Acquisitions and Sales - In fiscal 2020, the company acquired 100% of The 86 Company, which owns Fords Gin, and sold its Early Times, Canadian Mist, and Collingwood brands, resulting in a pre-tax gain of $127 million[73]. Financial Performance - Reported net sales for the six months ended October 31, 2020, were $1.7 billion, a decrease of 1% year-over-year, but underlying net sales grew 4% when excluding inventory changes and foreign exchange effects[96]. - Operating income increased by 19% to $717 million, with underlying operating income growing 11% after adjusting for certain gains and inventory changes[96]. - Diluted earnings per share rose by 20% to $1.17, benefiting from a $0.19 per share gain on the sale of certain brands[96]. - Reported net sales for the six months ended October 31, 2020, were $1.7 billion, a decrease of $16 million, or 1%, compared to the same period last year[130]. - Underlying net sales grew 4% for the six months ended October 31, 2020, driven by 15% volume growth, partially offset by 12% unfavorable price/mix[130]. - Gross profit for the three months ended October 31, 2020, was $581 million, a decrease of $38 million, or 6%, compared to the same period last year[134]. - Operating income for the three months ended October 31, 2020, was $330 million, a decrease of $22 million, or 6%, with an operating margin of 33.5%[141]. - Diluted earnings per share for the three months ended October 31, 2020, decreased 15% to $0.50 from $0.59 in the same period last year[145]. Market Performance - The largest developed international markets for the company include the United Kingdom, Germany, Australia, and France, which significantly contribute to net sales[79]. - Emerging markets such as Mexico, Poland, and Russia are also key contributors to the company's net sales of branded products[80]. - The United States reported a 3% increase in net sales, with underlying net sales growth of 9%, driven by premium bourbons and JD RTDs[105]. - Developed International markets saw a 10% increase in reported net sales, with underlying net sales also growing 10%, led by Australia, Germany, and France[106]. - Emerging markets experienced a 13% decrease in reported net sales, but underlying net sales remained flat, reflecting growth in Brazil, Mexico, and Poland[109]. - The Travel Retail channel reported a significant decline of 49% in net sales due to COVID-19 restrictions[104]. Cost and Expenses - Cost of sales for the six months ended October 31, 2020, increased 9% to $692 million compared to the same period last year[132]. - The underlying cost of sales increased 11% for the six months ended October 31, 2020, driven by 15% volume growth[132]. - Total operating expenses for the three months ended October 31, 2020, were $251 million, down $16 million, or 6%[136]. - The company expects overall operating expenses, particularly advertising investments, to accelerate significantly in the second half of fiscal 2021[102]. Tax and Guidance - The effective tax rate for the full year is expected to be in the range of 17% to 19%[103]. - The effective tax rate for the three months ended October 31, 2020, was 22.1%, up from 15.0% in the same period last year[143]. - The company is not providing quantitative guidance for fiscal 2021 due to uncertainties related to COVID-19 and its impact on various channels and markets[101]. Cash Flow and Dividends - Cash provided by operations increased by $96 million to $283 million for the six months ended October 31, 2020, reflecting lower working capital requirements[146]. - Cash and cash equivalents increased by $289 million during the six months ended October 31, 2020, totaling $964 million[151]. - The company declared a quarterly cash dividend of $0.1795 per share on November 19, 2020, payable on January 4, 2021[157]. Consumer Demand and Market Trends - Depletions, a measure of volume reflecting consumer demand, is used to assess performance, with a focus on shipments to retail and wholesale customers[88]. - Consumer takeaway data, provided by third parties, is utilized to estimate market share and trends in consumer demand[89]. - The ongoing COVID-19 pandemic continues to create economic uncertainty, impacting global operations and consumer behavior[93]. - Risks associated with acquisitions, market fluctuations, and changes in consumer preferences are highlighted as potential challenges for future performance[91]. - The Jack Daniel's family of brands contributed to underlying net sales growth, driven by JD RTDs and higher volumes of JDTH and Gentleman Jack[118]. - Reported net sales for Tequila brands grew 5%, while underlying net sales increased 13%, primarily due to higher volumes of New Mix[123]. - Reported net sales for the Wine business grew 15%, with underlying net sales increasing 11% driven by Korbel Champagne[125]. - Reported net sales for Finlandia declined 21%, with underlying net sales decreasing 20% due to COVID-19 impacts[126]. - The increase in underlying net sales growth for Jack Daniel's RTD/RTP was fueled by volumetric gains in the United States, Australia, and Germany[120]. - The underlying net sales decline for JDTW was attributed to lower volumes in Travel Retail and unfavorable channel mix due to COVID-19 restrictions[119].

