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 For the transition period from _______________ to _______________ Commission File No. 001-00123 Brown-Forman Corporation (Exact name of Registrant as specified in its Charter) 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 (+5% organic), with an operating margin decrease of 300 basis points to 29.3%[9]. - 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]. - Basic earnings per share for the nine months ended January 31, 2025, were $1.53, a 4% decline from $1.59[21]. - Total net sales decreased by 4% compared to the prior-year period, with organic growth at 2%[33]. Gross Profit and Margins - 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]. - Gross margin decreased to 59.4% from 60.9% year-over-year[21]. Dividends and Shareholder Returns - The company has paid regular quarterly cash dividends for 81 consecutive years and increased the regular dividend for 41 consecutive years[10]. - Cash dividends paid per common share increased to $0.6621 from $0.6288[21]. Market Performance - The Tequila portfolio net sales declined 15% (-13% organic), impacted by a competitive environment in the U.S. and challenging macroeconomic conditions in Mexico[7]. - The United States market reported a 5% decline in net sales, while emerging markets showed a 4% decline[33]. - Non-branded and bulk sales surged by 38%, contributing to a 39% organic growth[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[30]. - Ready-to-Drink segment experienced a 4% increase in shipments, with New Mix growing by 11%[30]. - The overall portfolio's total volume was 35.7 million 9-liter cases, a slight decrease of 1%[30]. Cost Management and Operational Changes - Operating income increased by 7%, 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]. Tax and Financial Guidance - The forecasted effective tax rate range has been updated to approximately 20% to 22% from 21% to 23%[11]. - Organic net sales growth is expected in the 2% to 4% range for fiscal 2025[14]. - Capital expenditures are planned to be in the range of $180 to $190 million[14]. Cash Flow and Assets - Cash provided by operating activities increased to $446 million from $362 million[25]. - Total current assets rose to $4,279 million, up from $4,036 million[23]. - Total liabilities decreased to $4,248 million from $4,649 million[23]. Inventory and Market Analysis - Estimated net change in distributor inventories increased by 4% in both the United States and Developed International markets[34]. - The company calculates "estimated net change in distributor inventories" to understand the relationship between shipments and actual consumer demand[57]. - A positive difference in estimated net change indicates a net increase in distributor inventories, potentially leading to decreased organic trends[57]. - The company emphasizes the importance of understanding changes in distributor inventories in the context of operating results[57]. Strategic Insights - The company uses non-GAAP measures like "organic change" to assess performance, excluding foreign exchange fluctuations to provide a clearer view of business trends[47]. - The company aggregates markets by economic development stage, with top developed international markets including Germany, Australia, and the UK[50]. - The company's top emerging markets include Mexico, Poland, and Brazil, reflecting its net sales strategy[54]. - Consumer takeaway data, sourced from Nielsen and NABCA, is used to estimate market share and consumer demand trends[57]. - The "Rest of Portfolio" category now includes Wine and Vodka due to recent divestitures, affecting fiscal 2024 comparisons[52].

