Brown-Forman(BF_A) - 2020 Q1 - Quarterly Report

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].