Divestitures and Gains - In fiscal 2024, the company sold the Sonoma-Cutrer wine business for a pre-tax gain of $175 million and received $50 million in cash along with 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 sold the Finlandia vodka business for $196 million and the Sonoma-Cutrer wine business for $50 million plus a 21.4% stake in Duckhorn[74]. Financial Performance - For the three months ended July 31, 2024, net sales were $951 million, a decrease of 8% compared to $1.038 billion in the same period last year[75]. - Gross profit for the same period was $565 million, down $86 million or 13%, with gross margin decreasing to 59.4% from 62.7%[75]. - Operating income decreased by 14% to $281 million, primarily due to input cost fluctuations and the impact of divestitures[75]. - Diluted earnings per share were $0.41, a decrease of 14% from $0.48 in the prior year[75]. - For the three months ended July 31, 2024, net sales were $1.0 billion, a decrease of $87 million, or 8%, primarily due to lower volumes and negative foreign exchange effects[95]. - Operating expenses totaled $284 million, a decrease of $40 million, or 12%, primarily due to lower SG&A and advertising expenses[102]. - Gross profit was $565 million, a decrease of $86 million, or 13%, with a gross margin of 59.4%, down 3.3 percentage points from the prior year[100]. - Operating income totaled $281 million, a decrease of $46 million, or 14%, with an operating margin of 29.6%, down 1.9 percentage points from the prior year[104]. - Diluted earnings per share were $0.41, a decrease of 14% from $0.48 reported for the same period last year[105]. Market Trends and Sales - The company reported organic net sales growth, excluding the effects of acquisitions, divestitures, and foreign exchange fluctuations, to better understand performance trends[56][60]. - Net sales in the United States declined by 5%, driven by lower volumes, particularly from JDTW and el Jimador[80]. - In the Developed International segment, net sales declined by 9%, with significant drops in the United Kingdom (21%) and Germany (6%)[81]. - Emerging markets saw a decline of 16% in net sales, with Mexico down 18% and Poland down 21% due to divestitures and lower volumes[83]. - Brazil experienced a net sales increase of 18%, driven by higher volumes across the portfolio[83]. - Travel Retail's net sales declined 11%, impacted by lower volumes of super-premium Jack Daniel's expressions and the divestiture of Finlandia[84]. - Woodford Reserve's net sales increased 3% due to higher volumes in the United States[89]. - Old Forester's net sales increased 16% driven by higher prices and volumes in the United States[89]. Future Projections - The company anticipates continued challenges from foreign exchange fluctuations and competitive pressures in the market[71]. - The company anticipates organic net sales growth in the range of 2% to 4% for fiscal 2025[106]. - Organic operating income is also expected to grow in the range of 2% to 4% for fiscal 2025[106]. - The effective tax rate is projected to be approximately 21% to 23%[106]. - Planned capital expenditures are estimated to be between $195 million and $205 million[106]. Cash and Financing - Cash and cash equivalents were $446 million as of April 30, 2024, and decreased to $416 million by 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 company has a $900 million commercial paper program to fund short-term operational needs[110]. - Average interest rate on commercial paper increased from 5.27% in 2023 to 5.52% in 2024[107]. - Approximately 41% of cash and cash equivalents were held by foreign subsidiaries, with plans to potentially repatriate additional cash[109]. Tax and Refunds - The company recognized a $13 million franchise tax refund in the first quarter of fiscal 2025 due to a change in tax calculation methodology[59]. - The effective tax rate for the three months ended July 31, 2024, was 23.1%, compared to 22.9% for the same period last year[104].
Brown-Forman(BF_A) - 2025 Q1 - Quarterly Report