LOUISVILLE, Ky.--(BUSINESS WIRE)--Dec 7, 2022--
Brown-Forman Corporation (NYSE: BFA, BFB) reported financial results for its second quarter and the first half of fiscal 2023. For the second quarter, reported net sales 1 increased 10% to $1.1 billion (+16% on an organic basis 2 ) compared to the same prior-year period. Reported operating income decreased 2% to $313 million (+8% on an organic basis) in the quarter, and diluted earnings per share decreased 4% to $0.47.
For the first six months of the fiscal year, reported net sales increased 11% to $2.1 billion (+17% on an organic basis) compared to the same prior-year period. Reported net sales growth was negatively impacted by six percentage points of foreign currency exchange. In the first half, reported operating income increased 8% to $656 million (+19% on an organic basis) and diluted earnings per share increased 11% to $0.99.
Lawson Whiting, Brown-Forman’s President and Chief Executive Officer stated, “Brown-Forman has once again displayed tremendous resolve, delivering double-digit revenue growth for the first half of fiscal 2023. Consumer demand for our brands remains strong, and we have set the organization on a path for continued growth with our sustained brand investments, recently announced acquisitions, product innovation, and strategic relationships.”
Whiting added, “Despite foreign exchange and inflationary headwinds, Brown-Forman is on track to deliver another solid year of growth in fiscal 2023. The Board’s recent approval of a 9% increase in the regular quarterly cash dividend reinforces our shared confidence in the long-term health of our business.”
First Half of Fiscal 2023 Highlights
First Half of Fiscal 2023 Brand Results
First Half of Fiscal 2023 Market Results
First Half of Fiscal 2023 Other P&L Items
First Half of Fiscal 2023 Financial Stewardship
On November 17, 2022, the Brown-Forman Board of Directors approved a 9% increase in the regular quarterly cash dividend to $0.2055 per share on its Class A and Class B common stock. The dividend is payable on January 3, 2023, to stockholders of record on December 2, 2022. Brown-Forman has paid regular quarterly cash dividends for 79 consecutive years and has increased the regular cash dividend for 39 consecutive years.
Fiscal 2023 Outlook
The company anticipates stronger growth in fiscal 2023 despite global macroeconomic and geopolitical uncertainties. Accordingly, we update our guidance for fiscal 2023 as follows:
Conference Call Details
Brown-Forman will host a conference call to discuss these results at 10:00 a.m. (ET) today. A live audio broadcast of the conference call, and the accompanying presentation slides, will be available via Brown-Forman’s website, brown-forman.com, through a link to “Investors/Events & Presentations.” A digital audio recording of the conference call and the presentation slides will also be posted on the website and will be available for at least 30 days following the conference call.
For over 150 years, Brown-Forman has enriched the experience of life by responsibly building fine quality beverage alcohol brands, including Jack Daniel’s Tennessee Whiskey, Jack Daniel’s Tennessee RTDs, Jack Daniel’s Tennessee Honey, Jack Daniel’s Tennessee Fire, Jack Daniel’s Tennessee Apple, Gentleman Jack, Jack Daniel’s Single Barrel, Woodford Reserve, Old Forester, Coopers’ Craft, The GlenDronach, Benriach, Glenglassaugh, Slane, Herradura, el Jimador, New Mix, Korbel, Sonoma-Cutrer, Finlandia, Chambord, Fords Gin, and Gin Mare. Brown-Forman’s brands are supported by approximately 5,200 employees globally and sold in more than 170 countries worldwide. For more information about the company, please visit brown-forman.com.