Acquisition and Divestitures - In fiscal 2020, the company acquired 100% of The 86 Company, which owns Fords Gin, and sold its Early Times, Canadian Mist, and Collingwood brands, resulting in a one-time pre-tax gain of $127 million[66]. Impact of COVID-19 - The COVID-19 pandemic negatively impacted results, particularly in the on-premise channel, which represents nearly 20% of the business, and in Travel Retail due to travel bans[85]. - Despite the challenges from COVID-19, the company reported solid off-premise gains in developed markets, reflecting increased at-home consumption and strong growth in the e-premise channel[85]. - Emerging markets reported a 20% decline in net sales, with underlying sales down 3%, primarily due to adverse effects from COVID-19 in Russia and Southeast Asia[102]. - Travel Retail channel experienced a significant decline, with reported net sales down 59% and underlying net sales down 63% due to travel restrictions[106]. - The ongoing COVID-19 crisis has led the company to manage operating expenses closely and limit discretionary spending to preserve liquidity[140]. Financial Performance - Reported net sales for fiscal 2021 were $753 million, a decrease of 2% year-over-year, but underlying net sales grew by 3% after adjusting for distributor inventories[87]. - Operating income increased by 56% to $387 million, with underlying operating income growing 15% when excluding certain gains and inventory adjustments[87]. - Diluted earnings per share rose by 73% to $0.67, benefiting from a $0.19 per share gain on the sale of certain brands and a $0.08 per share tax item[87]. - Reported net sales for the three months ended July 31, 2020, were $753 million, a decrease of $13 million, or 2% compared to the same period last year[126]. - Underlying net sales grew 3% after adjusting for an estimated net decrease in distributor inventories, driven by 22% volume growth[126]. - Operating income increased by 56% to $387 million for the three months ended July 31, 2020, with underlying operating income growing 15%[133]. - Gross profit decreased by 7% to $465 million, with a gross margin of 61.7%, down 3.2 percentage points from the prior year[129]. - Operating expenses totaled $205 million, down 18% compared to the same period last year, with underlying operating expenses down 17%[130]. - The diluted earnings per share for the three months ended July 31, 2020, increased by 73% to $0.67 from $0.39 in the same period last year, benefiting from a $0.19 per share gain on the sale of Early Times, Canadian Mist, and Collingwood[135]. Market Trends and Consumer Demand - The largest developed international markets for the company include the United Kingdom, Germany, Australia, and France, while the largest emerging markets are Mexico, Poland, and Russia[71][72]. - The company defines "depletions" as a measure of volume that reflects consumer demand more accurately than shipments to distributors[80]. - Consumer takeaway data, which measures retail purchases, is used to estimate market share and trends, indicating how consumer demand is evolving[81]. - The United States led underlying net sales growth with a reported increase of 3% and an underlying growth of 9%, driven by strong demand for JD RTDs and premium bourbons[97]. - Developed International markets saw reported net sales increase by 13% and underlying net sales grow by 12%, with significant contributions from Australia, the UK, and Germany[98]. - The Jack Daniel's family of brands saw underlying net sales growth, primarily from JD RTDs and JDTH, despite declines in JDTW[112][113]. - Tequila brands reported flat net sales, but underlying net sales grew 16%, supported by higher volumes of New Mix due to COVID-19 related disruptions in the beer industry[118]. - Reported net sales for the Wine business grew 3%, while underlying net sales increased 10% driven by volumetric growth and higher prices of Korbel Champagne[120]. - Reported net sales for Finlandia declined 27%, with underlying net sales decreasing 24% due to COVID-19 impacts in Russia and Travel Retail[121]. Financial Strategy and Outlook - The company maintains a strong financial position with solid operating cash flow, no current or impending shareholder distributions beyond regular dividends, and no long-term debt maturities until fiscal 2023[86]. - The company expects gross margin to remain under pressure due to higher input costs and mix shifts, with no quantitative guidance provided for fiscal 2021[91]. - The effective tax rate for the full year is expected to be in the range of 17% to 19%[93]. - The effective tax rate decreased to 11.6% for the three months ended July 31, 2020, down from 18.2% in the same period last year, driven by a deferred tax benefit[134]. - The company has an $800 million commercial paper program, with outstanding balances increasing from $336 million in 2019 to $360 million in 2020, while the interest rate dropped from 2.56% to 0.93%[144]. - Cash provided by operations increased by $19 million to $91 million, primarily due to lower working capital requirements[136]. - Cash provided by investing activities was $162 million, an increase of $205 million compared to the same period last year, mainly from the divestiture of brands totaling $177 million[137]. - Cash and cash equivalents rose by $233 million during the three months ended July 31, 2020, reaching $908 million, with approximately 43% held by foreign subsidiaries[141]. - Cash used for financing activities increased to $37 million from $26 million in the same period last year, largely due to a decline in net proceeds from short-term borrowings[138]. - The company declared a regular quarterly cash dividend of $0.1743 per share on July 23, 2020, for stockholders of record on September 4, 2020[147]. - The company emphasizes the importance of the Jack Daniel's family of brands for continued growth and market presence[82]. - The company anticipates ongoing risks from health epidemics, foreign currency fluctuations, and changes in consumer preferences, which could impact future performance[82][83]. - The company plans to increase advertising investments and contribute $20 million to the Brown-Forman Foundation during fiscal 2021[92]. - The company maintains strong investment-grade credit ratings (A1 by Moody's and A- by Standard & Poor's), providing financial flexibility for future investment opportunities[139].

