United States Securities and Exchange Commission Washington, D.C. 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 31, 2025 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________ Commission File No. 001-00123 Brown-Forman Corporation (Exact name of Registrant as specified in its Charter) Delaware 61-0143150 (State o ...

[Executive Summary & Financial Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Financial%20Highlights) Brown-Forman's Q1 FY26 performance review covers financial highlights, brand and geographic sales trends, and financial stewardship [First Quarter Fiscal 2026 Overview](index=1&type=section&id=1.1%20First%20Quarter%20Fiscal%202026%20Overview) Brown-Forman reported a challenging Q1 FY26 with net sales down 3% (up 1% organically) and operating income down 7% (up 2% organically), while reaffirming its full-year outlook despite a 13% decline in diluted EPS to $0.36 | Metric | Q1 FY26 (Reported) | Change YoY | Q1 FY26 (Organic) | Change YoY (Organic) | | :----------------- | :----------------- | :--------- | :---------------- | :------------------- | | Net Sales | $924 million | -3% | N/A | +1% | | Operating Income | $260 million | -7% | N/A | +2% | | Diluted EPS | $0.36 | -13% | N/A | N/A | - CEO Lawson Whiting stated that solid first-quarter performance reflects decisive actions, superior innovation, and bold route-to-consumer strategies, positioning the company for resilient results despite persistent headwinds. The **full-year outlook was reaffirmed**[1](index=1&type=chunk) [Brand Performance Highlights](index=1&type=section&id=1.2%20Brand%20Performance%20Highlights) Whiskey net sales remained flat, Tequila saw slight organic growth, and Ready-to-Drink achieved strong organic growth, while the Rest of Portfolio was significantly impacted by divestitures and relationship conclusions | Product Category | Reported Net Sales Change | Organic Net Sales Change | | :--------------- | :------------------------ | :----------------------- | | Whiskey | Flat | Flat | | Tequila | -1% | +1% | | Ready-to-Drink | +6% | +9% | | Rest of Portfolio| -27% | +17% | | Non-branded/bulk | -44% | -44% | [Whiskey Portfolio](index=1&type=section&id=1.2.1%20Whiskey%20Portfolio) Whiskey net sales were flat due to new product launches offsetting declines in core Jack Daniel's Tennessee Whiskey volumes in key markets - **Net sales for Whiskey products were flat** (flat organic) due to strong initial shipments of Jack Daniel's Tennessee Blackberry and growth of Jack Daniel's Tennessee Apple in Brazil, offset by lower volumes of Jack Daniel's Tennessee Whiskey in the United States and Germany[3](index=3&type=chunk) | Brand | Reported Net Sales Change | Organic Net Sales Change | | :-------------------- | :------------------------ | :----------------------- | | Jack Daniel's Tennessee Whiskey | -4% | -4% | | Jack Daniel's Tennessee Apple | +18% | +16% | | Gentleman Jack | +8% | +11% | [Tequila Portfolio](index=2&type=section&id=1.2.2%20Tequila%20Portfolio) Herradura's net sales declined due to U.S. competition, while el Jimador's sales increased from new bottle design, inventory build, and innovation - Herradura's net sales **declined 16% (-15% organic)** due to lower volumes in the competitive U.S. tequila category. el Jimador's net sales **increased 14% (+16% organic)** driven by higher U.S. volumes from a new bottle design, inventory build, and Cristalino innovation[7](index=7&type=chunk) [Ready-to-Drink (RTD) Portfolio](index=2&type=section&id=1.2.3%20Ready-to-Drink%20(RTD)%20Portfolio) New Mix achieved strong organic growth from market share gains, while Jack Daniel's RTD/RTP portfolio saw a slight decline due to Canadian performance - **New Mix net sales increased 26% (+36% organic)** fueled by market share gains. Jack Daniel's RTD/RTP portfolio **declined 2% (-1% organic)** due to declines in Canada, partially offset by U.S. growth[7](index=7&type=chunk) [Rest of Portfolio & Non-branded](index=2&type=section&id=1.2.4%20Rest%20of%20Portfolio%20%26%20Non-branded) The Rest of Portfolio net sales declined significantly due to prior-year divestitures and relationship conclusions, while non-branded sales decreased from lower used barrel sales - **Rest of Portfolio net sales declined 27% (+17% organic)** primarily due to the absence of Sonoma-Cutrer and Finlandia prior-year TSAs and the conclusion of the Korbel Champagne Cellars relationship. This was partially offset by new agency brand distribution in Japan and Mexico, and Gin Mare growth in Italy[7](index=7&type=chunk) - **Net sales for non-branded and bulk decreased 44%** driven by lower used barrel sales[7](index=7&type=chunk) [Geographic Performance Highlights](index=1&type=section&id=1.3%20Geographic%20Performance%20Highlights) Emerging markets and Travel Retail showed strong net sales growth, counteracting declines in the United States and Developed International markets due to divestitures and soft consumer demand | Geographic Area | Reported Net Sales Change | Organic Net Sales Change | | :------------------ | :------------------------ | :----------------------- | | United States | -8% | -2% | | Developed International | -8% | -9% | | Emerging | +20% | +25% | | Travel Retail | +8% | +7% | [United States](index=2&type=section&id=1.3.1%20United%20States) U.S. net sales decreased due to prior-year TSA absence, lower volumes of key brands, and the end of the Korbel relationship, partially offset by new product shipments - **Net sales in the United States decreased 8% (-2% organic)** due to the absence of the Sonoma-Cutrer prior-year TSA, lower volumes of Jack Daniel's Tennessee Whiskey and Herradura, and the end of the Korbel relationship. This was partially offset by strong initial shipments for Jack Daniel's Tennessee Blackberry and distributor transitions[7](index=7&type=chunk) [Developed International Markets](index=2&type=section&id=1.3.2%20Developed%20International%20Markets) Developed International net sales declined due to soft consumer demand, macroeconomic uncertainty, and lower volumes of Jack Daniel's Tennessee Whiskey in key markets - **Net sales declined 8% (-9% organic)** due to soft consumer demand impacted by macroeconomic and geopolitical uncertainty, particularly lower volumes of Jack Daniel's Tennessee Whiskey in Germany and the United Kingdom, and the absence of American-made alcohol in Canadian provinces[7](index=7&type=chunk) [Emerging Markets](index=2&type=section&id=1.3.3%20Emerging%20Markets) Emerging markets net sales increased significantly, driven by higher volumes across the Jack Daniel's family of brands in Brazil and Türkiye, and strong growth of New Mix - **Net sales increased 20% (+25% organic)** driven by higher volumes across the Jack Daniel's family of brands, led by Brazil and Türkiye, and double-digit growth of New Mix[7](index=7&type=chunk) [Travel Retail Channel](index=2&type=section&id=1.3.4%20Travel%20Retail%20Channel) Travel Retail net sales increased due to higher volumes of Jack Daniel's Tennessee Whiskey and Gin Mare, influenced by shipment timing and positive foreign exchange - **Net sales increased 8% (+7% organic)** due to higher volumes of Jack Daniel's Tennessee Whiskey and Gin Mare, partially attributed to shipment timing and positive foreign exchange effects[7](index=7&type=chunk) [Other P&L Items](index=3&type=section&id=1.4%20Other%20P%26L%20Items) Gross margin expanded despite cost pressures, while operating income declined due to unfavorable foreign exchange, $12 million in restructuring charges, and a $19 million non-operating pension settlement charge | Metric | Q1 FY26 (Reported) | Change YoY | Q1 FY26 (Organic) | Change YoY (Organic) | | :------------------------- | :----------------- | :--------- | :---------------- | :------------------- | | Gross Profit | N/A | -2% | N/A | -2% | | Gross Margin | 59.8% | +40 bps | N/A | N/A | | Advertising Expenses | N/A | -4% | N/A | -3% | | SG&A Expenses | N/A | -6% | N/A | -7% | | Operating Income | N/A | -7% | N/A | +2% | | Operating Margin | 28.2% | -140 bps | N/A | N/A | - The company incurred **$12 million in charges** related to the strategic restructuring initiative announced in January 2025[11](index=11&type=chunk) - A non-operating pension settlement charge of **$19 million was recognized**, largely related to an early retirement benefit offered in fiscal 2025[11](index=11&type=chunk) [Financial Stewardship](index=3&type=section&id=1.5%20Financial%20Stewardship) Brown-Forman declared a regular quarterly cash dividend of $0.2265 per share, continuing its 81-year history of payments and 41 consecutive years of increases - A regular quarterly cash dividend of **$0.2265 per share was declared**, payable on October 1, 2025[9](index=9&type=chunk) - Brown-Forman has paid regular quarterly cash dividends for **81 consecutive years** and increased the regular dividend for **41 consecutive years**[9](index=9&type=chunk) [Fiscal 2026 Outlook](index=3&type=section&id=Fiscal%202026%20Outlook) Brown-Forman anticipates a challenging operating environment for fiscal 2026 with low visibility, focusing on strategic initiatives to unlock future growth [Fiscal 2026 Outlook](index=3&type=section&id=2.1%20Fiscal%202026%20Outlook) Brown-Forman anticipates a challenging fiscal 2026 operating environment with low visibility, focusing on strategic initiatives like U.S. distribution evolution, restructuring, and new product innovation for long-term growth - The operating environment for fiscal 2026 is expected to be **challenging with low visibility** due to macroeconomic and geopolitical volatility, consumer uncertainty, potential tariffs, and lower non-branded sales of used barrels[10](index=10&type=chunk) - Strategic initiatives for fiscal 2026 include significant evolution of U.S. distribution, a restructuring initiative, and meaningful new product innovation to unlock future growth[10](index=10&type=chunk) | Expectation | Range/Value | | :-------------------------- | :---------------- | | Organic Net Sales Decline | Low-single digit | | Organic Operating Income Decline | Low-single digit | | Effective Tax Rate | 21% to 23% | | Capital Expenditures | $125 to $135 million | [Company Information & Contacts](index=4&type=section&id=Company%20Information%20%26%20Contacts) This section provides an overview of Brown-Forman Corporation, its global operations, premium brand portfolio, and key investor and media contact information [Company Overview](index=4&type=section&id=3.1%20Company%20Overview) Brown-Forman Corporation, a global spirits leader for over 155 years, is headquartered in Louisville, Kentucky, with a premium brand portfolio and operations in over 170 countries with approximately 5,000 employees - Brown-Forman Corporation is a **global leader in the spirits industry for over 155 years**, headquartered in Louisville, Kentucky[13](index=13&type=chunk) - Its premium portfolio includes the Jack Daniel's Family of Brands, Woodford Reserve, Old Forester, New Mix, el Jimador, Herradura, The Glendronach, Glenglassaugh, Benriach, Diplomático Rum, Gin Mare, Fords Gin, Chambord, and Slane[13](index=13&type=chunk) - The company has approximately **5,000 employees worldwide** and shares its products in more than **170 countries**[13](index=13&type=chunk) [Investor & Media Contacts](index=4&type=section&id=3.2%20Investor%20%26%20Media%20Contacts) Contact information for external communications and investor relations is provided for inquiries regarding the company's financial results and operations - Elizabeth Conway is the Director of External Communications, and Sue Perram is the Vice President and Director of Investor Relations[14](index=14&type=chunk) [Forward-Looking Statements & Risk Factors](index=5&type=section&id=Forward-Looking%20Statements%20%26%20Risk%20Factors) This section outlines the company's forward-looking statement disclaimer and details key risk factors that could materially impact future financial results and operations [Forward-Looking Statements](index=5&type=section&id=4.1%20Forward-Looking%20Statements) This section disclaims forward-looking statements, noting inherent risks and uncertainties that may cause actual results to differ materially, with no intent to update unless legally required - The press release contains forward-looking statements that involve risks, uncertainties, and other factors that could cause actual results to differ materially[15](index=15&type=chunk) - The company does not intend to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law[15](index=15&type=chunk) [Key Risk Factors](index=5&type=section&id=4.2%20Key%20Risk%20Factors) Key risks include substantial dependence on the Jack Daniel's family of brands, intense competition, distribution disruptions, trade policy changes, supply chain issues, and global economic conditions, alongside product liability, negative publicity, and talent retention challenges - Key risks include substantial dependence on the **Jack Daniel's family of brands**, intense competition, disruption of distribution networks, and changes in trade policies, tariffs, and import/export regulations[17](index=17&type=chunk) - Other significant risks involve changes in consumer preferences, production facility or supply chain disruption, higher costs of raw materials or labor, and unfavorable global or regional economic conditions[17](index=17&type=chunk) - Additional risks include product recalls, negative publicity, failure to attract or retain talent, fluctuations in foreign currency exchange rates, changes in laws/regulations, and cyber breaches[17](index=17&type=chunk) [Unaudited Consolidated Financial Statements](index=6&type=section&id=Unaudited%20Consolidated%20Financial%20Statements) This section presents the unaudited consolidated statements of operations, balance sheets, and cash flows for Brown-Forman, detailing the company's financial performance and position [Consolidated Statements of Operations](index=6&type=section&id=5.1%20Consolidated%20Statements%20of%20Operations) For the three months ended July 31, 2025, Brown-Forman reported a 3% decrease in net sales to $924 million, a 7% decline in operating income to $260 million, and a 13% decrease in net income to $170 million | Metric | 3 Months Ended July 31, 2024 (Millions) | 3 Months Ended July 31, 2025 (Millions) | Change (%) | | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | :--------- | | Net sales | $951 | $924 | (3%) | | Cost of sales | $386 | $372 | (4%) | | Gross profit | $565 | $552 | (2%) | | Advertising expenses | $126 | $120 | (4%) | | Selling, general, and administrative expenses | $188 | $177 | (6%) | | Restructuring and other charges | — | $12 | N/A | | Operating income | $281 | $260 | (7%) | | Net income | $195 | $170 | (13%) | | Diluted earnings per share | $0.41 | $0.36 | (13%) | | Gross margin | 59.4% | 59.8% | +0.4% | | Operating margin | 29.6% | 28.2% | -1.4% | [Condensed Consolidated Balance Sheets](index=7&type=section&id=5.2%20Condensed%20Consolidated%20Balance%20Sheets) As of July 31, 2025, total assets increased to $8,171 million, while total liabilities rose to $4,183 million, primarily due to increased current portion of long-term debt and dividends payable | Metric | April 30, 2025 (Millions) | July 31, 2025 (Millions) | | :-------------------------------------- | :------------------------ | :----------------------- | | Cash and