Brown-Forman(BF_B) - 2025 Q2 - Quarterly Report

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$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$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$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$305 million, a decrease of $27 million, or 8$341 million, an increase of $2 million, or 1$446 million at April 30, 2024, and $416 million at October 31, 2024, with approximately 48$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$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].