Market Presence and Sales - Jack Daniel's Tennessee Whiskey is the largest American whiskey brand globally and the fourth-largest premium spirits brand, with consistent volume growth over the past five years[9]. - The United States accounted for 50% of the company's net sales in fiscal 2020, with the remaining 50% from international markets[13]. - Approximately 30% of net sales for fiscal 2018, 2019, and 2020 occurred in the fourth calendar quarter, indicating seasonality in sales[18]. - The company operates in over 170 countries, with significant owned distribution in markets like Australia, Brazil, and the UK, launched in May 2020[16]. - The two largest customers, Republic National Distributing Company and Breakthru Beverage Group, accounted for approximately 18% and 13% of consolidated net sales in 2020, respectively[17]. - Jack Daniel's Tennessee Honey is the second-largest-selling flavored whiskey globally, highlighting the brand's strong market presence[9]. - The company has a diverse portfolio of over 40 brands, including premium offerings like Woodford Reserve and Old Forester, which have received industry recognition[9]. - The U.S. remains the largest market for the company, with growth driven by fast-growing spirits categories and inclusive marketing strategies[39]. - The company plans to expand sales of Jack Daniel's Tennessee Apple internationally as part of its long-term growth strategy[80]. Competition and Market Risks - The company faces competition from major global spirits companies, including Bacardi and Diageo, but maintains a strong competitive position due to brand awareness and product quality[18][19]. - Increased competition from small, local distilleries in the U.S. could negatively affect demand for the company's premium and super-premium whiskey brands, including Jack Daniel's[79]. - The company faces substantial competition in the spirits industry, including new entrants and consolidation among producers, which could hinder marketing and distribution efforts[95]. Financial Performance and Growth Strategy - The company expects continued growth in its premium spirits portfolio, focusing on organic growth and innovation, with a strategic emphasis on acquisitions and partnerships[31]. - Woodford Reserve surpassed one million nine-liter cases during fiscal 2020, indicating strong global growth potential for the brand[36]. - The Jack Daniel's family of brands continues to be the company's most valuable asset, contributing significantly to overall financial performance[35]. - The Jack Daniel's family of brands is the primary driver of revenue and growth, and any significant decline in its volume or selling price could negatively impact financial results[77]. Sustainability and Corporate Responsibility - The company aims to achieve a 15% reduction in absolute greenhouse gas emissions by 2023 from a 2012 baseline, supported by a wind power project expected to offset over 90% of its electricity usage in the U.S.[47]. - The company has achieved zero-waste at 14 of its owned facilities by the end of 2019, with a goal to send zero waste to landfill for all facilities by the end of 2020[47]. - The company integrates its Corporate Responsibility and Annual Reports to provide a comprehensive view of its business results alongside sustainability efforts[30]. - The company made a $2 million donation to the Republic Bank Foundation YMCA in fiscal 2019 to expand health and wellness resources in underserved communities[51]. - The company aims to expand civic engagement in global office locations, allowing employees to decide on charitable-giving resources[52]. - The Brown-Forman Foundation was created in fiscal 2018 to provide a consistent source of revenue for charitable giving independent of annual earnings[52]. Employee and Governance - Approximately 4,800 employees were employed worldwide as of April 30, 2020, with about 2,600 in the United States, and 14% of U.S. employees represented by a union[55]. - The company has a long-term-focused shareholder base, anchored by the Brown family, which provides a strategic advantage in capital allocation and investments for long-term growth[53]. - The Brown family controls a majority of the voting stock, which may lead to actions that do not align with the interests of other shareholders, potentially affecting stock price[119]. - The dual-class share structure allows the Brown family to maintain control, which could make the company less attractive as a takeover target, impacting stock value[120]. Regulatory and Economic Risks - The company is exposed to various risks, including health pandemics, regulatory changes, and fluctuations in foreign currency exchange rates, which could impact financial performance[5]. - The company is subject to extensive regulatory requirements that could increase costs or limit business activities, particularly in advertising and promotional activities[69]. - The company has observed excise tax increases in Australia, Poland, and the Czech Republic in fiscal 2020, which could affect product affordability and sales[76]. - Unfavorable economic conditions, such as those caused by the COVID-19 pandemic, could lead to decreased consumer confidence and spending, negatively impacting demand for products[71]. - The company is exposed to fluctuations in foreign currency exchange rates, which could materially affect financial results as foreign currency revenues exceed expenses[68]. Supply Chain and Production Risks - The company faces risks related to supply chain disruptions, particularly for its major brands distilled at single locations, which could impact product availability[83]. - The company acknowledges the inherent uncertainty in forecasting supply and demand for aged products, which could lead to inventory surplus or shortages[84]. - Higher costs or unavailability of key materials, such as glass and American white oak logs, could adversely affect production capabilities and financial results[87]. - The company is exposed to risks from geopolitical events, tariffs, and climate change that could impact raw material costs and availability[89][90]. Brand Protection and Legal Risks - Counterfeiting and inadequate protection of intellectual property rights pose risks to the company's business prospects, affecting brand equity and financial results[103]. - The company combats product counterfeiting through memberships in organizations like the Alliance Against Counterfeit Spirits (AACS) and React, although effectiveness varies by market[104]. - Product recalls due to contamination or quality issues could materially affect sales and the company's financial results[105]. - Legal disputes and litigation could expose the company to financial and reputational risks, impacting business operations and results[106]. - Increased IT security threats and cyberattacks pose risks to the security and availability of the company's IT systems, potentially harming business operations and financial results[112]. - Compliance with personal data protection laws, such as GDPR, may require costly changes to business practices and could result in fines or litigation, negatively affecting financial performance[113]. - Negative publicity, whether accurate or not, could adversely affect the company's corporate reputation and financial results[114]. Marketing and Brand Strategy - The company emphasizes creative marketing strategies to enhance brand recognition and consumer demand, aiming to be the best brand-builder in the industry[12].