cash equivalents | $444 | $471 | | Total current assets | $4,195 | $4,178 | | Total assets | $8,086 | $8,171 | | Total current liabilities | $1,080 | $1,497 | | Long-term debt | $2,421 | $2,075 | | Total liabilities | $4,093 | $4,183 | | Stockholders' equity | $3,993 | $3,988 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=5.3%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the three months ended July 31, 2025, cash provided by operating activities significantly increased to $160 million, while cash used for financing activities rose to $138 million, and investing activities provided $2 million | Cash Flow Activity | 3 Months Ended July 31, 2024 (Millions) | 3 Months Ended July 31, 2025 (Millions) | | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Cash provided by operating activities | $17 | $160 | | Cash provided by (used for) investing activities | $10 | $2 | | Cash provided by (used for) financing activities | ($51) | ($138) | | Net increase (decrease) in cash, cash equivalents, and restricted cash | ($30) | $27 | | Cash and cash equivalents at end of period | $416 | $471 | [Supplemental Financial Information](index=9&type=section&id=Supplemental%20Financial%20Information) This section provides supplemental financial information, including reconciliations of organic performance, detailed brand and geographic sales, and estimated distributor inventory changes [Organic Performance Reconciliation (Schedule A)](index=9&type=section&id=6.1%20Organic%20Performance%20Reconciliation%20(Schedule%20A)) Schedule A reconciles reported to organic changes for key statement of operations metrics, adjusting for acquisitions, divestitures, other items, and foreign exchange to reveal underlying business performance | Metric | Reported Change | Acquisitions and Divestitures | Other Items | Foreign Exchange | Organic Change | | :--------------------- | :-------------- | :---------------------------- | :---------- | :--------------- | :------------- | | Net sales | (3%) | 3% | —% | —% | 1% | | Gross profit | (2%) | (1%) | —% | 1% | (2%) | | Advertising expenses | (4%) | 2% | —% | (1%) | (3%) | | SG&A | (6%) | —% | (1%) | (1%) | (7%) | | Operating income | (7%) | 2% | 3% | 5% | 2% | [Brand & Product Category Performance (Schedule B)](index=10&type=section&id=6.2%20Brand%20%26%20Product%20Category%20Performance%20(Schedule%20B)) Schedule B details net sales changes by product category and brand, illustrating the impact of acquisitions, divestitures, and foreign exchange on organic growth, with New Mix and Gin Mare showing strong performance | Product Category / Brand Family | Reported Net Sales % Change | Acquisitions and Divestitures | Foreign Exchange | Organic Net Sales % Change | | :------------------------------ | :-------------------------- | :---------------------------- | :--------------- | :------------------------- | | Whiskey | —% | —% | —% | —% | | Jack Daniel's Tennessee Whiskey | (4%) | —% | —% | (4%) | | Jack Daniel's Tennessee Apple | 18% | —% | (2%) | 16% | | Ready-to-Drink | 6% | —% | 3% | 9% | | New Mix | 26% | —% | 10% | 36% | | Tequila | (1%) | —% | 1% | 1% | | el Jimador | 14% | —% | 1% | 16% | | Herradura | (16%) | —% | 1% | (15%) | | Rest of Portfolio | (27%) | 44% | —% | 17% | | Gin Mare | 40% | —% | (4%) | 36% | [Geographic Performance Details (Schedule C)](index=11&type=section&id=6.3%20Geographic%20Performance%20Details%20(Schedule%20C)) Schedule C details geographic net sales changes, highlighting strong organic growth in Emerging markets, particularly Brazil and Türkiye, contrasted by significant declines in Developed International markets like Canada and the United Kingdom | Geographic Area | Reported Net Sales % Change | Acquisitions and Divestitures | Foreign Exchange | Organic Net Sales % Change | | :------------------ | :-------------------------- | :---------------------------- | :--------------- | :------------------------- | | United States | (8%) | 6% | —% | (2%) | | Developed International | (8%) | 1% | (1%) | (9%) | | Germany | (10%) | 1% | (3%) | (13%) | | United Kingdom | (16%) | 1% | —% | (16%) | | Canada | (62%) | 2% | —% | (59%) | | Emerging | 20% | 1% | 3% | 25% | | Mexico | 14% | —% | 9% | 22% | | Brazil | 31% | —% | (1%) | 30% | | Türkiye | 11% | —% | 27% | 39% | | Travel Retail | 8% | —% | (2%) | 7% | [Estimated Distributor Inventory Changes (Schedule D)](index=12&type=section&id=6.4%20Estimated%20Distributor%20Inventory%20Changes%20(Schedule%20D)) Schedule D estimates distributor inventory changes, showing increases in the U.S. and Emerging markets that could impact future organic trends, while Herradura's inventory decrease suggests potential for organic trend increases | Geographic Area - Net Sales | Estimated Net Change in Distributor Inventories vs. Prior-Year Period | | :-------------------------- | :------------------------------------------------------------------ | | United States | 6% | | Developed International | (1%) | | Emerging | 10% | | Travel Retail | —% | | Product Category / Brand Family / Brand | Estimated Net Change in Distributor Inventories vs. Prior-Year Period | | :-------------------------------------- | :------------------------------------------------------------------ | | Whiskey | 4% | | Jack Daniel's Tennessee Apple | 14% | | Old Forester | 13% | | Tequila | 7% | | el Jimador | 20% | | Herradura | (5%) | - A positive difference indicates a net increase in distributors' inventories, implying that organic trends could decrease as distributors reduce inventories. A negative difference implies that organic trends could increase as distributors rebuild inventories[33](index=33&type=chunk) [Notes to Financial Information](index=13&type=section&id=Notes%20to%20Financial%20Information) This section provides important context for the financial information, including definitions of non-GAAP financial measures and key aggregations and metrics used in the report [Non-GAAP Financial Measures](index=13&type=section&id=7.1%20Non-GAAP%20Financial%20Measures) This section explains the use of non-GAAP 'organic change' measures, which adjust GAAP results for acquisitions, divestitures, other items, and foreign exchange to provide a clearer understanding of underlying business performance and comparability - Non-GAAP measures, such as '**organic change**,' are used to supplement GAAP results by adjusting for acquisitions and divestitures, other items, and foreign exchange to provide a consistent understanding of performance[36](index=36&type=chunk)[37](index=37&type=chunk)[43](index=43&type=chunk) - Adjustments for acquisitions and divestitures include removing gains/losses on sales, non-recurring effects, and operating activity for non-comparable periods related to brands like Gin Mare, Finlandia, Sonoma-Cutrer, and Korbel Champagne Cellars[37](index=37&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk) - Other items adjusted for include a **$13 million franchise tax refund in Q1 FY25**, **$12 million in restructuring charges in Q1 FY26**, and an **$18 million net benefit from substitution drawback claims in Q1 FY26**[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk) [Definitions of Aggregations and Metrics](index=15&type=section&id=7.2%20Definitions%20of%20Aggregations%20and%20Metrics) This section defines key geographic and brand aggregations, including 'Developed International,' 'Emerging,' 'Whiskey,' 'Ready-to-Drink,' and 'Tequila,' along with metrics like 'Shipments,' 'Depletions,' and 'Estimated net change in distributor inventories' for understanding sales trends - Geographic aggregations include '**Developed International**' (IMF advanced economies excluding U.S.), '**Emerging**' (IMF emerging and developing economies), and '**Travel Retail**' (global duty-free and U.S. military customers)[49](index=49&type=chunk) - Brand aggregations define categories like '**Whiskey**' (including Jack Daniel's family, Woodford Reserve), '**Ready-to-Drink**' (RTD/RTP products like Jack Daniel's RTD/RTP, New Mix), and '**Tequila**' (el Jimador, Herradura)[47](index=47&type=chunk)[49](index=49&type=chunk) - Other metrics include '**Shipments**' (revenue recognition), '**Depletions**' (volume reflecting consumer demand), '**Consumer takeaway**' (retail sales value by consumers), and '**Estimated net change in distributor inventories**' (difference between shipments and depletions to gauge inventory levels)[52](index=52&type=chunk)