Important Information on Forward-Looking Statements:
This press release contains statements, estimates, and projections that are “forward-looking statements” as defined under U.S. federal securities laws. Words such as “aim,” “anticipate,” “aspire,” “believe,” “can,” “continue,” “could,” “envision,” “estimate,” “expect,” “expectation,” “intend,” “may,” “might,” “outlook,” “plan,” “potential,” “project,” “pursue,” “see,” “seek,” “should,” “will,” “would,” and similar words indicate forward-looking statements, which speak only as of the date we make them. Except as required by law, we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. By their nature, forward-looking statements involve risks, uncertainties, and other factors (many beyond our control) that could cause our actual results to differ materially from our historical experience or from our current expectations or projections. These risks and uncertainties include, but are not limited to:
For further information on these and other risks, please refer to our public filings, including the “Risk Factors” section of our annual report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission.Brown-Forman Corporation
Unaudited Consolidated Statements of Operations
For the Three Months Ended October 31, 2021 and 2022
(Dollars in millions, except per share amounts)
2021
2022
Change
Net sales
$
994
$
1,094
10
%
Cost of sales
404
481
19
%
Gross profit
590
613
4
%
Advertising expenses
104
121
16
%
Selling, general, and administrative expenses
165
180
9
%
Other expense (income), net
(1
)
(1
)
Operating income
322
313
(2
%)
Non-operating postretirement expense
2
—
Interest expense, net
19
15
Income before income taxes
301
298
(1
%)
Income taxes
65
71
Net income
$
236
$
227
(4
%)
Earnings per share:
Basic
$
0.49
$
0.47
(4
%)
Diluted
$
0.49
$
0.47
(4
%)
Gross margin
59.3
%
56.0
%
Operating margin
32.3
%
28.7
%
Effective tax rate
21.6
%
23.7
%
Cash dividends paid per common share
$
0.1795
$
0.1885
Shares (in thousands) used in the calculation of earnings per share
Basic
478,857
479,138
Diluted
480,518
480,549
Brown-Forman Corporation
Unaudited Consolidated Statements of Operations
For the Six Months Ended October 31, 2021 and 2022
(Dollars in millions, except per share amounts)
2021
2022
Change
Net sales
$
1,900
$
2,101
11
%
Cost of sales
757
866
14
%
Gross profit
1,143
1,235
8
%
Advertising expenses
194
231
19
%
Selling, general, and administrative expenses
333
355
7
%
Other expense (income), net
5
(7
)
Operating income
611
656
8
%
Non-operating postretirement expense
2
—
Interest expense, net
39
32
Income before income taxes
570
624
10
%
Income taxes
142
148
Net income
$
428
$
476
11
%
Earnings per share:
Basic
$
0.89
$
0.99
11
%
Diluted
$
0.89
$
0.99
11
%
Gross margin
60.1
%
58.8
%
Operating margin
32.1
%
31.2
%
Effective tax rate
24.9
%
23.7
%
Cash dividends paid per common share
$
0.3590
$
0.3770
Shares (in thousands) used in the calculation of earnings per share
Basic
478,822
479,106
Diluted
480,615
480,494
Brown-Forman Corporation
Unaudited Condensed Consolidated Balance Sheets
(Dollars in millions)
April 30,
2022
October 31,
2022
Assets:
Cash and cash equivalents
$
868
$
1,087
Accounts receivable, net
813
894
Inventories
1,818
1,995
Other current assets
277
282
Total current assets
3,776
4,258
Property, plant, and equipment, net
875
890
Goodwill
761
748
Other intangible assets
586
571
Other assets
375
385
Total assets
$
6,373
$
6,852
Liabilities:
Accounts payable and accrued expenses
$
703
$
750
Accrued income taxes
81
57
Short-term borrowings
—
186
Current portion of long-term debt
250
250
Total current liabilities
1,034
1,243
Long-term debt
2,019
1,974
Deferred income taxes
219
234
Accrued postretirement benefits
183
183
Other liabilities
181
178
Total liabilities
3,636
3,812
Stockholders’ equity
2,737