Financial Performance - Reported net sales reached $2.7 billion, reflecting a 3% increase on both a reported and underlying basis compared to the same period last year[95] - Reported operating income was $904 million, a decrease of 1% on both a reported and underlying basis due to higher input and tariff-related costs[95] - Diluted earnings per share increased by 4% to $1.45, attributed to a lower effective tax rate and a reduction in non-operating postretirement expense[95] - Net sales for the three months ended January 31, 2020, were $899 million, a reported change of (0.6%) and an underlying change of 3% compared to the same period in 2019[96] - Gross profit for the nine months ended January 31, 2020, was $1,674 million, reflecting a reported change of (0.6%) and an underlying change of 3%[96] - Operating income for the three months ended January 31, 2020, was $304 million, a reported decrease of (5%) and an underlying increase of 5% compared to the same period in 2019[96] - Reported net sales for the nine months ended January 31, 2020, were $2.7 billion, an increase of $74 million, or 3%, compared to the same period last year[128] - Underlying net sales for the nine months increased 3%, driven by 2% volume growth and 1% price/mix, with significant contributions from the Jack Daniel's family of brands and Woodford Reserve[128] Market Performance - The United States led the underlying net sales growth, with contributions from both emerging and developed international markets, although there was a decline in the Travel Retail channel[95] - Reported net sales growth in the United States was 7%, with underlying net sales growth of 6% driven by premium bourbons and the launch of JDTA[103] - The United Kingdom experienced a reported net sales decline of (9%) and an underlying decline of (7%) due to reduced promotional activities[105] - Emerging markets reported a net sales increase of 4%, with underlying net sales growth of 6% led by Turkey, Russia, and China[109] - Travel Retail saw reported net sales decline of (4%) and an underlying decline of (3%) due to lower volumes of JDTW[111] Cost and Margin Analysis - Cost of sales for the nine months ended January 31, 2020, was $980 million, an increase of $84 million, or 9%, compared to the same period last year[130] - Underlying cost of sales increased 10%, driven by higher input costs of agave and wood, as well as tariff-related costs[130] - Gross margin for the three months ended January 31, 2020, was 61.9%, down from 63.1% in the prior year[131] - Gross margin decreased approximately 1.2 percentage points to 61.9% for the three months ended January 31, 2020, primarily due to increased input costs and foreign exchange effects[133] - Operating margin decreased 1.5 percentage points to 33.8% for the three months ended January 31, 2020, from 35.3% in the same period last year[144] Cash Flow and Expenses - Cash provided by operations was $509 million for the nine months ended January 31, 2020, down $68 million from the same period last year[149] - Cash used for investing activities was $111 million during the nine months ended January 31, 2020, compared to $86 million for the same period last year[150] - Total operating expenses for the three months ended January 31, 2020, totaled $253 million, an increase of $2 million, or 1%, compared to the same period last year[136] Tax and Earnings - The effective tax rate for the nine months ended January 31, 2020, was 19.2%, a decrease of (2.1) percentage points compared to the same period in 2019[96] - The effective tax rate for the three months ended January 31, 2020, was 18.6%, down from 20.3% for the same period last year[147] - Diluted earnings per share increased 2% to $0.48 for the three months ended January 31, 2020, compared to $0.47 for the same period last year[148] Product Performance - Underlying net sales growth was primarily driven by the Jack Daniel's family of brands, premium bourbon brands like Woodford Reserve, and tequila brands, with lower used barrel sales partially offsetting this growth[95] - Whiskey brands reported net sales growth of 4%, with underlying net sales growing 5% after adjusting for foreign exchange effects[116] - The launch of JDTA in the United States and JD RTDs in Germany contributed to the growth of the Jack Daniel's family of brands[116] - Tequila brands reported net sales growth of 9%, with underlying net sales increasing by 10% after adjusting for distributor inventory changes[119] - Reported net sales for Finlandia declined 8%, with underlying net sales decreasing 7% due to lower volumes and net prices in Poland[121] Outlook - The fiscal 2020 outlook indicates that underlying net sales growth is expected to be less than in fiscal 2019 due to global economic uncertainties and the impact of COVID-19[100]