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 divested the Finlandia vodka business for $196 million and the Sonoma-Cutrer wine business for $50 million cash plus a 21.4% stake in Duckhorn, negatively impacting net sales and operating income[121][122]. Financial Performance - For the six months ended October 31, 2024, the company reported net sales of $2.0 billion, a decrease of 5% compared to the same period last year[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, 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 prior year[123]. - The decline in net sales was attributed to lower volumes, negative effects from foreign exchange, and the impact of divestitures, partially offset by favorable price/mix[123]. - For the six months ended October 31, 2024, net sales were $2.0 billion, a decrease of $100 million, or 5% compared to the prior year, driven by lower volumes and the negative effect of acquisitions and divestitures[152]. - 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]. - The overall organic change in net sales for the six months was flat, with a 3% increase in price/mix offsetting declines in volume[151]. Geographic Sales Performance - The top developed international markets contributing to net sales included Germany, Australia, the United Kingdom, France, Canada, and Spain[97]. - 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]. - Brazil's net sales increased 31%, driven by higher volumes across the portfolio, particularly JDTW, JDTA, and JDTH[133]. - 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]. - Germany's net sales declined 2%, driven by lower volumes of JDTW and JD RTDs, partially offset by the positive contribution from Diplomático[129]. - Spain's net sales declined 12%, primarily due to lower volumes of JDTW, partially offset by the positive contribution from Diplomático[131]. Cost and Expenses - Advertising expenses decreased by 7% to $252 million for the six months ended October 31, 2024[125]. - For the three months ended October 31, 2024, cost of sales increased by $12 million, or 3%, totaling $449 million, primarily due to unfavorable cost/mix and higher volumes[155]. - Gross profit for the same period decreased by $24 million, or 4%, to $646 million, with a gross margin decline to 59.1% from 60.6% year-over-year[160]. - 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]. - Operating income for the three months ended October 31, 2024, was $341 million, an increase of $2 million, or 1%, with an operating margin of 31.1%[169]. Tax and Cash Flow - The effective tax rate for the six months 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 same period last year[171]. - 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]. - Cash used for investing activities decreased to $21 million from $61 million in the same period last year, primarily due to a $38 million increase in proceeds from asset sales[184]. - Cash used for financing activities increased to $129 million from $23 million in the prior-year period, largely due to a $137 million decrease in net proceeds from short-term borrowings[185]. - 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 continued challenges from competition, consumer preferences, and economic conditions impacting future performance[120]. - 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]. 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]. - There have been no material changes to the market risks or risk management program since April 30, 2024[188]. Miscellaneous - The company aims to enhance understanding of historical financial performance through non-GAAP measures, which are useful for comparing performance across periods[95]. - The company uses consumer takeaway data to estimate market share and trends, which is considered a leading indicator of consumer demand[112]. - The estimated net change in distributor inventories is calculated to understand the impact of distributor sales on organic trends, indicating potential increases or decreases in inventory levels[115]. - The company aggregated the "Wine" and "Vodka" product categories with "Rest of Portfolio" starting in fiscal 2025 due to recent divestitures[102]. - The company plans to continue dividend payments, with details available in the financial statements[186].

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% decline on an organic basis[2]. - Gross profit declined 8% (-4% organic) primarily due to divestitures, with gross margin contracting 240 basis points to 59.2%[5][14]. - Net sales for the Tequila portfolio declined 17% (-17% organic), with el Jimador's net sales down 16% and Herradura's down 14%[7]. - The Travel Retail channel's net sales declined 5% (-3% organic), impacted by lower volumes and divestitures[13]. - Net sales for 2023 were $1,107 million, a decrease of 1% compared to $1,095 million in 2024[28]. - Gross profit decreased by 4% from $671 million in 2023 to $646 million in 2024[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]. - 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]. - Organic net sales decreased by 3% due to foreign exchange impacts and acquisitions[41]. Dividends and Taxation - The quarterly cash dividend was increased by 4% to $0.2265 per share, marking the 41st consecutive year of dividend increases[18][19]. - The effective tax rate is expected to be in the range of approximately 21% to 23%[21]. - The effective tax rate increased from 22.0% in 2023 to 17.6% in 2024[28]. - Cash dividends paid per common share increased from $0.2055 in 2023 to $0.2178 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]. 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 international market gains and normalizing inventory trends[20]. - The company plans to continue focusing on market expansion and new product development strategies[39]. Market Performance - Emerging markets saw a 6% organic 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]. - Estimated net change in distributor inventories for the United States was 3%, while travel retail saw a decrease of 1%[43]. - Top developed international markets include Germany, Australia, the UK, France, Canada, and Spain, while top emerging markets are Mexico, Poland, and Brazil[63]. Business Transactions - The company recognized a pre-tax gain of $175 million from the sale of the Sonoma-Cutrer wine business[51]. - The divestiture of the Finlandia vodka business resulted in a pre-tax gain of $92 million[50]. - 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]. Inventory and Consumer Insights - 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 estimated net change in distributor inventories is calculated to understand the impact of inventory changes on organic trends, with positive differences indicating potential decreases in organic trends[79]. - Consumer takeaway data, provided by external parties, is used to estimate market share and trends, reflecting actual consumer demand[77]. - The company aggregates markets by economic development stage and brands by beverage alcohol category to explain operational results and highlight trends[61].