Sales and Market Performance - In fiscal 2025, the United States accounted for 44% of Brown-Forman's net sales, with the remaining 56% from international markets[19]. - Approximately 27%, 28%, and 29% of reported net sales for fiscal 2023, 2024, and 2025, respectively, occurred in the fourth calendar quarter, indicating seasonality in sales[26]. - The company operates in over 170 countries, with Mexico, Germany, Australia, and the United Kingdom being significant markets, each contributing 7%, 6%, 5%, and 4% to net sales in fiscal 2025[19]. - In fiscal 2025, two largest customers accounted for approximately 13% and 11% of consolidated net sales, indicating a diversified customer base[25]. - Jack Daniel's Tennessee Whiskey remains the 1 selling American whiskey globally, with super-premium offerings receiving World's Best Awards in 2025[13]. - Woodford Reserve sold over 1.8 million nine-liter cases for the fiscal year ended April 30, 2025, with strong double-digit compound annual growth rate since its introduction[44]. - The Jack Daniel's family of brands is the primary revenue driver, with significant investment in brand reputation and consumer trust[73]. - Net sales in the United States declined by 7%, driven by the divestiture of Sonoma-Cutrer and lower volumes in a challenging consumer environment[183]. - Net sales decreased by 5% to $4.0 billion in fiscal 2025, driven by a 7% decline in volume, partially offset by a 2% increase in price/mix[195]. Financial Performance - In fiscal 2025, the company reported net sales of $4.0 billion, a decrease of 5% compared to fiscal 2024, with organic net sales increasing by 1%[179]. - Gross profit for fiscal 2025 was $2.3 billion, down 7% from fiscal 2024, resulting in a gross margin of 58.9%, a decline of 1.5 percentage points[179]. - Operating income decreased by 22% to $1.1 billion in fiscal 2025, primarily due to the absence of gains from the sale of Sonoma-Cutrer and Finlandia, as well as a $47 million impairment charge for the Gin Mare brand[179][173]. - Diluted earnings per share fell to $1.84, a decrease of 14% compared to fiscal 2024, influenced by lower operating income and a gain on the sale of the investment in Duckhorn[179]. - The cumulative total shareholder return for Class B common stock decreased from $100 in 2020 to $61 in 2025, underperforming compared to the S&P 500 Index which increased from $100 to $207 in the same period[146]. - The effective tax rate for fiscal 2025 was 19.6%, down from 21.2% in fiscal 2024[202]. - The company experienced a 33% decline in net sales for the Rest of Portfolio, impacted by divestitures and lower volumes[192]. Strategic Initiatives and Brand Development - Brown-Forman's portfolio includes over 40 brands, with significant recognition and awards for premium products like Woodford Reserve and Old Forester[13]. - The company emphasizes brand-building through creative marketing strategies, aiming to enhance brand recognition and consumer demand[17]. - The Jack Daniel's family of brands will continue to pursue growth opportunities across markets and consumer segments[44]. - The company launched several new products, including Jack Daniel's 14 Year Old and Woodford Reserve Double Double Oaked, contributing to brand growth[175]. - The company launched the Jack & Coke ready-to-drink cocktail in over 25 markets, including the United States, Japan, and the United Kingdom[45]. Sustainability and Community Engagement - The company is committed to environmental sustainability and responsible marketing, which are integral to its long-term growth strategy[40]. - The 2030 Sustainability Strategy was revised to align with industry best practices and current climate science, focusing on supply chain impacts[54]. - A 10-year, $50 million commitment was made to five organizations in west Louisville to support community initiatives[57]. - The anaerobic digester project at the Jack Daniel Distillery is expected to convert byproducts to renewable energy and fertilizer, operational by fiscal 2026[59]. Risks and Challenges - The company faces risks from changes in trade policies and tariffs, including a 25% tariff on goods imported from Canada, which has led to retaliatory measures affecting sales[78]. - Consolidation among beverage alcohol producers and distributors may hinder product distribution and increase competition for shelf space[76]. - The company has experienced a significant decline in sales due to negative publicity, which could adversely affect financial results[73]. - The company is adapting to a more challenging competitive landscape, requiring agility in adopting digital technologies and building analytical capabilities[76]. - Changes in route-to-consumer models could result in temporary or long-term sales disruptions and higher costs[75]. - The company faces risks from changing consumer preferences, which may lead to a decline in demand for premium and super-premium products[79]. - Increased competition from new entrants and diversification by existing suppliers could negatively impact market share and pricing strategies[80]. - Economic downturns could lead to decreased consumer spending and demand for beverage alcohol products, impacting sales[92]. - Cybersecurity threats pose risks to IT systems and data privacy, with past incidents highlighting vulnerabilities that could disrupt operations[117]. Operational and Structural Aspects - The company employs approximately 5,000 people across 45 countries, with a low voluntary turnover rate[62]. - As of May 1, 2025, the company owned and operated 17 distribution companies across 18 countries, transitioning from third-party to owned distribution models[74]. - The company operates production facilities including distilleries and bottling plants in multiple countries, with significant operations in the United States, Mexico, and Ireland[138]. - The company has agreements for contract production in various countries, including Australia, Belgium, and China, to support its global operations[138]. - The company maintains a dual-class share structure, with the Brown family controlling a majority of the voting stock, which may affect the attractiveness of the company as a takeover target[123]. Financial Management and Liquidity - Cash and cash equivalents were $446 million at April 30, 2024, and $444 million at April 30, 2025, with approximately 54% held by foreign subsidiaries[207]. - The company has a $900 million commercial paper program, with average balances of $475 million in 2024 and $373 million in 2025[208][209]. - The average interest rate for the commercial paper was 5.46% in 2024 and decreased to 5.13% in 2025[209]. - The company expects to meet short-term liquidity needs through cash generated from operations and borrowings under the commercial paper program[211]. - Long-term cash requirements primarily involve payments related to long-term debt, employee benefit obligations, and deferred tax liabilities[210].