Financial Performance - Reported net sales reached $1.8 billion, a 5% increase compared to the same period last year, with underlying net sales growth of 3% after adjusting for estimated net increase in distributor inventories[95] - Operating income was reported at $600 million, reflecting a 1% increase year-over-year; however, underlying operating income declined by 5% when excluding inventory changes and foreign exchange effects[95] - Diluted earnings per share increased to $0.97, a 5% rise compared to the previous year, attributed to higher operating income and a lower effective tax rate[95] - Net sales for the three months ended October 31, 2019, were $989 million, a reported increase of 9% and an underlying increase of 6% compared to the same period in 2018[96] - Operating income for the three months ended October 31, 2019, was $352 million, reflecting a 6% increase year-over-year[96] - Diluted earnings per share for the three months ended October 31, 2019, were $0.59, a 14% increase compared to $0.52 in the same period last year[96] - For the six months ended October 31, 2019, net sales were $1.8 billion, a 5% increase compared to the same period last year, with underlying net sales growing 3%[129] - Operating income for the six months ended October 31, 2019, was $600 million, an increase of $4 million or 1% year-over-year, while underlying operating income declined by 5%[146] - Effective tax rate decreased to 15.0% for the three months ended October 31, 2019, down from 19.5% in the same period last year[148] - Diluted earnings per share increased by 14% to $0.59 for the three months ended October 31, 2019, compared to $0.52 for the same period last year[149] Sales Performance by Category - The Jack Daniel's family of brands, premium bourbon brands like Woodford Reserve, and tequila brands drove underlying net sales growth, while declines in Jack Daniel's Tennessee Whiskey (JDTW) partially offset this growth[95] - Reported net sales in the United States increased by 10%, with underlying net sales growth of 6%, driven by the Jack Daniel's family of brands and premium bourbons[102] - Reported net sales in Emerging markets increased by 4%, with underlying net sales growth of 5%, led by Russia, China, and Mexico[106] - Travel Retail reported a net sales decline of 9%, with underlying net sales down 8% due to lower volumes of the Jack Daniel's family of brands[110] - Non-branded and bulk sales saw a significant decline of 21% in both reported and underlying net sales[111] - JDTF's underlying net sales growth was 6%, driven by increased volumes in Brazil and Poland, partially offset by lower volumes in Travel Retail[119] - Reported net sales for tequila brands grew 10%, while underlying net sales increased 11% after adjusting for distributor inventories and foreign exchange effects[120] - Reported net sales for Finlandia declined 8%, with underlying net sales decreasing 7% due to lower volumes and net prices in Poland[121] - Underlying net sales for wine brands increased 2%, driven by volume growth of Sonoma-Cutrer and Korbel Champagne in the United States[122] - The rest of the portfolio reported a 15% increase in net sales, with underlying net sales growing 1% after accounting for foreign exchange and acquisitions[123] Cost and Expenses - Cost of sales increased 15% to $370 million for the three months ended October 31, 2019, with underlying cost of sales rising 16% due to tariff-related costs and higher input costs[130] - Gross profit for the three months ended October 31, 2019, was $619 million, a 5% increase, but underlying gross profit remained flat[133] - Operating expenses totaled $267 million, up 4% for the three months ended October 31, 2019, with underlying operating expenses also growing 4%[137] - Operating margin decreased by 0.9 percentage points to 35.6% for the three months ended October 31, 2019, compared to 36.5% in the same period last year[145] - Operating income increased 6% to $352 million for the three months ended October 31, 2019, but underlying operating income declined 3%[144] Cash Flow and Investments - Cash provided by operations was $187 million for the six months ended October 31, 2019, a decrease of $85 million from $272 million in the same period last year[150] - Cash used for investing activities increased to $75 million for the six months ended October 31, 2019, primarily due to the acquisition of The 86 Company for $22 million[151] - Cash used for financing activities decreased to $183 million for the six months ended October 31, 2019, compared to $243 million in the same period last year[152] - Quarterly cash dividend increased from $0.1660 to $0.1743 per share, effective January 2, 2020[161] - Cash and cash equivalents decreased from $307 million at April 30, 2019, to $235 million at October 31, 2019[156] - The company maintains a $800 million commercial paper program, with outstanding commercial paper of $156 million as of October 31, 2019[157] Market and Strategic Developments - The United States was the leading contributor to underlying net sales growth, with emerging and developed international markets also making significant contributions[95] - Tariff-related costs negatively impacted results, leading to lower net sales and higher cost of sales due to increased inventory costs in markets where the company owns inventory[94] - The company experienced timing-related impacts from tariffs, with prior-year tariff-related buy-ins affecting net sales in the first quarter of fiscal 2019[94] - The Travel Retail channel saw a decline in underlying net sales, influenced by the timing of customer orders compared to the same period last year[95] - The company acquired The 86 Company for $22 million in cash, which is expected to enhance its product offerings[75] - The company utilizes non-GAAP measures to provide a clearer understanding of its performance, including adjustments for acquisitions, foreign exchange, and distributor inventory changes[78] - The company plans to continue expanding its product offerings and market presence, particularly with the launch of new products like JDTA[102]