Divestitures and Acquisitions - 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.[57] - The divestiture of the Finlandia vodka business resulted in a pre-tax gain of $92 million during fiscal 2024[58] - The company acquired Gin Mare Brand, S.L.U. in fiscal 2023, with adjustments related to earn-out contingent consideration liabilities[57] - The company divested the Finlandia vodka business for $196 million and the Sonoma-Cutrer wine business for $50 million cash, impacting gross margin negatively[74] Financial Performance - For the three months ended July 31, 2024, net sales were $1.0 billion, a decrease of 8% compared to the same period last year, driven by lower volumes and the negative effects of acquisitions and divestitures[75] - Gross profit for the same period was $565 million, a decrease of $86 million or 13%, with gross margin declining to 59.4% from 62.7%[75] - Operating income decreased by 14% to $281 million, impacted by input cost fluctuations and the effects of divestitures[75] - Diluted earnings per share were $0.41, down 14% from $0.48 in the prior year[75] - Operating income totaled $281 million, a decrease of $46 million, or 14%, with an operating margin decrease to 29.6% from 31.5% in the same period last year[104] - Diluted earnings per share decreased 14% to $0.41 from $0.48 reported for the same period last year, primarily due to the decrease in operating income[105] - Gross profit was $565 million, a decrease of $86 million, or 13%, with gross margin decreasing 3.3 percentage points to 59.4%[100] Market Performance - The United States market saw a 5% decline in net sales, primarily due to lower volumes from JDTW and el Jimador[80] - The United Kingdom experienced a significant 21% decline in net sales, attributed to lower volumes and prior-year buy-in ahead of an excise tax increase[81] - Brazil's net sales increased by 18%, driven by higher volumes across the portfolio, particularly from JDTA, JDTW, and JDTH[83] - Travel Retail's net sales declined 11% due to lower volumes of super-premium Jack Daniel's expressions and the Finlandia divestiture[84] Operational Metrics - The company uses "depletions" as a key metric to measure consumer demand, reflecting sales from distributors to retailers[67] - Estimated net change in distributor inventories is calculated to understand the impact of inventory changes on organic trends[69] - The company aggregates markets by economic development stages and brands by beverage alcohol categories for performance analysis[62][64] - The "Rest of Portfolio" category now includes brands like Gin Mare and excludes divested brands, reflecting changes in the product lineup[64] Cost and Expenses - Gross margin decreased by 3.3 percentage points, largely due to high inventory levels and the timing of input cost fluctuations[75] - Advertising expenses decreased by 4% due to lower spending on Jack Daniel's and Coca-Cola RTD compared to the prior-year period[102] - SG&A expenses decreased by 6% driven by lower compensation-related expenses and discretionary spending[102] Future Projections - Fiscal 2025 organic net sales growth is expected to be in the range of 2% to 4%[106] - Fiscal 2025 organic operating income growth is also anticipated to be in the range of 2% to 4%[106] - The effective tax rate for fiscal 2025 is projected to be approximately 21% to 23%[106] - Planned capital expenditures for fiscal 2025 are estimated to be between $195 million and $205 million[106] Cash and Financing - Cash and cash equivalents were $446 million at April 30, 2024, and decreased to $416 million at 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 average interest rate on commercial paper increased from 5.27% in 2023 to 5.52% in 2024[107] - The company has a $900 million commercial paper program to fund short-term operational needs[110] - Approximately 41% of cash and cash equivalents were held by foreign subsidiaries, with plans to potentially repatriate additional cash[109]

Financial Performance - Net sales decreased 8% to $1.0 billion (-4% organic) in Q1 fiscal 2025 compared to the prior year period[1] - Operating income declined 14% to $281 million (-13% organic) and diluted EPS decreased 14% to $0.41[1] - Gross profit declined 13% (-8% organic) with gross margin down 330 basis points to 59.4%[9] - Net sales decreased by 8% to $951 million in Q2 2024 compared to $1,038 million in Q2 2023[19] - Gross profit declined by 13% to $565 million in Q2 2024 from $651 million in Q2 2023[19] - Net income dropped by 16% to $195 million in Q2 2024 from $231 million in Q2 2023[19] - Operating income decreased by 14% to $281 million in Q2 2024 from $327 million in Q2 2023[19] - Gross margin fell to 59.4% in Q2 2024 from 62.7% in Q2 2023[19] - Operating margin declined to 29.6% in Q2 2024 from 31.5% in Q2 2023[19] - Cash and cash equivalents decreased to $416 million in Q2 2024 from $446 million in Q2 2023[21] - Accounts receivable increased to $806 million in Q2 2024 from $769 