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Brown-Forman(BF_A) - 2021 Q2 - Quarterly Report
BF_ABrown-Forman(BF_A)2020-12-08 21:38

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 127million[73].FinancialPerformance−ReportednetsalesforthesixmonthsendedOctober31,2020,were127 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 717million,withunderlyingoperatingincomegrowing11717 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 0.19persharegainonthesaleofcertainbrands[96].−ReportednetsalesforthesixmonthsendedOctober31,2020,were0.19 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 16million,or116 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 38million,or638 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 22million,or622 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 0.59inthesameperiodlastyear[145].MarketPerformance−ThelargestdevelopedinternationalmarketsforthecompanyincludetheUnitedKingdom,Germany,Australia,andFrance,whichsignificantlycontributetonetsales[79].−EmergingmarketssuchasMexico,Poland,andRussiaarealsokeycontributorstothecompany′snetsalesofbrandedproducts[80].−TheUnitedStatesreporteda30.59 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 251million,down251 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 96millionto96 million to 283 million for the six months ended October 31, 2020, reflecting lower working capital requirements[146]. - Cash and cash equivalents increased by 289millionduringthesixmonthsendedOctober31,2020,totaling289 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].