3,040
Total liabilities and stockholders’ equity
$
6,373
$
6,852
Brown-Forman Corporation
Unaudited Condensed Consolidated Statements of Cash Flows
For the Six Months Ended October 31, 2021 and 2022
(Dollars in millions)
2021
2022
Cash provided by operating activities
$
335
$
316
Cash flows from investing activities:
Additions to property, plant, and equipment
(33
)
(61
)
Other
(2
)
3
Cash provided by (used for) investing activities
(35
)
(58
)
Cash flows from financing activities:
Net change in short-term borrowings
(184
)
186
Dividends paid
(172
)
(180
)
Other
(6
)
(5
)
Cash provided by (used for) financing activities
(362
)
1
Effect of exchange rate changes
(15
)
(37
)
Net increase (decrease) in cash, cash equivalents, and restricted cash
(77
)
222
Cash, cash equivalents, and restricted cash at beginning of period
1,150
874
Cash, cash equivalents, and restricted cash at end of period
1,073
1,096
Less: Restricted cash at end of period
—
(9
)
Cash and cash equivalents at end of period
$
1,073
$
1,087
Schedule A
Brown-Forman Corporation
Supplemental Statement of Operations Information (Unaudited)
Three Months
Ended
Six Months
Ended
Fiscal Year Ended
October 31, 2022
October 31, 2022
April 30, 2022
Reported change in net sales
10%
11%
14%
Acquisitions and divestitures
—%
—%
2%
Foreign exchange
6%
6%
2%
Organic change in net sales 2
16%
17%
17%
Reported change in gross profit
4%
8%
14%
Acquisitions and divestitures
—%
—%
1%
Foreign exchange
9%
9%
3%
Organic change in gross profit 2
13%
17%
17%
Reported change in advertising expenses
16%
19%
10%
Foreign exchange
7%
6%
2%
Organic change in advertising expenses 2
22%
25%
11%
Reported change in SG&A
9%
7%
3%
Foundation
—%
—%
3%
Foreign exchange
6%
5%
1%
Organic change in SG&A 2
15%
11%
7%
Reported change in operating income
(2)%
8%
3%
Acquisitions and divestitures
(1)%
—%
14%
Foundation
—%
—%
(2)%
Impairment Charges
(1)%
(1)%
6%
Foreign exchange
12%
14%
6%
Organic change in operating income 2
8%
19%
27%
See "Note 2 - Non-GAAP Financial Measures" for details on our use of Non-GAAP financial measures, how these measures are calculated and the reasons why we believe this information is useful to readers.
Note: Totals may differ due to rounding.
Schedule B
Brown-Forman Corporation
Supplemental Brand Information (Unaudited)
Six Months Ended October 31, 2022
Brand 3
Supplemental Information -
Depletions 3
Shipments
Net Sales % Change vs. Prior Year Period
9-Liter
(Millions)
% Change
vs. Prior
Year
Period
9-Liter
(Millions)
% Change
vs. Prior
Year
Period
Reported
Acquisitions
and
Divestitures
Foreign
Exchange
Organic 2
Whiskey
10.8
8%
11.5
15%
13%
—%
7%
20%
JDTW
7.4
8%
7.8
14%
9%
—%
8%
18%
JDTH
1.1
—%
1.1
8%
6%
—%
6%
12%
Gentleman Jack
0.4
5%
0.4
20%
14%
—%
7%
21%
JDTF
0.3
15%
0.4
24%
23%
—%
5%
28%
JDTA
0.4
(4)%
0.3
(11)%
(16)%
—%
6%
(10)%
Woodford Reserve
0.8
15%
0.9
34%
39%
—%
1%
40%
Old Forester
0.2
8%
0.3
35%
39%
—%
—%
39%
Rest of Whiskey
0.3
24%
0.3
36%
19%
1%
8%
27%
Ready-to-Drink
10.8
22%
12.6
17%
14%
—%
6%
20%
JD RTD/RTP
6.1
16%
7.9
10%
9%
—%
7%
15%
New Mix
4.6
32%
4.6
32%
48%
—%
(2)%
46%
Tequila
1.3
5%
1.3
5%
10%
—%
1%
11%
Herradura
0.3
(13)%
0.4
(2)%
9%
—%
—%
9%
el Jimador
0.9
11%
0.9
16%
16%
—%
2%
18%
Wine
0.9
(7)%
1.0
(16)%
(9)%
—%
—%
(9)%
Vodka (Finlandia)
1.3
5%
1.3
2%
(17)%
—%
12%
(4)%
Rest of Portfolio
0.3
1%
0.3
1%
1%
—%
6%
8%
Non-branded and bulk
NM
NM
NM
NM
16%
11%
3%
30%
Total Portfolio
25.4
12%
28.0
13%
11%
—%
6%
17%
Other Brand Aggregations
Jack Daniel's Family of Brands
15.9
10%
18.2
12%
9%
—%
8%
17%
American Whiskey
10.7
8%
11.4
15%
13%
—%
7%
20%
Premium Bourbons
1.0
13%
1.1
34%
39%
—%
1%
40%
See "Note 2 - Non-GAAP Financial Measures" for details on our use of Non-GAAP financial measures, how these measures are calculated and the reasons why we believe this information is useful to readers.