Financial Performance - Reported net sales for the three months ended July 31, 2019, were $766 million, flat on both a reported and underlying basis compared to the same period last year[91]. - Operating income decreased by 6% to $248 million compared to the same period last year; underlying operating income declined 8% when excluding foreign exchange effects and estimated net change in distributor inventories[91]. - Diluted earnings per share were $0.39, a decrease of 6% compared to the same period last year, attributed to the decline in reported operating income[91]. - For the three months ended July 31, 2019, reported net sales were $766 million, unchanged from the previous year, while gross profit decreased by 5% to $498 million[93]. - Operating income for the same period was $248 million, reflecting a 6% decline year-over-year, with operating expenses totaling $250 million, a decrease of 3%[93]. - Reported net sales of $766 million for the three months ended July 31, 2019, were flat compared to the same period last year, with underlying net sales reflecting a decline of 1% due to lower volumes and unfavorable price/mix[123]. - Gross profit decreased by $25 million, or 5%, to $498 million for the three months ended July 31, 2019, with a gross margin of 64.9%, down from 68.2% in the prior year[128]. - Operating income of $248 million decreased by $16 million, or 6%, for the three months ended July 31, 2019, with an underlying operating income decline of 8%[133]. - Cash provided by operations was $72 million during the three months ended July 31, 2019, a decrease of $54 million compared to $126 million for the same period last year[139]. - Total operating expenses decreased by $9 million, or 3%, to $250 million for the three months ended July 31, 2019, with underlying operating expenses down 2%[130]. - Diluted earnings per share decreased by 6% to $0.39 for the three months ended July 31, 2019, compared to $0.41 for the same period last year[137]. Market Performance - Growth in the United States and emerging markets was offset by declines in developed international markets and Travel Retail, primarily due to prior-year tariff-related buy-ins and costs[91]. - In the United States, reported net sales increased by 6%, with underlying net sales growth of 4%, driven by premium bourbons and the Jack Daniel's family of brands[97]. - Developed International markets saw a reported net sales decline of 5%, with underlying net sales down 3%, primarily due to the United Kingdom and Germany[98]. - Emerging markets reported a 1% increase in net sales, with underlying net sales growing by 3%, led by Russia and China[102]. - The Jack Daniel's family of brands experienced a 1% decline in reported net sales, with underlying net sales also down by 1%[111]. - Woodford Reserve saw significant growth, with reported net sales increasing by 22% and underlying net sales up by 15%[110]. - Tequila brands reported a 9% increase in net sales, with underlying net sales growing by 12%[116]. - Non-branded and bulk sales declined by 22% in reported net sales, with underlying net sales down 21%[107]. Tariff Impact - Underlying net sales growth was reduced by approximately three percentage points due to prior-year tariff-related buy-ins and tariff-related costs[91]. - Tariffs negatively impacted results, leading to lower net sales and higher cost of sales due to increased costs being passed on to customers[90]. - The company anticipates continued negative impacts from tariffs as long as they remain in place[90]. Tax and Dividend - The effective tax rate for the period was 17.4%, a slight improvement from 18.2% in the previous year[93]. - The effective tax rate increased to 18.2% for the three months ended July 31, 2019, compared to 17.4% for the same period last year[136]. - The company declared a regular quarterly cash dividend of $0.166 per share on July 25, 2019, payable on October 1, 2019[148]. Non-GAAP Measures - The company uses non-GAAP measures to provide a clearer understanding of performance, adjusting for foreign exchange and estimated net changes in distributor inventories[74]. - The company emphasizes the importance of consumer takeaway data as a leading indicator of consumer demand trends[85]. Cash Flow and Investment - Cash used for investing activities increased to $43 million during the three months ended July 31, 2019, primarily due to the acquisition of The 86 Company for $22 million[140]. - The average daily commercial paper outstanding decreased from $463 million in the prior year to $336 million for the three months ended July 31, 2019[149].