million in Q2 2023[21] - Inventories rose to $2,596 million in Q2 2024 from $2,556 million in Q2 2023[21] - Cash provided by operating activities decreased to $17 million in Q2 2024 from $38 million in Q2 2023[22] - Total portfolio depletions decreased by 9% to 10.9 million cases, with net sales declining by 8% on a reported basis and 4% organically[26] - Jack Daniel's Family depletions fell by 8% to 7.1 million cases, with net sales down 8% reported and 4% organically[26] - Ready-to-Drink category depletions dropped by 9% to 4.9 million cases, with net sales declining 12% reported and 4% organically[26] - Tequila category depletions decreased by 21% to 0.5 million cases, with net sales down 23% both reported and organically[26] - United States net sales declined by 5% reported and 4% organically, while Developed International markets saw a 9% reported and 6% organic decline[28] - Emerging markets net sales fell by 16% reported but only 5% organically, with Brazil showing strong growth of 18% reported and 29% organically[28] - Estimated net change in distributor inventories showed a 3% increase in the United States and a 4% increase in Developed International markets[30] Product Performance - Whiskey net sales decreased 5% (-3% organic), led by lower Jack Daniel's Tennessee Whiskey volumes[4] - Tequila portfolio net sales declined 23% (-23% organic), with el Jimador down 26% (-26% organic)[4] - Ready-to-Drink portfolio net sales declined 12% (-4% organic), with Jack Daniel's RTD/RTP down 13% (-2% organic)[5] - US net sales declined 5% (-4% organic), with Jack Daniel's Tennessee Whiskey, el Jimador and Korbel leading the decrease[5] - Developed International markets net sales declined 9% (-6% organic), led by lower Jack Daniel's volumes[6] - Emerging markets net sales declined 16% (-5% organic), impacted by foreign exchange and Finlandia divestiture[8] - Diplomático brand shipments increased by 84% with net sales growth of 142% reported and 134% organically[26] - Non-branded and bulk sales grew by 27% both reported and organically[26][28] - Old Forester brand shipments increased by 7% with net sales growth of 16% both reported and organically[26] Market Performance - Developed International markets include Germany, Australia, the UK, France, Canada, and Spain, representing net sales of branded products[43] - Top emerging markets include Mexico, Poland, and Brazil, with Brazil also encompassing Uruguay, Paraguay, and surrounding territories[43] - Travel Retail represents net sales to global duty-free customers, travel retail customers, and the U.S. military[43] Category Definitions - Whiskey category includes Jack Daniel's family of brands, Woodford Reserve, Old Forester, and others, with American whiskey and super-premium American whiskey as subcategories[45][46] - Ready-to-Drink (RTD) category includes Jack Daniel's RTD/RTP products, New Mix, and other RTD/RTP products, with Jack Daniel's & Coca-Cola RTD as a specific subcategory[46] - Tequila category includes el Jimador, Herradura, and other tequilas, while Rest of Portfolio includes divested brands like Sonoma-Cutrer and Finlandia[47] Operational and Strategic Updates - Jack Daniel's Country Cocktails production fully transitioned to Pabst Brewing Company in fiscal 2024, removing non-comparable operating activity related to Brown-Forman-produced products for fiscal 2024 and 2025[38] - Recognized a $13 million franchise tax refund in Q1 fiscal 2025 due to a change in Tennessee franchise tax calculation methodology, retroactively applied to fiscal 2020-2023[38] Data and Methodology - Consumer takeaway data, sourced from Nielsen and NABCA, measures consumer purchases from retail outlets and e-commerce channels, reflecting demand trends[50] - Estimated net change in distributor inventories calculated by comparing organic dollar amounts to depletion volumes, indicating potential inventory adjustments[51] Outlook - Fiscal 2025 outlook expects organic net sales growth of 2-4% and organic operating income growth of 2-4%[13]

Financial Performance - For the fiscal year ended April 30, 2024, net sales were $4,178 million, a decrease of 1.2% compared to $4,228 million in 2023[36] - Gross profit for the same period was $2,526 million, reflecting an increase of 1.3% from $2,494 million in 2023[36] - Operating income increased to $1,414 million in 2024, up 25.5% from $1,127 million in 2023[36] - Net income for the fiscal year 2024 was $1,024 million, representing a 30.9% increase from $783 million in 2023[36] - Basic earnings per share rose to $2.15 in 2024, compared to $1.63 in 2023, marking a 32% increase[36] Cash and Debt Management - Cash and cash equivalents were reported at $446 million, with short-term commercial paper borrowings of $429 million exposed to interest rate changes[25] - The company has a committed revolving credit agreement of $900 million, expiring in May 2028, with no borrowings outstanding as of April 30, 2024[77] Shareholder Information - As of April 30, 2024, total shares outstanding are 472,600 thousand, a decrease from 479,316 thousand in 2023, reflecting a reduction of approximately 1.5%[78] - The company has approximately 11,269,000 shares available for issuance under the 2022 Omnibus Compensation Plan as of April 30, 2024[115] Pension and Benefits - The funded status of pension benefits as of April 30, 2024, shows a net liability of $103 million, down from $125 million in 2023[86] - The company projects pension benefits of $54 million for 2025 and 2026, with a gradual increase to $57 million by 2029[82] - The company has recognized a net actuarial gain of $20 million for pension benefits in 2024, following a loss of $29 million in 2023[87] - The total fair value of pension plan assets decreased from $606 million as of April 30, 2023, to $576 million as of April 30, 2024[105] Revenue Growth - Revenue from the United States increased from $1,917 million in 2022 to $1,968 million in 2023, representing a growth of approximately 2.7%[79] - The total revenue for 2023 was $4,228 million, up from $3,933 million in 2022, indicating a year-over-year increase of about 7.5%[80] - Whiskey sales for 2023 reached $2,915 million, a rise from $2,756 million in 2022, marking an increase of approximately 5.8%[80] - The company plans to continue expanding its market presence, particularly in emerging markets, where revenue grew from $714 million in 2022 to $842 million in 2023, an increase of approximately 17.9%[79] Risks and Challenges - The company faces potential adverse effects from unfavorable economic conditions, including inflation and economic slowdowns, which could reduce consumer demand for its products[117] - The company’s financial results could be negatively impacted by product recalls or liability claims, affecting brand reputation and sales[119] - The company operates in over 170 countries, facing commercial, political, and financial risks that could disrupt business operations and affect stock prices[124] - Tariffs imposed in 2018 negatively impacted the business until they were removed or suspended in late fiscal 2022 and early fiscal 2023, highlighting the vulnerability to international trade policies[125] - The company faces risks related to the availability and cost of raw materials, which could adversely affect financial results if not managed effectively[141] - The company may incur increased costs due to health epidemics or pandemics, which could materially affect operations and financial results[152] - Health epidemics and pandemics pose risks that could materially and adversely affect the company's operations and financial results[151] - The company is significantly dependent on the health of the Jack Daniel's family of brands, which could impact sales and marketing efforts[166] - Changes in consumer preferences and a potential decline in the social acceptability of beverage alcohol could negatively affect business results[158] - The company faces substantial competition from new entrants and consolidations by competitors, which may lead to pricing pressures and affect financial results[166] Regulatory and Compliance - The company is committed to compliance with anti-corruption laws, with potential violations leading to investigations and financial penalties[126] - The company is subject to extensive regulatory requirements that could lead to increased costs or limit business activities[161] - Regulatory changes regarding greenhouse gas emissions and environmental issues could increase operating costs, impacting profitability[154] - The U.S. Inflation Reduction Act of 2022 implemented a 15% minimum tax on book income for large corporations, which could adversely affect the company's effective tax rate and net earnings[155] - Potential changes in global tax rules, including a proposed global minimum tax rate of 15%, could have a material adverse impact on net income and cash flows[162] Operational Challenges - The company experienced supply chain disruptions that increased production costs and constrained product availability, prompting actions to diversify suppliers[143] - Disruptions in the distribution network or inventory fluctuations could negatively affect sales and financial performance[157] - The company may not succeed in its strategies for acquisitions and investments, which could lead to financial losses or integration challenges[148] - The company’s growth strategy relies on product innovation, but there is no assurance that successful new products or line extensions will continue to be developed[160] - The company recorded a $7 million impairment charge related to the write-off of an immaterial discontinued brand name during fiscal 2024[97] - The company recognized a non-cash impairment charge of $96 million for the Finlandia brand name during fiscal 2023, primarily due to higher discount rates and input costs[97] Currency Exposure - The company’s net exposure to foreign currency changes is significant, as foreign currency revenues exceed foreign currency expenses, impacting financial results based on the strength of the U.S. dollar[91] - Fluctuations in foreign currency exchange rates relative to the U.S. dollar could materially impact financial results due to the global nature of operations[127]