Financial Performance - Fourth quarter net sales decreased 7% to $894 million, with a 3% decline on an organic basis[3] - Full year reported net sales decreased 5% to $4.0 billion, but increased 1% on an organic basis[3] - Operating income for the fourth quarter decreased 45% to $205 million, and diluted earnings per share decreased 45% to $0.31[3] - Gross profit declined 7% (-2% organic), with gross margin contracting 150 basis points to 58.9% due to higher input costs and unfavorable fixed cost absorption[8] - Net sales for the Tequila portfolio declined 14% (-12% organic), impacted by macroeconomic conditions in Mexico and competition in the U.S.[8] - Net sales decreased by 5% from $4,178 million in 2024 to $3,975 million in 2025[24] - Gross profit declined by 7% from $2,526 million in 2024 to $2,343 million in 2025[24] - Operating income fell by 22% from $1,414 million in 2024 to $1,107 million in 2025[24] - Net income decreased by 15% from $1,024 million in 2024 to $869 million in 2025[24] - Basic earnings per share dropped by 14% from $2.15 in 2024 to $1.84 in 2025[24] - Cash provided by operating activities decreased from $647 million in 2024 to $598 million in 2025[28] - Total assets slightly decreased from $8,166 million in 2024 to $8,086 million in 2025[26] - Total liabilities decreased from $4,649 million in 2024 to $4,093 million in 2025[26] - The effective tax rate increased from 21.2% in 2024 to 19.6% in 2025[24] - Cash dividends paid per common share increased from $0.8466 in 2024 to $0.8886 in 2025[24] - Total portfolio net sales decreased by 5% compared to the prior year, with organic growth at 1%[33] Restructuring and Cost Management - A restructuring initiative resulted in $63 million in charges, with expected annualized savings of $70 to $80 million[11] - The operating margin decreased by 600 basis points to 27.9% for the full year, primarily due to the absence of gains from divested brands[14] - The company approved a restructuring initiative to reduce its structural cost base, including a 12% workforce reduction and the closure of the Louisville-based Brown-Forman Cooperage, resulting in a $63 million impact on cost of sales and operating income for Q3 and Q4 of fiscal 2025[48] - The restructuring and other charges included $60 million in costs and $3 million in inventory charges related to restructuring, impacting overall financial performance[50] Market Trends and Sales Performance - Whiskey category depletions declined by 3%, while shipments increased by 1%[31] - Jack Daniel's Family reported a 4% decrease in depletions and no change in shipments[31] - Ready-to-Drink segment saw a 3% increase in depletions and a 4% increase in shipments[31] - Tequila category experienced an 11% decline in both depletions and shipments[31] - United States net sales decreased by 7%, with organic growth at -2%[33] - Emerging markets showed a 2% decline in net sales but a 9% organic growth[33] - Operating income increased by 7% year-over-year[36] - Non-branded and bulk sales increased by 18% compared to the prior year[34] Revenue Recognition and Inventory Management - The company recognizes revenue upon shipment, with "depletions" measuring consumer demand more accurately than shipments to distributors[56] - A positive estimated net change in distributor inventories suggests potential decreases in organic trends as distributors reduce inventories, while a negative change indicates potential increases as they rebuild inventories[56] - Estimated fluctuations in distributor inventories are provided to understand performance trends, particularly in the U.S. market, which operates under a regulated three-tier system[49] Strategic Decisions and Market Relationships - The company divested Sonoma-Cutrer and Finlandia Vodka, leading to adjustments in product category aggregations starting in fiscal 2025[53] - The company announced the end of its sales, marketing, and distribution relationship with Korbel California Cellars effective June 30, 2025, impacting future market strategies[56] - The company aggregates markets by economic development stages and brands by beverage alcohol categories to explain operational results and highlight trends[51] - Top developed international markets include Germany, Australia, the UK, France, and Canada, while top emerging markets are Mexico, Poland, Brazil, and Türkiye, reflecting net sales of branded products[54] Miscellaneous - The company recognized a $13 million franchise tax refund, impacting overall financial performance positively[47] - The company uses non-GAAP measures like "organic change" to assess performance, excluding foreign exchange impacts, which can distort trends; this approach aids in consistent period comparisons and management incentive calculations[48] - Capital expenditures are planned to be in the range of $125 to $135 million for fiscal 2026[15] - The company anticipates organic net sales and operating income to decline in the low-single digit range for fiscal 2026[15]

Financial Performance - Net sales for the nine months ended January 31, 2025, were $3.1 billion, a decrease of 4% compared to the same period last year, primarily due to the negative effects of acquisitions and divestitures, foreign exchange, and JDCC[108]. - Gross profit for the same period was $1.8 billion, a decrease of 6%, with gross margin declining by 1.5 percentage points to 59.4% from 60.9%[108]. - Operating income for the nine months ended January 31, 2025, was $902 million, a decrease of 13%, driven by higher costs and the absence of the gain on the sale of the Finlandia vodka business[108]. - Diluted earnings per share for the nine months ended January 31, 2025, were $1.53, a decrease of 4% from $1.58 in the prior year[108]. - Operating income for the three months ended January 31, 2025, totaled $280 million, a decrease of 25% compared to the same period last year, with an operating margin decrease of 7.8 percentage points to 27.1%[138]. - For the nine months ended January 31, 2025, operating income totaled $902 million, a decrease of 13% compared to the same period last year, with an operating margin decrease of 3.0 percentage points to 29.3%[139]. - Diluted earnings per share for the three months ended January 31, 2025, was $0.57, a decrease of 5% from $0.60 reported for the same period last year[142]. Sales and Market Trends - Brown-Forman's top developed international markets include Germany, Australia, the UK, France, Canada, and Spain, contributing significantly to net sales[90]. - Net sales in the United States declined by 5%, primarily due to the divestiture of Sonoma-Cutrer and lower volumes of other brands[112]. - Non-branded and bulk business saw a significant increase in net sales by 38%, driven by higher prices for used barrels[112]. - Spain's net sales declined 9%, driven by lower volumes of JDTW, partially offset by positive contributions from Diplomático and Gin Mare[117]. - Net sales in the Rest of Developed International declined 6%, impacted by the divestiture of Finlandia and lower volumes of the Jack Daniel's family of brands in South Korea[117]. - Mexico's net sales decreased 9%, primarily due to lower volumes of the Tequila portfolio and negative foreign exchange effects[117]. - Brazil's net sales increased 6%, led by higher volumes of JDTW and JDTA, despite negative foreign exchange impacts[117]. - Woodford