Market Position and Sales - Jack Daniel's Tennessee Whiskey is the largest American whiskey brand globally and the fourth-largest spirits brand overall, with consistent volume growth over the past five years[7]. - The United States accounted for 47% of the company's net sales in fiscal 2019, while international markets contributed 53%[11]. - In fiscal 2019, approximately 31% of net sales occurred in the fourth calendar quarter, highlighting seasonality in sales[18]. - The company operates in over 170 countries, with significant markets including the United Kingdom, Mexico, Australia, Germany, France, Poland, Russia, Japan, and Brazil[11]. - The Jack Daniel's family of brands is the primary driver of the company's revenue and growth, with significant reliance on its brand reputation for authenticity and quality[83]. - The company expects significant contributions to growth from emerging markets including Africa, Brazil, China, and Turkey[41]. Product Innovation and Development - The company aims to grow its premium spirits portfolio organically and through innovation, while also considering acquisitions and partnerships for further growth[32]. - The company plans to introduce Jack Daniel's Tennessee Apple in the fall of 2019, continuing its product innovation strategy[34]. - Woodford Reserve is the leading super-premium American whiskey globally, with expected continued growth as bourbon interest rises[35]. - Herradura Ultra surpassed 90,000 nine-liter cases in fiscal 2019, indicating strong growth in the ultra-premium tequila segment[39]. - The company plans to continue the global growth of the Jack Daniel's family of brands, specifically aiming to grow Jack Daniel's Tennessee Honey sales and launch Jack Daniel's Tennessee Apple in the U.S. in fiscal 2020[85]. Environmental and Social Responsibility - The company aims to reduce absolute greenhouse gas emissions by 15% and water use by 30% by fiscal 2023, compared to 2012 metrics[54]. - In fiscal 2019, the company made charitable donations of $7.4 million and logged approximately 15,000 volunteer hours[59]. - The Brown-Forman Foundation was created with a contribution of $70 million in fiscal 2018, distributing $2.5 million in charitable contributions in fiscal 2019[59]. Workforce and Corporate Governance - Approximately 4,700 employees were employed worldwide as of April 30, 2019, with 15% of U.S. employees represented by a union[62]. - The company emphasizes building a strong, agile workforce with a focus on diversity and inclusion to support its growth strategy[31]. - Attracting and retaining key talent is critical for the company's success, with potential impacts from labor market dynamics[120]. - The Brown family controls a majority of the voting stock, which may lead to decisions that do not align with the interests of other shareholders[123]. Competition and Market Challenges - The company has maintained a strong competitive position in the premium spirits market despite facing competition from major global brands[20]. - The company faces significant competition from a growing number of small, local distilleries in the U.S., which could negatively impact demand for its premium and super-premium brands, including Jack Daniel's[84]. - The company is experiencing a competitive pricing environment, with competitors potentially having more flexibility to adjust to market conditions[105]. - Unfavorable economic conditions could lead to increased taxes on beverage alcohol, reducing consumer willingness to purchase premium brands[76]. Regulatory and Legal Risks - Changes in laws and regulations regarding advertising and promotional activities could limit market opportunities and increase costs[74]. - The company is subject to extensive regulatory requirements that could increase operational costs and impact growth in affected markets[74]. - The Tax Cuts and Jobs Act has significantly revised U.S. corporate income tax rates, impacting the company's financial results[79]. - The company remains subject to risks of corruption in certain markets, which could lead to legal and financial repercussions[71]. - Compliance with various laws, including anti-money laundering and data protection regulations, poses ongoing risks for the company[114]. Financial and Operational Risks - The company is exposed to foreign currency exchange rate fluctuations, which can adversely affect financial results due to net exposure from foreign currency revenues exceeding expenses[71]. - The company does not attempt to hedge all foreign currency exposure, which may lead to unmitigated risks from currency fluctuations[71]. - A significant decline in the volume or selling price of Jack Daniel's products could negatively impact the company's financial results[83]. - There is an inherent risk of forecasting imprecision in determining the quantity of aged and maturing products to produce, which could lead to inventory surplus or shortages[91]. - The company relies heavily on the availability of raw materials, and disruptions in supply could adversely affect production capabilities and financial results[94]. - Disruptions in the distribution network or fluctuations in inventory levels could negatively affect sales and financial results[104]. Intellectual Property and Cybersecurity - The company has registered trademarks globally, focusing on markets where it sells or plans to sell its products, to protect its intellectual property[24]. - The company faces challenges in protecting its intellectual property rights globally, with varying success in different markets[110]. - Counterfeiting and trademark infringement are significant issues for the spirits industry, potentially harming brand equity and financial results[111]. - Cybersecurity threats and IT system failures could materially impact business operations and financial results[115]. - The company relies heavily on IT systems for various business functions, making it vulnerable to disruptions[116]. - Changes in personal data protection laws, such as GDPR, could lead to increased costs and operational challenges[119].

