Brown-Forman(BF_A) - 2023 Q1 - Quarterly Report

Financial Performance - Reported net sales for the three months ended July 31, 2022, were $1.0 billion, an increase of 11$343 million for the three months ended July 31, 2022, with diluted earnings per share rising 30% to $0.52[92]. - Reported net sales growth was driven by key brands such as JDTW, Woodford Reserve, and JDTH, with significant contributions from the United States, emerging markets, and Travel Retail[92]. - Travel Retail reported net sales increased by 77$343 million, an increase of $54 million, or 19$899 million as of July 31, 2022, with approximately 62% held by foreign subsidiaries[130]. - Cash provided by operations was $173 million, a decline of$12 million from the same period last year, primarily due to increased working capital[137]. - Cash used for investing activities increased to $34 million during the three months ended July 31, 2022, compared to$15 million for the same period last year, reflecting increased capital spending[138]. - Cash used for financing activities was $94 million during the three months ended July 31, 2022, a decrease of$47 million from $141 million in the same period last year[139]. - The company has an$800 million commercial paper program with no borrowings under the program as of April 30, 2022, and July 31, 2022[131]. - The company expects to meet planned short-term liquidity needs largely through cash generated from operations and borrowings under the commercial paper program[135]. - The company believes its current liquidity position and ability to generate positive cash flows will be sufficient to meet all expected future financial commitments[136]. - Significant short-term cash requirements include funding operations, repayment of a note maturing in 2023, and capital investments[134]. Market and Operational Challenges - The company has suspended commercial operations in Russia, which is no longer considered one of its largest markets[70]. - Supply chain disruptions continued to affect the business, with logistics and transportation challenges increasing costs[89]. - Foreign exchange fluctuations negatively impacted results, particularly due to a stronger U.S. dollar against the euro and other currencies[88]. - The company faced challenges from competition, changing consumer preferences, and potential economic downturns related to global conditions[86]. - The company faces market risks from changes in foreign currency exchange rates, commodity prices, and interest rates, managed through procurement strategies and financial instruments[141]. Strategic Initiatives - The company introduced "Ready-to-Drink" as a new brand aggregation due to its growth contribution in recent years[73]. - The company uses "organic change" to measure performance, excluding the effects of acquisitions, divestitures, foreign exchange, and impairment charges[64]. - The company believes that consumer takeaway data is a leading indicator of consumer demand trends[82]. - The company calculates the "estimated net change in distributor inventories" to understand the impact of distributor inventory changes on organic trends[84]. - The company emphasizes the importance of understanding organic results on a comparable basis to assess performance accurately[64]. - The company aggregates markets by economic development stages as defined by the IMF for performance analysis[69]. - The company aims to enhance understanding of historical financial performance through non-GAAP measures[64]. Impairments and Asset Management - The company reported a non-cash impairment charge of $6 million for certain fixed assets during the first quarter of fiscal 2022[63].