Reserve's net sales increased 10%, driven by higher volumes and favorable price/mix in the United States[121]. - Net sales for JD RTD/RTP brands declined 7%, driven by the impact of JDCC and lower volumes in Germany[125]. Cost Management and Restructuring - The company plans to reduce its structural cost base by approximately 12% through workforce reductions and closing the Louisville-based Brown-Forman Cooperage, impacting operating expenses by $33 million[88]. - The restructuring plan included a workforce reduction of approximately 12% and closing the Louisville-based Brown-Forman Cooperage, negatively impacting operating expenses[106]. - Operating expenses totaled $928 million for the nine months ended January 31, 2025, a decrease of $80 million, or 8%[136]. Gains and Divestitures - Brown-Forman reported a pre-tax gain of $92 million from the sale of its Finlandia vodka business during fiscal 2024[82]. - The company recognized a pre-tax gain of $175 million from the sale of the Sonoma-Cutrer wine business, which included $50 million in cash and a 21.4% ownership stake in The Duckhorn Portfolio Inc.[83]. - The company recognized a $78 million gain on the sale of its investment in Duckhorn during the three months ended January 31, 2025[105]. - The divestiture of Sonoma-Cutrer and Finlandia has led to a reclassification of the "Rest of Portfolio" category, affecting financial comparisons[93]. - The company sold the Finlandia vodka business for $196 million and the Sonoma-Cutrer wine business for $50 million cash, impacting net sales and operating income negatively[104][105]. Tax and Cash Flow - A franchise tax refund of $13 million was recognized in the first quarter of fiscal 2025 due to a change in tax calculation methodology in Tennessee[87]. - The effective tax rate for the three months ended January 31, 2025, was 18.7%, an increase from 16.5% in the same period last year[140]. - The forecasted effective tax rate range for fiscal 2025 has been updated to approximately 20% to 22%[144]. - Cash provided by operations for the nine months ended January 31, 2025, was $446 million, an increase of $84 million from the same period last year[151]. - Cash used for financing activities during the nine months ended January 31, 2025, was $546 million, compared to $212 million in the prior-year period[153]. Organic Growth and Market Insights - Brown-Forman's organic change measures are adjusted for acquisitions, divestitures, foreign exchange, and other items to provide a clearer view of performance[81]. - The company uses consumer takeaway data to estimate market share and trends, indicating a leading indicator of consumer demand[96]. - Estimated net changes in distributor inventories are calculated to understand the impact on organic trends, with positive differences indicating potential decreases in organic trends[99]. - Organic net sales growth is expected to be in the range of 2% to 4% for fiscal 2025[144].

Financial Performance - Third quarter reported net sales decreased 3% to $1.0 billion, with a 6% increase on an organic basis compared to the prior-year period[1]. - Year-to-date reported net sales decreased 4% to $3.1 billion, with a 2% increase on an organic basis compared to the prior-year period[1]. - Operating income for the nine months decreased 13% to $902 million (+5% organic), with an operating margin decrease of 300 basis points to 29.3%[9]. - Net sales for the nine months ended January 31, 2025, decreased by 4% to $3,081 million compared to $3,214 million in the prior year[21]. - Operating income for the same period fell by 13% to $902 million, down from $1,039 million[21]. - Net income decreased by 5% to $723 million, compared to $758 million in the previous year[21]. - Basic earnings per share for the nine months ended January 31, 2025, were $1.53, a 4% decline from $1.59[21]. - Total net sales decreased by 4% compared to the prior-year period, with organic growth at 2%[33]. Gross Profit and Margins - Gross profit declined 6% (-1% organic), with gross margin contracting 150 basis points to 59.4% due to higher costs and negative foreign exchange effects[3]. - Gross margin decreased to 59.4% from 60.9% year-over-year[21]. Dividends and Shareholder Returns - The company has paid regular quarterly cash dividends for 81 consecutive years and increased the regular dividend for 41 consecutive years[10]. - Cash dividends paid per common share increased to $0.6621 from $0.6288[21]. Market Performance - The Tequila portfolio net sales declined 15% (-13% organic), impacted by a competitive environment in the U.S. and challenging macroeconomic conditions in Mexico[7]. - The United States market reported a 5% decline in net sales, while emerging markets showed a 4% decline[33]. - Non-branded and bulk sales surged by 38%, contributing to a 39% organic growth[33]. - Whiskey category depletions declined by 3%, while shipments increased by 1%[30]. - Woodford Reserve saw a significant increase in shipments, up 6% year-over-year[30]. - Ready-to-Drink segment experienced a 4% increase in shipments, with New Mix growing by 11%[30]. - The overall portfolio's total volume was 35.7 million 9-liter cases, a slight decrease of 1%[30]. Cost Management and Operational Changes - Operating income increased by 7%, reflecting improved cost management[36]. - The company approved a plan to reduce its structural cost base, resulting in a workforce reduction of approximately 12% and a $33 million impact on operating expenses and income[47]. Tax and Financial Guidance - The forecasted effective tax rate range has been updated to approximately 20% to 22% from 21% to 23%[11]. - Organic net sales growth is expected in the 2% to 4% range for fiscal 2025[14]. - Capital expenditures are planned to be in the range of $180 to $190 million[14]. Cash Flow and Assets - Cash provided by operating activities increased to $446 million from $362 million[25]. - Total current assets rose to $4,279 million, up from $4,036 million[23]. - Total liabilities decreased to $4,248 million from $4,649 million[23]. Inventory and Market Analysis - Estimated net change in distributor inventories increased by 4% in both the United States and Developed International markets[34]. - The company calculates "estimated net change in distributor inventories" to understand the relationship between shipments and actual consumer demand[57]. - A positive difference in estimated net change indicates a net increase in distributor inventories, potentially leading to decreased organic trends[57]. - The company emphasizes the importance of understanding changes in distributor inventories in the context of operating results[57]. Strategic Insights - The company uses non-GAAP measures like "organic change" to assess performance, excluding foreign exchange fluctuations to provide a clearer view of business trends[47]. - The company aggregates markets by economic development stage, with top developed international markets including Germany, Australia, and the UK[50]. - The company's top emerging markets include Mexico, Poland, and Brazil, reflecting its net sales strategy[54]. - Consumer takeaway data, sourced from Nielsen and NABCA, is used to estimate market share and consumer demand trends[57]. - The "Rest of Portfolio" category now includes Wine and Vodka due to recent divestitures, affecting fiscal 2024 comparisons[52].

