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Brown-Forman(BF_B) - 2025 Q1 - Quarterly Report
BF_BBrown-Forman(BF_B)2024-08-29 20:14

Divestitures and Acquisitions - In fiscal 2024, the company sold the Sonoma-Cutrer wine business for a pre-tax gain of 175million,receiving175 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 92millionduringfiscal2024[58]−ThecompanyacquiredGinMareBrand,S.L.U.infiscal2023,withadjustmentsrelatedtoearn−outcontingentconsiderationliabilities[57]−ThecompanydivestedtheFinlandiavodkabusinessfor92 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 50millioncash,impactinggrossmarginnegatively[74]FinancialPerformance−ForthethreemonthsendedJuly31,2024,netsaleswere50 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 565million,adecreaseof565 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 281million,impactedbyinputcostfluctuationsandtheeffectsofdivestitures[75]−Dilutedearningspersharewere281 million, impacted by input cost fluctuations and the effects of divestitures[75] - Diluted earnings per share were 0.41, down 14% from 0.48intheprioryear[75]−Operatingincometotaled0.48 in the prior year[75] - Operating income totaled 281 million, a decrease of 46million,or1446 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 0.48reportedforthesameperiodlastyear,primarilyduetothedecreaseinoperatingincome[105]−Grossprofitwas0.48 reported for the same period last year, primarily due to the decrease in operating income[105] - Gross profit was 565 million, a decrease of 86million,or1386 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 205million[106]CashandFinancing−Cashandcashequivalentswere205 million[106] Cash and Financing - Cash and cash equivalents were 446 million at April 30, 2024, and decreased to 416millionatJuly31,2024[109]−CashprovidedbyoperationsforthethreemonthsendedJuly31,2024,was416 million at July 31, 2024[109] - Cash provided by operations for the three months ended July 31, 2024, was 17 million, a decline of 21millionfromthesameperiodlastyear[112]−Cashusedforfinancingactivitieswas21 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 50millionprovidedinthesameprior−yearperiod[113]−Theaverageinterestrateoncommercialpaperincreasedfrom5.2750 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]