased by 26% to $298 million in 2023, compared to $375 million in 2024[82]. - Net income for 2023 was $207 million, reflecting a 29% increase from $266 million in 2024[82]. - Earnings per share (EPS) for 2023 were $0.43, a 31% increase compared to $0.56 in 2024[82]. Shareholder Returns - The company returned $804 million to stockholders, including $404 million in dividends and $400 million through share repurchases[21]. - Cash dividends paid per common share increased from $0.2055 in 2023 to $0.2178 in 2024[82]. Sales and Product Performance - Reported net sales for the Tequila portfolio decreased 4% (-7% organic), with Herradura's sales declining 10% (-13% organic)[44]. - The Ready-to-Drink portfolio delivered reported net sales growth of 2% (flat on an organic basis), with New Mix's sales increasing 32% (+17% organic)[44]. - Whiskey depletions totaled 21.7 million cases, with a reported decline of 3% compared to the prior year[88]. - Jack Daniel's family of brands reported net sales of $30.0 million, reflecting an 11% decrease year-over-year[88]. - The Ready-to-Drink category saw depletions of 21.0 million cases, down 3% from the previous year[88]. - Tequila depletions were 2.3 million cases, representing an 11% decline compared to the prior year[88]. - Organic sales growth for the New Mix brand was 4%, with net sales increasing by 32%[88]. - The company reported a 61% increase in net sales for non-branded and bulk products[88]. Inventory and Operating Activities - Cash provided by operating activities was $640 million, a decrease from $647 million[60]. - The company experienced a (4%) change in net sales in the United States, with organic change also at (4%) for the same period[66]. - The company reported a (6%) estimated net change in distributor inventories for the emerging market segment[68]. - The company noted a (12%) change in estimated net change in distributor inventories for the emerging market segment[68]. - Estimated net change in distributor inventories indicates a potential increase in organic trends as distributors rebuild inventories[110]. Acquisitions and Divestitures - The acquisition of Gin Mare Brand, S.L.U. was completed during the third quarter of fiscal 2023, impacting financial results[71]. - A pre-tax gain of $92 million was realized from the sale of the Finlandia vodka business during the third quarter of fiscal 2024[72]. - The divestitures of Finlandia and Sonoma-Cutrer resulted in a gain of $267 million[43]. - The divestiture of the Sonoma-Cutrer wine business resulted in a pre-tax gain of $175 million[95]. - The company acquired several brands, including Diplomático, during the third quarter of fiscal 2023, impacting future performance[94]. Future Outlook - The company anticipates organic net sales growth in the range of 2% to 4% for fiscal 2025[29]. - Capital expenditures are planned to be between $195 million and $205 million for fiscal 2025[53]. Assets and Liabilities - Total assets increased from $7,777 million in April 2023 to $8,166 million in April 2024[84]. - Cash and cash equivalents rose from $374 million in April 2023 to $446 million in April 2024[84]. - Total liabilities increased from $4,509 million in April 2023 to $4,649 million in April 2024[84]. - The company reported a net increase in cash provided by financing activities of $239 million in 2023, with a decrease of $618 million in 2024[86]. Operating Expenses - Reported gross profit increased by 1% (+2% organic) with gross margin expansion of 150 basis points to 60.5%[48]. - Organic change in gross profit was reported at (8%) for the 12 months ended April 30, 2024[63]. - Advertising expenses saw a reported change of (14%) for the 3 months ended April 30, 2024[63]. - Operating expenses included a commitment of $23 million to the Brown-Forman Foundation, affecting organic operating income[112].