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% stake in Duckhorn, negatively impacting net sales and operating income[121][122]. Financial Performance - For the six months ended October 31, 2024, the company reported net sales of $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% decrease, with gross margin declining by 2.4 percentage points to 59.2%[123]. - Operating income decreased by 7% to $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% from $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% from 60.6% year-over-year[160]. - Operating expenses for the three months ended October 31, 2024, totaled $305 million, a decrease of $27 million, or 8%, driven by lower advertising and SG&A expenses[164]. - Operating income for the three months ended October 31, 2024, was $341 million, an increase of $2 million, or 1%, with an operating margin of 31.1%[169]. Tax and Cash Flow - The effective tax rate for the six months was 20.1%, down from 22.4% in the same period last year[125]. - The effective tax rate for the three months ended October 31, 2024, was 17.6%, down from 22.0% in the same period last year[171]. - Cash and cash equivalents were $446 million at April 30, 2024, and $416 million at October 31, 2024, with approximately 48% held by foreign subsidiaries[178]. - Cash provided by operations was $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% to 4% for fiscal 2025, along with organic operating income growth in the same range[175]. - The estimated capital expenditure range for fiscal 2025 has been updated to $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].

Financial Performance - Second quarter reported net sales decreased 1% to $1.1 billion, with a 3% increase on an organic basis compared to the prior-year period[1]. - For the first half of fiscal 2025, reported net sales decreased 5% to $2.0 billion, remaining flat on an organic basis[2]. - First half reported operating income decreased 7% to $622 million, with a 3% decline on an organic basis[2]. - Gross profit declined 8% (-4% organic) primarily due to divestitures, with gross margin contracting 240 basis points to 59.2%[5][14]. - Net sales for the Tequila portfolio declined 17% (-17% organic), with el Jimador's net sales down 16% and Herradura's down 14%[7]. - The Travel Retail channel's net sales declined 5% (-3% organic), impacted by lower volumes and divestitures[13]. - Net sales for 2023 were $1,107 million, a decrease of 1% compared to $1,095 million in 2024[28]. - Gross profit decreased by 4% from $671 million in 2023 to $646 million in 2024[28]. - Net income increased by 7% from $242 million in 2023 to $258 million in 2024[28]. - Earnings per share (diluted) rose by 9% from $0.50 in 2023 to $0.55 in 2024[28]. - Total portfolio depletions decreased by 5% and shipments decreased by 2% compared to the prior year period[39]. - Whiskey category depletions were 10.4 million, down 4%, with net sales down 1%[39]. - Ready-to-drink segment depletions were 10.3 million, down 4%, with net sales down 6%[39]. - Organic net sales decreased by 3% due to foreign exchange impacts and acquisitions[41]. Dividends and Taxation - The quarterly cash dividend was increased by 4% to $0.2265 per share, marking the 41st consecutive year of dividend increases[18][19]. - The effective tax rate is expected to be in the range of approximately 21% to 23%[21]. - The effective tax rate increased from 22.0% in 2023 to 17.6% in 2024[28]. - Cash dividends paid per common share increased from $0.2055 in 2023 to $0.2178 in 2024[28]. - A $13 million franchise tax refund was recognized in the first quarter of fiscal 2025 due to a change in franchise tax calculation methodology in Tennessee, retroactively applied to fiscal 2020 through fiscal 2023[57]. Future Outlook - The company anticipates organic net sales growth in the range of 2% to 4% for fiscal 2025[20]. - The company expects a return to growth in fiscal 2025, driven by international market gains and normalizing inventory trends[20]. - The company plans to continue focusing on market expansion and new product development strategies[39]. Market Performance - Emerging markets saw a 6% organic sales increase, while developed international markets experienced a 5% decline[41]. - The company reported a 39% increase in non-branded and bulk sales, with a 2% organic growth[41]. - Estimated net change in distributor inventories for the United States was 3%, while travel retail saw a decrease of 1%[43]. - Top developed international markets include Germany, Australia, the UK, France, Canada, and Spain, while top emerging markets are Mexico, Poland, and Brazil[63]. Business Transactions - The company recognized a pre-tax gain of $175 million from the sale of the Sonoma-Cutrer wine business[51]. - The divestiture of the Finlandia vodka business resulted in a pre-tax gain of $92 million[50]. - In fiscal 2024, production of Jack Daniel's Country Cocktails fully transitioned to Pabst Brewing Company, removing non-comparable operating activity from the first and second quarters of fiscal 2024 and fiscal 2025[55]. Inventory and Consumer Insights - Estimated fluctuations in distributor inventories are provided to understand performance trends, particularly in the U.S. market, which operates under a three-tier distribution system[60]. - The estimated net change in distributor inventories is calculated to understand the impact of inventory changes on organic trends, with positive differences indicating potential decreases in organic trends[79]. - Consumer takeaway data, provided by external parties, is used to estimate market share and trends, reflecting actual consumer demand[77]. - The company aggregates markets by economic development stage and brands by beverage alcohol category to explain operational results and highlight trends[61].