Financial Performance - For fiscal 2024, reported net sales decreased 1% to $4.2 billion, with an organic basis decline of 1%[25] - Reported operating income increased 25% to $1.4 billion, while organic operating income decreased by 2%[25] - Diluted earnings per share rose 32% to $2.14, reflecting strong operating performance[25] - The company anticipates organic operating income growth in the range of 2% to 4% for fiscal 2025[14] - The company returned $804 million to stockholders through dividends and share repurchase programs[29] - For the three months ended April 30, 2024, reported net sales decreased by 8% compared to the prior year, with organic net sales down by 5%[70] - Gross profit reported a decrease of 10%, while organic gross profit declined by 8% for the same period[70] - Operating income increased by 26%, with an organic change in operating income showing a decrease of 16%[70] - The company recognized a pre-tax gain of $175 million from the sale of its Sonoma-Cutrer wine business, along with $50 million in cash[79] - The company sold its Finlandia vodka business, resulting in a pre-tax gain of $92 million[97] Sales and Market Performance - The Tequila portfolio reported net sales decline of 4% (-7% organic), with Herradura's sales down 10% (-13% organic)[6] - Emerging markets saw reported net sales growth of 5% (+8% organic), driven by strong performance in Mexico and Brazil[9] - Whiskey depletions decreased by 2% to 21.7 million cases, with a reported net sales decline of 3%[49] - Ready-to-Drink category saw a 3% decrease in depletions to 21.0 million cases, with net sales growth of 2%[49] - Tequila depletions fell by 11% to 2.3 million cases, resulting in a 4% decline in net sales[49] - Vodka depletions decreased by 6% to 1.2 million cases, with a significant net sales drop of 16%[49] - The total portfolio's other brand depletions aggregated to 48.8 million cases, reflecting a 2% decrease[49] - The United States market experienced a reported net sales decline of 4%, with organic sales also down by 4%[73] - Emerging markets reported a net sales increase of 5%, with organic sales growth of 8%[73] Expenses and Investments - Gross profit increased 1% (+2% organic) with gross margin expansion of 150 basis points to 60.5%[10] - Reported advertising expense grew 4% (+2% organic), reflecting increased investment in key brands[34] - Advertising expenses reported a decrease of 14%, while organic advertising expenses decreased by 12%[70] - Capital expenditures are planned to be between $195 million and $205 million for fiscal 2025[15] Community and Corporate Responsibility - The company committed $23 million to the Brown-Forman Foundation and Dendrifund to support community initiatives[58] Acquisitions and Strategic Moves - The acquisition of Diplomático Rum and related assets occurred during the third quarter of fiscal 2023, impacting future performance metrics[55] Financial Position and Assets - Total assets increased from $7,777 million in April 2023 to $8,166 million in April 2024[67] - Cash and cash equivalents rose from $374 million in April 2023 to $446 million in April 2024[67] - Total liabilities increased from $4,509 million in April 2023 to $4,649 million in April 2024[67] - Cash dividends paid per common share increased from $0.2055 in 2023 to $0.2178 in 2024[65] - The company reported a 29% increase in income before income taxes, rising from $269 million in 2023 to $347 million in 2024[65] Inventory and Demand Insights - The estimated net change in distributor inventories showed a decrease of 4% in the United States and 12% in emerging markets[75] - The company provides information on estimated fluctuations in distributor inventories, particularly in the United States, which is crucial for understanding performance and trends[101] - The estimated net change in distributor inventories is calculated to provide insights into actual consumer demand versus shipments[115] - The depletion-based amount is calculated to assess the impact of inventory changes on organic net sales[116] Employee and Global Operations - The company operates globally with approximately 5,700 employees and sells products in over 170 countries[63] Brand Performance - The Jack Daniel's family of brands continues to be a significant contributor, with various expressions showing mixed performance in sales trends[96] - The company categorizes its whiskey products, including brands like Jack Daniel's, Woodford Reserve, and Old Forester, which are significant contributors to net sales[107] - The "Ready-to-Drink" category includes products such as Jack Daniel's RTD and RTP, indicating a growing segment in the portfolio[109] - Organic change measures are used to assess performance consistently and compare with competitors[59]