Financial Performance - For the nine months ended January 31, 2019, the company reported net sales of $2,515 million, consistent with previously reported figures[112]. - The gross profit for the same period was $1,690 million, indicating stable performance[112]. - Operating income for the nine months was reported at $901 million, reflecting a slight increase from prior adjustments[112]. - The company’s net income for the nine months was $607 million, unchanged from prior reports[112]. - The company reported net sales of $2.6 billion for the nine months ended January 31, 2019, representing a 3% increase year-over-year, with underlying net sales growth of 5% after adjusting for foreign exchange and other factors[118]. - Operating income for the same period was $916 million, a 2% increase compared to the previous year, with underlying operating income growth of 4%[118]. - Diluted earnings per share increased by 12% to $1.40, driven by a lower effective tax rate and increased operating income[118]. - For the nine months ended January 31, 2019, net sales were $2.6 billion, an increase of $65 million, or 3%, compared to the same period last year[143]. - Underlying net sales grew 5% after adjusting for foreign exchange effects, estimated net increase in distributor inventories, and the adoption of the revenue recognition accounting standard[143]. - Gross profit for the three months ended January 31, 2019 was $571 million, a decrease of $16 million, or 3%, compared to the same period last year[151]. - Operating income for the three months ended January 31, 2019 was $320 million, an increase of $14 million, or 4%, compared to the same period last year[161]. - Diluted earnings per share for the three months ended January 31, 2019 increased 20% to $0.47 from $0.39 reported for the same period last year[168]. - Cost of sales for the nine months ended January 31, 2019 increased $71 million, or 9%, to $896 million compared to the same period last year[147]. - Gross margin for the nine months ended January 31, 2019 decreased approximately 1.9 percentage points to 65.3% from 67.2% in the same period last year[154]. - The effective tax rate in the nine months ended January 31, 2019 was 19.2%, down from 28.5% for the same period last year[167]. - Underlying operating income grew 4% for the nine months ended January 31, 2019, driven by factors contributing to the growth in underlying gross profit[163]. Market Performance - The largest developed international markets include the United Kingdom, Australia, and Germany, contributing significantly to net sales[99]. - Emerging markets, particularly Mexico and Poland, are also highlighted as key growth areas for branded products[100]. - The company emphasizes the importance of "depletions" as a measure of consumer demand, reflecting shipments to retail and wholesale customers[107]. - Consumer takeaway data is used to estimate market share and trends, derived from third-party sources like Nielsen[108]. - Emerging markets led the underlying net sales growth, while the U.S. market also contributed meaningfully[118]. - In the United States, underlying net sales increased by 4%, supported by growth from brands like Woodford Reserve and Old Forester, despite declines from Canadian Mist[1]. - Developed International reported flat net sales, but underlying net sales grew by 4%, led by Germany, Australia, and the United Kingdom, with tariff-related costs reducing growth by approximately 2%[1]. - Emerging markets saw reported net sales increase by 3% and underlying net sales grow by 10%, with significant contributions from Mexico, Brazil, and China[1]. - Jack Daniel's family of brands experienced underlying net sales growth, particularly in international markets, despite flat results in the U.S. due to modest volume declines[137]. - Woodford Reserve led premium bourbon growth with a 24% increase in underlying net sales, primarily in the U.S.[139]. - Tequila brands reported an 8% increase in net sales, with underlying net sales growing by 13%, driven by strong performance in the U.S. and Mexico[139]. - Finlandia vodka reported a 9% decline in net sales, with underlying net sales down 7% due to unfavorable product mix and lower volumes in key markets[139]. Costs and Expenses - Advertising expenses totaled $308 million, after reclassifications, showing a reduction from previous reports[112]. - The company faced incremental costs associated with tariffs, which negatively impacted underlying net sales growth by approximately one percentage point[118]. - The company anticipates that underlying cost of sales will grow at a significantly higher rate than net sales for the remainder of fiscal 2019 due to tariff-related costs and input cost increases in the high single digits[125]. - Tariffs imposed by the European Union, Mexico, Canada, Turkey, and China have resulted in increased costs, with American whiskey facing a 25% tariff in the EU and Mexico, and a 30% tariff in China[117]. - The company expects the growth rate for underlying operating income in fiscal 2019 to decelerate compared to fiscal 2018 due to tariff costs[126]. Cash Flow and Liquidity - Cash and cash equivalents increased by $21 million during the nine months ended January 31, 2019, compared to an increase of $105 million for the same period last year[170]. - Cash provided by operations was $577 million during the nine months ended January 31, 2019, slightly down from $582 million for the same period last year[170]. - Cash used for investing activities decreased to $86 million during the nine months ended January 31, 2019, from $121 million in the same period last year, reflecting a $35 million decline[171]. - Cash used for financing activities increased to $458 million during the nine months ended January 31, 2019, compared to $380 million for the same period last year, primarily due to a $205 million increase in share repurchases[172]. - The company declared a regular quarterly cash dividend of $0.166 per share on Class A and Class B common stock, payable on April 1, 2019[179]. - The share repurchase program authorized up to $200 million, completed in November 2018, resulting in the repurchase of 4,186,603 shares[181]. - As of January 31, 2019, approximately $210 million of cash and cash equivalents were held by foreign subsidiaries, with $120 million repatriated to the U.S. during the fiscal quarter[178]. - The average interest rate on commercial paper borrowings was 2.27% during the nine months ended January 31, 2019, with borrowings averaging $462 million[175]. - The company maintains a conservative liquidity management strategy to meet obligations and fund capital expenditures while returning cash to shareholders[174]. Risk Management - The company utilizes non-GAAP measures to assess underlying changes in financial performance, adjusting for foreign exchange and inventory changes[97]. - The company is exposed to market risks from foreign exchange rates, commodity prices, and interest rates, managed through various strategies including hedging[183].