Divestitures and Acquisitions - 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.[57] - The divestiture of the Finlandia vodka business resulted in a pre-tax gain of $92 million during fiscal 2024[58] - The company acquired Gin Mare Brand, S.L.U. in fiscal 2023, with adjustments related to earn-out contingent consideration liabilities[57] - The company divested the Finlandia vodka business for $196 million and the Sonoma-Cutrer wine business for $50 million cash, impacting gross margin negatively[74] Financial Performance - For the three months ended July 31, 2024, net sales were $1.0 billion, a decrease of 8% compared to the same period last year, driven by lower volumes and the negative effects of acquisitions and divestitures[75] - Gross profit for the same period was $565 million, a decrease of $86 million or 13%, with gross margin declining to 59.4% from 62.7%[75] - Operating income decreased by 14% to $281 million, impacted by input cost fluctuations and the effects of divestitures[75] - Diluted earnings per share were $0.41, down 14% from $0.48 in the prior year[75] - Operating income totaled $281 million, a decrease of $46 million, or 14%, with an operating margin decrease to 29.6% from 31.5% in the same period last year[104] - Diluted earnings per share decreased 14% to $0.41 from $0.48 reported for the same period last year, primarily due to the decrease in operating income[105] - Gross profit was $565 million, a decrease of $86 million, or 13%, with gross margin decreasing 3.3 percentage points to 59.4%[100] Market Performance - The United States market saw a 5% decline in net sales, primarily due to lower volumes from JDTW and el Jimador[80] - The United Kingdom experienced a significant 21% decline in net sales, attributed to lower volumes and prior-year buy-in ahead of an excise tax increase[81] - Brazil's net sales increased by 18%, driven by higher volumes across the portfolio, particularly from JDTA, JDTW, and JDTH[83] - Travel Retail's net sales declined 11% due to lower volumes of super-premium Jack Daniel's expressions and the Finlandia divestiture[84] Operational Metrics - The company uses "depletions" as a key metric to measure consumer demand, reflecting sales from distributors to retailers[67] - Estimated net change in distributor inventories is calculated to understand the impact of inventory changes on organic trends[69] - The company aggregates markets by economic development stages and brands by beverage alcohol categories for performance analysis[62][64] - The "Rest of Portfolio" category now includes brands like Gin Mare and excludes divested brands, reflecting changes in the product lineup[64] Cost and Expenses - Gross margin decreased by 3.3 percentage points, largely due to high inventory levels and the timing of input cost fluctuations[75] - Advertising expenses decreased by 4% due to lower spending on Jack Daniel's and Coca-Cola RTD compared to the prior-year period[102] - SG&A expenses decreased by 6% driven by lower compensation-related expenses and discretionary spending[102] Future Projections - Fiscal 2025 organic net sales growth is expected to be in the range of 2% to 4%[106] - Fiscal 2025 organic operating income growth is also anticipated to be in the range of 2% to 4%[106] - The effective tax rate for fiscal 2025 is projected to be approximately 21% to 23%[106] - Planned capital expenditures for fiscal 2025 are estimated to be between $195 million and $205 million[106] Cash and Financing - Cash and cash equivalents were $446 million at April 30, 2024, and decreased to $416 million at July 31, 2024[109] - Cash provided by operations for the three months ended July 31, 2024, was $17 million, a decline of $21 million from the same period last year[112] - Cash used for financing activities was $51 million during the three months ended July 31, 2024, compared to $50 million provided in the same prior-year period[113] - The average interest rate on commercial paper increased from 5.27% in 2023 to 5.52% in 2024[107] - The company has a $900 million commercial paper program to fund short-term operational needs[110] - Approximately 41% of cash and cash equivalents were held by foreign subsidiaries, with plans to potentially repatriate additional cash[109]

Financial Performance - Net sales decreased 8% to $1.0 billion (-4% organic) in Q1 fiscal 2025 compared to the prior year period[1] - Operating income declined 14% to $281 million (-13% organic) and diluted EPS decreased 14% to $0.41[1] - Gross profit declined 13% (-8% organic) with gross margin down 330 basis points to 59.4%[9] - Net sales decreased by 8% to $951 million in Q2 2024 compared to $1,038 million in Q2 2023[19] - Gross profit declined by 13% to $565 million in Q2 2024 from $651 million in Q2 2023[19] - Net income dropped by 16% to $195 million in Q2 2024 from $231 million in Q2 2023[19] - Operating income decreased by 14% to $281 million in Q2 2024 from $327 million in Q2 2023[19] - Gross margin fell to 59.4% in Q2 2024 from 62.7% in Q2 2023[19] - Operating margin declined to 29.6% in Q2 2024 from 31.5% in Q2 2023[19] - Cash and cash equivalents decreased to $416 million in Q2 2024 from $446 million in Q2 2023[21] - Accounts receivable increased to $806 million in Q2 2024 from $769 million in Q2 2023[21] - Inventories rose to $2,596 million in Q2 2024 from $2,556 million in Q2 2023[21] - Cash provided by operating activities decreased to $17 million in Q2 2024 from $38 million in Q2 2023[22] - Total portfolio depletions decreased by 9% to 10.9 million cases, with net sales declining by 8% on a reported basis and 4% organically[26] - Jack Daniel's Family depletions fell by 8% to 7.1 million cases, with net sales down 8% reported and 4% organically[26] - Ready-to-Drink category depletions dropped by 9% to 4.9 million cases, with net sales declining 12% reported and 4% organically[26] - Tequila category depletions decreased by 21% to 0.5 million cases, with net sales down 23% both reported and organically[26] - United States net sales declined by 5% reported and 4% organically, while Developed International markets saw a 9% reported and 6% organic decline[28] - Emerging markets net sales fell by 16% reported but only 5% organically, with Brazil showing strong growth of 18% reported and 29% organically[28] - Estimated net change in distributor inventories showed a 3% increase in the United States and a 4% increase in Developed International markets[30] Product Performance - Whiskey net sales decreased 5% (-3% organic), led by lower Jack Daniel's Tennessee Whiskey volumes[4] - Tequila portfolio net sales declined 23% (-23% organic), with el Jimador down 26% (-26% organic)[4] - Ready-to-Drink portfolio net sales declined 12% (-4% organic), with Jack Daniel's RTD/RTP down 13% (-2% organic)[5] - US net sales declined 5% (-4% organic), with Jack Daniel's Tennessee Whiskey, el Jimador and Korbel leading the decrease[5] - Developed International markets net sales declined 9% (-6% organic), led by lower Jack Daniel's volumes[6] - Emerging markets net sales declined 16% (-5% organic), impacted by foreign exchange and Finlandia divestiture[8] - Diplomático brand shipments increased by 84% with net sales growth of 142% reported and 134% organically[26] - Non-branded and bulk sales grew by 27% both reported and organically[26][28] - Old Forester brand shipments increased by 7% with net sales growth of 16% both reported and organically[26] Market Performance - Developed International markets include Germany, Australia, the UK, France, Canada, and Spain, representing net sales of branded products[43] - Top emerging markets include Mexico, Poland, and Brazil, with Brazil also encompassing Uruguay, Paraguay, and surrounding territories[43] - Travel Retail represents net sales to global duty-free customers, travel retail customers, and the U.S. military[43] Category Definitions - Whiskey category includes Jack Daniel's family of brands, Woodford Reserve, Old Forester, and others, with American whiskey and super-premium American whiskey as subcategories[45][46] - Ready-to-Drink (RTD) category includes Jack Daniel's RTD/RTP products, New Mix, and other RTD/RTP products, with Jack Daniel's & Coca-Cola RTD as a specific subcategory[46] - Tequila category includes el Jimador, Herradura, and other tequilas, while Rest of Portfolio includes divested brands like Sonoma-Cutrer and Finlandia[47] Operational and Strategic Updates - Jack Daniel's Country Cocktails production fully transitioned to Pabst Brewing Company in fiscal 2024, removing non-comparable operating activity related to Brown-Forman-produced products for fiscal 2024 and 2025[38] - Recognized a $13 million franchise tax refund in Q1 fiscal 2025 due to a change in Tennessee franchise tax calculation methodology, retroactively applied to fiscal 2020-2023[38] Data and Methodology - Consumer takeaway data, sourced from Nielsen and NABCA, measures consumer purchases from retail outlets and e-commerce channels, reflecting demand trends[50] - Estimated net change in distributor inventories calculated by comparing organic dollar amounts to depletion volumes, indicating potential inventory adjustments[51] Outlook - Fiscal 2025 outlook expects organic net sales growth of 2-4% and organic operating income growth of 2-4%[13]