Note: Totals may differ due to rounding.
Schedule C
Brown-Forman Corporation
Supplemental Geographic Information (Unaudited)
Six Months Ended October 31, 2022
% Change vs. Prior-Year Period
Geographic Area 3
Net Sales
Reported
Acquisitions
and
Divestitures
Foreign
Exchange
Organic 2
United States
11%
—%
—%
11%
Developed International
3%
—%
11%
14%
Germany
1%
—%
13%
14%
Australia
3%
—%
6%
9%
United Kingdom
(8)%
—%
10%
2%
France
(18)%
—%
10%
(8)%
Canada
33%
—%
6%
39%
Rest of Developed International
20%
—%
17%
37%
Emerging
14%
—%
13%
27%
Mexico
23%
—%
(2)%
21%
Poland
7%
—%
20%
27%
Brazil
44%
—%
2%
45%
Chile
(17)%
—%
—%
(17)%
Rest of Emerging
8%
—%
23%
30%
Travel Retail
60%
—%
7%
67%
Non-branded and bulk
16%
11%
3%
30%
Total
11%
—%
6%
17%
See "Note 2 - Non-GAAP Financial Measures" for details on our use of Non-GAAP financial measures, how these measures are calculated and the reasons why we believe this information is useful to readers.
Note: Totals may differ due to rounding.
Schedule D
Brown-Forman Corporation
Supplemental Geographic, Product, and Operations Information (Unaudited)
Six Months Ended October 31, 2022
Estimated Net Change in Distributor Inventories 3
Geographic Area 3 - Net Sales
United States
7%
Developed International
2%
Emerging
3%
Travel Retail
13%
Non-Branded and Bulk
—%
Brand 3 - Net Sales
Whiskey
8%
JDTW
5%
JDTH
9%
Gentleman Jack
13%
JDTF
10%
JDTA
(8)%
Woodford Reserve
20%
Old Forester
26%
Rest of Whiskey
10%
Ready-to-Drink
(1)%
JD RTD/RTP
(1)%
New Mix
—%
Tequila
3%
Herradura
12%
el Jimador
2%
Wine
(10)%
Vodka (Finlandia)
(3)%
Rest of Portfolio
(2)%
Non-branded and bulk
—%
Statement of Operations Line Items
Net Sales
5%
Cost of Sales
2%
Gross Profit
6%
Operating Income
11%
A positive difference is interpreted as a net increase in distributors’ inventories; whereas, a negative difference is interpreted as a net decrease in distributors’ inventories.
Note: Totals may differ due to rounding.
Note 1 - Percentage growth rates are compared to the same prior-year periods, unless otherwise noted.
Note 2 - Non-GAAP Financial Measures
Use of Non-GAAP Financial Information. We use some financial measures in this report that are not measures of financial performance under U.S. generally accepted accounting principles (GAAP). These non-GAAP measures, defined below, should be viewed as supplements to (not substitutes for) our results of operations and other measures reported under GAAP. Other companies may not define or calculate these non-GAAP measures in the same way. Reconciliations of these non-GAAP measures to the most closely comparable GAAP measures are presented on Schedules A, B, and C of this press release.