Acquisitions and Divestitures - In fiscal 2023, the company acquired Gin Mare Brand, S.L.U. and Mareliquid Vantguard, S.L.U. for a total purchase price of $523 million, which included $468 million in cash and $55 million in contingent consideration[109]. - The company recognized a pre-tax gain of $90 million from the sale of its Finlandia vodka business to Coca-Cola HBC AG for $194 million in cash during the third quarter of fiscal 2024[116]. - The company plans to sell its Sonoma-Cutrer wine business to The Duckhorn Portfolio, Inc. for approximately $50 million in cash and a 21.5% ownership stake in The Duckhorn Portfolio, Inc.[118]. - The goodwill recorded for the Gin Mare acquisition is $306 million, which is not expected to be deductible for tax purposes[113]. - The company expects to finalize the purchase price allocation for the Diplomático acquisition, which had a total goodwill of $386 million, with $108 million expected to be tax-deductible[112]. - The company reached an agreement to sell its Sonoma-Cutrer wine business, expected to close in Q4 of fiscal 2024[123]. - The company recognized a non-cash impairment charge of $96 million for the Finlandia brand name in Q3 of fiscal 2023[126]. Financial Performance - Reported net sales for the nine months ended January 31, 2024, were $3.2 billion, an increase of 1% compared to the same period last year, driven by favorable price/mix and acquisitions, partially offset by lower volumes[170]. - Reported gross profit for the nine months ended January 31, 2024, was $2.0 billion, an increase of $98 million, or 5%, with gross margin rising to 60.9% from 58.4% in the same period last year[172]. - Reported operating income for the nine months ended January 31, 2024, was $1.0 billion, a 25% increase compared to the same period last year, attributed to acquisitions and higher gross margin[172]. - Diluted earnings per share for the nine months ended January 31, 2024, were $1.58, a 32% increase from $1.20 reported for the same period last year[172]. - For the nine months ended January 31, 2024, reported net sales were $3.2 billion, an increase of $31 million, or 1%, compared to the same period last year[188]. - Reported gross profit for the nine months ended January 31, 2024, was $2.0 billion, an increase of $98 million, or 5%, with gross margin increasing 2.5 percentage points to 60.9%[220]. - For the three months ended January 31, 2024, reported operating income totaled $373 million, an increase of $200 million, or 116%[194]. - Diluted earnings per share for the three months ended January 31, 2024, were $0.60, an increase of 189% from $0.21 reported for the same period last year[197]. - Reported operating income for the nine months ended January 31, 2024, totaled $1.0 billion, an increase of $210 million, or 25% compared to the same period last year[224]. Sales Performance - Reported net sales for Jack Daniel's Tennessee Whiskey (JDTW) decreased by 6%, primarily due to declines in Japan, the U.S., and Sub-Saharan Africa, along with negative foreign exchange effects[152]. - Reported net sales for Jack Daniel's Tennessee Honey (JDTH) declined by 6%, attributed to lower volumes in the U.S.[153]. - The company's organic net sales for the whiskey category decreased by 1% year-over-year, with a 1% positive impact from foreign exchange[151]. - The company experienced a 9% decline in reported net sales for Jack Daniel's Tennessee Fire (JDTF), driven by lower volumes in the U.S.[153]. - The company reported a 3% increase in net sales for the vodka category, which includes Finlandia, prior to its divestiture[151]. - The company noted a 79% increase in net sales for the rest of the portfolio, despite a 72% impact from acquisitions and divestitures[151]. - Emerging markets and Travel Retail contributed positively to reported net sales growth, while developed international and the United States experienced declines[170]. - The acquisition of the Gin Mare and Diplomático brands positively impacted reported net sales growth and operating income for the nine months ended January 31, 2024[170]. - The United States reported a net sales decline of 1%, primarily due to lower volumes, which was partially offset by higher prices and the acquisition of Diplomático[175]. - Germany's reported net sales increased by 12%, driven by the launch of Jack Daniel's & Coca-Cola RTD and the acquisitions of Diplomático and Gin Mare[176]. - Reported net sales for New Mix grew by 34%, fueled by higher prices in Mexico and favorable foreign exchange effects[184]. - Reported net sales in Mexico increased 22%, driven by the positive effect of foreign exchange and higher prices of New Mix[209]. - Reported net sales for JDTA increased 44%, driven by higher volumes in Brazil and the product launch in South Korea[212]. Expenses and Costs - Reported cost of sales for the nine months ended January 31, 2024, were $1.3 billion, a decrease of $66 million, or 5%, primarily driven by lower volumes[189]. - For the three months ended January 31, 2024, reported operating expenses totaled $262 million, a decrease of $189 million, or 42% compared to the same period last year[221]. - Reported advertising expense increased by 1% for the three months ended January 31, 2024, driven by increased investment in JDTW and advertising for the recently acquired brands[221]. - Reported SG&A expense increased by 9% for the three months ended January 31, 2024, led by higher compensation and benefit-related expenses[221]. - Operating margin increased by 6.3 percentage points to 32.3% from 26.0% in the same period last year[224]. Cash Flow and Financing - Cash and cash equivalents increased from $374 million at April 30, 2023, to $589 million at January 31, 2024[227]. - Cash used for financing activities was $212 million during the nine months ended January 31, 2024, compared to $468 million in cash provided by financing activities during the same prior-year period[230]. - Under the Repurchase Program, the company repurchased 175,632 Class A shares at an average price of $59.35 per share and 6,736,658 Class B shares at an average price of $57.83 per share, for a total cost of $400 million[231]. Tax and Capital Expenditures - The effective tax rate for the three months ended January 31, 2024, was 16.5%, down from 19.5% for the same period last year[196]. - The effective tax rate for the nine months ended January 31, 2024, was 20.3%, down from 23.0% for the same period last year[225]. - Capital expenditures are planned to be in the range of $230 to $240 million for fiscal 2024[199]. Market Outlook - Organic net sales are expected to be flat for fiscal 2024, reflecting slower than anticipated growth for the nine months ended January 31, 2024[199]. - The average interest rate on commercial paper increased from 4.61% in January 2023 to 5.51% in January 2024[228].