Financial Performance - Reported net sales of $3.2 billion for the nine months ended January 31, 2024, an increase of 1% compared to the same period last year, driven by favorable price/mix and acquisitions, partially offset by lower volumes [175]. - Reported gross profit of $2.0 billion for the nine months ended January 31, 2024, an increase of $98 million, or 5%, with gross margin increasing 2.5 percentage points to 60.9% [175]. - Reported operating income of $1.0 billion for the nine months ended January 31, 2024, an increase of 25% compared to the same period last year [175]. - Diluted earnings per share of $1.58 for the nine months ended January 31, 2024, an increase of 32% from $1.20 reported for the same period last year [175]. - Reported net sales for the nine months ended January 31, 2024, were $3,214 million, reflecting a 1% increase compared to the prior year [204]. - Gross profit for the three months ended January 31, 2024, was $635 million, a 2% increase from the previous year, with a gross profit margin of 59.4% [204]. - Operating income for the three months ended January 31, 2024, was $373 million, a significant increase of 116% compared to the same period last year [204]. - The effective tax rate for the three months ended January 31, 2024, was 16.5%, a decrease of 3.0 percentage points from the previous year [204]. - 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]. - Reported gross profit for the nine months ended January 31, 2024, was $2.0 billion, an increase of $98 million, or 5% compared to the same period last year [220]. - Reported gross profit for the three months ended January 31, 2024, was $635 million, an increase of $11 million, or 2%, with gross margin rising 1.8 percentage points to 59.4% [250]. Sales Performance by Region - Germany's reported net sales increased 12% driven by the launch of Jack Daniel's & Coca-Cola RTD and acquisitions, partially offset by lower volumes [178]. - Mexico's reported net sales increased 22% driven by higher prices of New Mix and positive foreign exchange effects, partially offset by lower volumes of el Jimador [179]. - Brazil's reported net sales increased 12% led by higher volumes of JDTA and positive foreign exchange effects, partially offset by lower JDTW volumes [179]. - Reported net sales growth in emerging markets and Travel Retail was partially offset by declines in developed international and the United States [173]. - Emerging markets, including Mexico, Poland, and Brazil, showed strong growth with net sales increases of 22%, 24%, and 12% respectively [205]. - Reported net sales in Japan declined 100% due to lower volumes and an estimated net decrease in distributor inventories [207]. - Reported net sales in the Rest of Developed International increased 11%, driven by acquisitions and new product launches [207]. - Travel Retail's reported net sales increased 3%, supported by growth in the super-premium American whiskey portfolio [208]. - JDTA reported net sales increased 44%, attributed to higher volumes in Brazil and a product launch in South Korea [241]. - Reported net sales for JDTW decreased 6%, impacted by declines in multiple regions and an estimated net decrease in distributor inventories [239]. Acquisitions and Divestitures - During the third quarter of fiscal 2024, the company sold its Finlandia vodka business, resulting in a pre-tax gain of $90 million [174]. - The company reached an agreement to sell its Sonoma-Cutrer wine business, expected to close in the fourth quarter of fiscal 2024 [180]. - The company acquired the Gin Mare and Diplomático brands, contributing positively to net sales growth and operating income for the nine months ended January 31, 2024 [202]. - Reported net sales for the Rest of Portfolio increased 79%, largely driven by acquisitions [246]. Expenses and Cash Flow - Total operating expenses decreased by 42% for the three months ended January 31, 2024, compared to the same period last year [204]. - Reported operating expenses totaled $918 million for the nine months ended January 31, 2024, a decrease of $112 million, or 11%, compared to the same period last year [253]. - Cash flows from operations were $362 million for the nine months ended January 31, 2024, a decline of $48 million from the same period last year [259]. - 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 in the prior-year period [260]. - Cash and cash equivalents increased from $374 million at April 30, 2023, to $589 million at January 31, 2024 [257]. Future Outlook - The company expects organic net sales to be flat for fiscal 2024, with organic operating income growth anticipated in the 0% to 2% range [256]. - Capital expenditures for fiscal 2024 are planned to be in the range of $230 to $240 million [256]. - The Board of Directors authorized a share repurchase program of up to $400 million from October 2, 2023, through October 1, 2024 [261].

