Brown-Forman(BF_A) - 2022 Q3 - Quarterly Report

Financial Performance - Reported net sales for the nine months ended January 31, 2022, were $2.9 billion, an increase of 11% compared to the same period last year, driven by favorable price/mix and higher volumes[102]. - Reported operating income for the nine months ended January 31, 2022, was$ 958 million, a decrease of 4% compared to the same period last year[102]. - Diluted earnings per share for the nine months ended January 31, 2022, were $1.43, a decrease of 12% from$ 1.63 reported for the same period last year[102]. - Reported net sales for the nine months ended January 31, 2022, were $2.9 billion, an increase of$ 288 million, or 11% compared to the same period last year[131]. - Reported gross profit was $622 million for the three months ended January 31, 2022, an increase of$ 72 million, or 13% compared to the same period last year[134]. - For the nine months ended January 31, 2022, reported gross profit was $1.8 billion, an increase of$ 169 million, or 11% year-over-year[135]. - Reported operating income for the three months ended January 31, 2022, was $347 million, an increase of$ 66 million, or 24% year-over-year, with an operating margin of 33.5%[140]. - For the nine months ended January 31, 2022, reported operating income totaled $958 million, a decrease of$ 40 million, or 4% year-over-year, with an operating margin of 32.6%[141]. - Reported operating expenses for the nine months ended January 31, 2022, totaled $807 million, an increase of$ 82 million, or 11% year-over-year[139]. - Cash provided by operations was $683 million for the nine months ended January 31, 2022, compared to$ 572 million for the same period last year, reflecting a $111 million increase[145]. - Cash and cash equivalents decreased by$ 338 million during the nine months ended January 31, 2022, totaling $812 million[149]. - The effective tax rate for the nine months ended January 31, 2022, was 23.4%, up from 16.2% in the same period last year[143]. - The effective tax rate outlook for fiscal 2022 is expected to be in the range of approximately 22% to 23%[105]. Market Performance - The largest developed international markets for the company include Australia, Germany, the United Kingdom, France, and Canada[83]. - The largest emerging markets for the company are Mexico, Poland, Brazil, and Russia[84]. - Emerging markets contributed significantly to reported net sales growth, with a 22% increase[108]. - Travel Retail channel reported a 57% increase in net sales compared to the previous year[108]. - Reported net sales in the United States increased 5%, driven by higher volumes and a favorable channel mix shift to the on-premise channel[111]. - Reported net sales in Germany increased 16%, fueled by volumetric gains of JDTW and JD RTDs[112]. - Reported net sales in the Rest of Emerging increased 37%, driven primarily by JDTW gains, led by Turkey, Chile, and Romania[114]. - JDTA reported net sales grew 41%, fueled by continued international launch in emerging markets, led by Brazil and Chile[124]. - Herradura's reported net sales increased 31% due to higher volumes in the United States and Mexico[126]. - The Jack Daniel's family of brands grew reported net sales 12%, primarily driven by the broad-based growth of JDTW[120]. Strategic Initiatives - The company aims to enhance understanding of historical financial performance through non-GAAP measures[78]. - The company will report "organic change" in certain measures of the statements of operations, excluding adjustments for estimated net change in distributor inventories[79]. - The company believes that changes in distributor inventories are relevant for understanding performance and trends[80]. - The company uses "depletions" to measure volume, which reflects consumer demand more closely than shipments to distributors[92]. - Forward-looking statements indicate potential risks, including dependence on the growth of the Jack Daniel's family of brands and competition from new entrants[96]. - Organic net sales outlook for fiscal 2022 is projected to grow by 11% to 13%[105]. - Organic operating income outlook for fiscal 2022 is projected to grow by 12% to 16%[105]. Acquisitions and Divestitures - In fiscal 2021, the company sold Early Times, Canadian Mist, and Collingwood brands, resulting in a pretax gain of$ 127 million[73]. - The company acquired Part Time Rangers Limited, which owns Part Time Rangers RTDs, during fiscal 2021[73]. Impairments and Charges - The company recognized non-cash impairment charges of $9 million for certain fixed assets during the first three quarters of fiscal 2022[76]. Advertising and Expenses - Reported advertising expense increased by 12% for the nine months ended January 31, 2022, reflecting continued investment in brands[102]. - Reported cost of sales for the nine months ended January 31, 2022, were$ 1.2 billion, an increase of $119 million, or 11% compared to the same period last year[133]. Dividends and Financial Instruments - The company declared a special cash dividend of$ 1.00 per share on its Class A and Class B common stock, paid on December 29, 2021[154]. - The company has an $800 million commercial paper program to fund short-term operational needs, supported by an undrawn bank credit facility[150].