Financial Performance - In fiscal 2023, net sales decreased by 5%, with a notable decline in developed international markets by 6% and emerging markets by 11%[10] - The operating income saw a significant drop of 10%, indicating challenges in maintaining profitability amidst declining sales[10] - Reported net sales for the third quarter decreased 1% to $1.1 billion, with a 2% decline on an organic basis compared to the prior-year period[39] - Reported operating income increased 116% to $373 million, with a 5% increase on an organic basis[39] - Diluted earnings per share rose 189% to $0.60[39] - For the first nine months of fiscal 2024, reported net sales increased 1% to $3.2 billion, with flat organic growth compared to the prior year[49] - Year-to-date reported operating income rose 25% to $1.0 billion (+2% organic), while diluted earnings per share increased 32% to $1.58[49] - Net sales for the three months ended January 31, 2024, were $3,214 million, a 1% increase from $3,182 million in the same period of 2023[83] - Operating income rose by 25% to $1,039 million in 2024, up from $829 million in 2023, leading to an operating margin of 32.3%[83] - Net income for the three months ended January 31, 2024, was $758 million, a 32% increase from $576 million in 2023[83] - Basic earnings per share increased by 32% to $1.59 in 2024, compared to $1.20 in 2023[83] Brand Performance - The company reported a non-cash impairment charge of $96 million for the Finlandia brand name during the third quarter of fiscal 2023[21] - The company sold its Finlandia vodka business, resulting in a pre-tax gain of $90 million, with related transition services agreements in place[15] - The "Ready-to-Drink" product category was highlighted as a significant growth contributor, reflecting industry-wide trends[9] - New Mix brand achieved reported net sales growth of 34% (+17% organic)[40] - Jack Daniel's Tennessee Apple achieved reported net sales growth of 44% (+45% organic), while Jack Daniel's Tennessee Whiskey saw a decline of 6% (-5% organic)[51] - Whiskey product net sales declined 2% (-1% organic), primarily due to lower volumes for Jack Daniel's Tennessee Whiskey and Jack Daniel's Tennessee Honey[43] - Emerging markets reported net sales growth of 9% (+11% organic), driven by strong performance in Mexico and Brazil[44] - The recently acquired brands, Gin Mare and Diplomático, contributed to a 79% increase in Rest of Portfolio's reported net sales growth (+11% organic)[50] Cost and Expenses - The gross profit margin decreased by 5%, reflecting increased costs and competitive pressures in the market[10] - Reported gross profit increased 5% (+6% organic) with a gross margin expansion of 250 basis points[41] - Advertising expenses increased by 11% (+7% organic) to support long-term brand investment[41] - Advertising expenses rose by 11% to $414 million in 2024, up from $372 million in 2023[83] - The effective tax rate decreased to 20.3% in 2024 from 23.0% in 2023[83] - The effective tax rate for fiscal 2024 is expected to be in the range of approximately 20% to 22%[58] Strategic Initiatives - The acquisition of Gin Mare Brand, S.L.U. and related entities occurred in the third quarter of fiscal 2023, with adjustments made for transaction and integration costs[13] - The company authorized a share repurchase program of up to $400 million, completed as of December 31, 2023[47] - The company completed a $400 million share repurchase program as of December 31, 2023[52] - The transition to owned distribution in Japan is set for April 1, 2024, following a significant inventory build[45] - Capital expenditures are now planned to be between $230 million and $240 million[76] - A regular quarterly cash dividend of $0.2178 per share was declared, payable on April 1, 2024[74] Market Outlook - The company anticipates continued market expansion, particularly in emerging markets such as Mexico, Poland, and Brazil[25] - The company aims to provide guidance for organic change in certain measures, excluding the impact of foreign exchange fluctuations[22] - The company emphasizes the importance of understanding distributor inventory fluctuations, particularly in the U.S. market, to gauge customer demand[23] - Organic net sales are anticipated to be flat, with expected organic operating income growth in the range of 0% to 2%[75] - The company continues to face risks related to competition, consumer preferences, and economic conditions that could impact future performance[80] Cash Flow - Cash provided by investing activities was $63 million in 2024, a significant improvement from a cash used of $1,300 million in 2023[87]