Financial Performance - Third quarter reported net sales decreased 1% to $1.1 billion (-2% organic) compared to the prior-year period[1] - Reported operating income increased 116% to $373 million (+5% organic) and diluted earnings per share increased 189% to $0.60[1] - Year-to-date reported net sales increased 1% to $3.2 billion (flat on an organic basis) compared to the same prior-year period[7] - Year-to-date reported operating income increased 25% to $1.0 billion (+2% organic) and diluted earnings per share increased 32% to $1.58[7] - Reported net sales for the nine months ended January 31, 2024, were $3,214 million, reflecting a 1% increase compared to $3,182 million in the prior year[37] - Operating income rose by 25% to $1,039 million, compared to $829 million in the same period last year[37] - Net income for the nine months ended January 31, 2024, was $758 million, a 32% increase from $576 million[37] - Earnings per share (diluted) increased by 32% to $1.58 for the nine months ended January 31, 2024, compared to $1.20 in the prior year[37] Sales Growth - The recently acquired brands, Gin Mare and Diplomático, drove Rest of Portfolio's reported net sales growth of 79% (+11% organic)[2] - Jack Daniel's Tennessee Apple delivered double-digit reported net sales growth of 44% (+45% organic)[3] - New Mix brand reported a strong net sales growth of 34%, with 17% organic growth[40] - The company experienced reported net sales growth in Emerging markets and the Travel Retail channel, offset by declines in Developed International markets and the United States[42] - The emerging markets, particularly Mexico, Poland, and Brazil, showed strong growth with net sales increasing by 22%, 24%, and 12% respectively[64] Cost and Profitability - Reported gross profit increased 5% (+6% organic) with gross margin expansion of 250 basis points to 60.9%[27] - Gross profit increased by 5% to $1,957 million for the nine months ended January 31, 2024, up from $1,859 million[37] - The company reported a 4% decrease in the cost of sales, contributing to a gross profit decline of 5%[82] Market Trends - The Jack Daniel's family of brands reported depletions of 23.4 million, reflecting a 4% decrease compared to the prior-year period[78] - The company’s "Tequila" category, including brands like Herradura and el Jimador, experienced a 9% decrease in depletions[78] - Consumer takeaway data indicates trends in market demand, with estimates derived from retail sales value metrics[103] Strategic Actions - The sale of the Finlandia vodka brand generated a pre-tax gain of $90 million[4] - The $400 million share repurchase program was completed as of December 31, 2023[4] - The company reached an agreement to sell its Sonoma-Cutrer wine business, expected to close in the fourth quarter of fiscal 2024, with transaction costs related to this disposition being adjusted out[71] - The company acquired Gin Mare Brand, S.L.U. and Mareliquid Vantguard, S.L.U. during the third quarter of fiscal 2023, impacting financial results[84] Tax and Financial Adjustments - The effective tax rate decreased to 20.3% for the nine months ended January 31, 2024, down from 23.0% in the prior year[37] - Organic net sales adjustments are made to account for acquisitions, divestitures, foreign exchange, and impairment charges[83] - A non-cash impairment charge of $96 million for the Finlandia brand name was recognized during the third quarter of fiscal 2023, which was adjusted for organic results[74] - A gain of $7 million was recognized on the sale of certain fixed assets during the second quarter of fiscal 2024, which was also adjusted for organic results[72] Future Outlook - The company expects organic net sales to be flat for fiscal 2024, with organic operating income growth anticipated in the 0% to 2% range[15] - Capital expenditures are now planned to be in the range of $230 to $240 million[44] - The company recognized that changes in distributor inventories can affect organic trends, with a positive difference indicating a net increase in inventories[95]