“Organic change” in measures of statements of operations. We present changes in certain measures, or line items, of the statements of operations that are adjusted to an “organic” basis. We use “organic change” for the following measures: (a) organic net sales; (b) organic cost of sales; (c) organic gross profit; (d) organic advertising expenses; (e) organic selling, general, and administrative (SG&A) expenses; (f) organic other expense (income) net; (g) organic operating expenses*; and (h) organic operating income. To calculate these measures, we adjust, as applicable, for (1) acquisitions and divestitures, (2) foreign exchange, (3) impairment changes and (4) a commitment to our charitable foundation. We explain these adjustments below.
We use the non-GAAP measure “organic change,” along with other metrics, to: (a) understand our performance from period to period on a consistent basis; (b) compare our performance to that of our competitors; (c) calculate components of management incentive compensation; (d) plan and forecast; and (e) communicate our financial performance to the Board of Directors, stockholders, and investment community. We have consistently applied the adjustments within our reconciliations in arriving at each non-GAAP measure. We believe these non-GAAP measures are useful to readers and investors because they enhance the understanding of our historical financial performance and comparability between periods. When we provide guidance for organic change in certain measures of the statements of operations we do not provide guidance for the corresponding GAAP change because the GAAP measure will include items that are difficult to quantify or predict with reasonable certainty, such as foreign exchange, which could have a significant impact on our GAAP income statement measures.
As of the third quarter ended January 31, 2022, we changed certain non-GAAP financial measures that we have historically used. We no longer report “underlying changes” in certain measures of the statements of operations; instead, we now report “organic change” for certain measures of the statements of operations. “Organic change” includes all of the non-GAAP adjustments that we have historically made in adjusting GAAP to “underlying change” results, except that “organic change” does not include an adjustment for “estimated net change in distributor inventories,” which reflected the estimated net effect of changes in distributor inventories on changes in certain line items of the statements of operations. This change to our non-GAAP financial measures was in response to comments from and discussions with the Staff of the Securities and Exchange Commission.
Although we no longer provide non-GAAP financial measures that adjust for “estimated net change in distributor inventories,” we still believe that our results are affected by changes in distributor inventories, particularly in our largest market, the United States, where the spirits industry is subject to regulations that essentially mandate a so-called “three-tier system,” with a value chain that includes suppliers, distributors and retailers. Accordingly, we continue to provide information concerning fluctuations in distributor inventories. We believe such information is useful in understanding our performance and trends as it provides relevant information regarding customers’ demand for our products.
Note 3 - Definitions
From time to time, to explain our results of operations or to highlight trends and uncertainties affecting our business, we aggregate markets according to stage of economic development as defined by the International Monetary Fund (IMF), and we aggregate brands by beverage alcohol category. Below, we define the geographic and brand aggregations used in this release.
In Schedule C and Schedule D, we provide supplemental information for our largest markets ranked by percentage of total fiscal 2022 reported net sales. Due to our decision to suspend commercial operations in Russia, it is no longer considered one of our largest markets. In addition to markets that are listed by country name, we include the following aggregations:
Brand Aggregations.
In Schedule B and Schedule D, we provide supplemental information for our largest brands ranked by percentage of total fiscal 2022 reported net sales. In addition to brands that are listed by name, we include the following aggregations outlined below.
Beginning in fiscal 2023, we began presenting “Ready-to-Drink” products as a separate aggregation due to its more significant contribution to our growth in recent years and industry-wide category growth trends. “Whiskey” no longer contains Jack Daniel’s ready-to-drink (RTD) and ready-to-pour (RTP), and “Tequila” no longer includes New Mix. These brands are now included in the “Ready-to-Drink” brand aggregation.
Other Metrics.
We perform the following calculation to determine the “estimated net change in distributor inventories”:
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CONTACT: Brown-Forman Corporation
Rob Frederick
Vice President
Corporate Communications
502-774-7707Sue Perram
Vice President
Investor Relations
502-774-6862
KEYWORD: UNITED STATES NORTH AMERICA KENTUCKY
INDUSTRY KEYWORD: RETAIL RESTAURANT/BAR WINE & SPIRITS
SOURCE: Brown-Forman Corporation
Copyright Business Wire 2022.
PUB: 12/07/2022 08:00 AM/DISC: 12/07/2022 08:02 AM
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