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%[108]. - Operating income for the nine months ended January 31, 2025, was $902 million, a decrease of 13%, largely 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]. - 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]. - 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]. - Gross profit for the nine months ended January 31, 2025, was $1.8 billion, a decrease of $127 million, or 6%[132]. - Operating expenses totaled $928 million for the nine months ended January 31, 2025, a decrease of $80 million, or 8%[136]. - The gross margin for the nine months ended January 31, 2025, decreased to 59.4% from 60.9% compared to the same period last year[132]. - 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 Performance - In the U.S. market, net sales declined by 5%, driven by the divestiture of Sonoma-Cutrer and lower volumes of certain brands[111]. - 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%, impacted by lower volumes in Germany and negative foreign exchange effects[125]. - Non-branded and bulk business saw a significant increase in net sales by 38%, primarily due to higher prices for used barrels[112]. Acquisitions and Divestitures - In fiscal 2024, the company sold its Finlandia vodka business, resulting in a pre-tax gain of $92 million[82]. - The sale of the Sonoma-Cutrer wine business generated a pre-tax gain of $175 million, along with a 21.4% ownership stake in The Duckhorn Portfolio Inc.[83]. - 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]. - The company acquired Gin Mare Brand, S.L.U. during fiscal 2023, which will affect future organic sales comparisons[81]. - The company recognized a $78 million gain on the sale of its investment in Duckhorn during the three months ended January 31, 2025[105]. Restructuring and Cost Management - A restructuring plan approved in the third quarter of fiscal 2025 aims to reduce the structural cost base by approximately 12%, impacting operating expenses by $33 million[88]. - The restructuring plan included a workforce reduction of approximately 12%, negatively impacting operating expenses and income for the nine months ended January 31, 2025[106]. - Advertising expense decreased by 13% for the three months ended January 31, 2025, driven by lower JDTW and JDTA spend, foreign exchange effects, and divested brands[34]. - SG&A expense decreased by 13% for the three months ended January 31, 2025, due to lower compensation-related expenses and the absence of transaction-related expenses from recent divestitures[34]. Tax and Cash Flow - The company recognized a $13 million franchise tax refund in the first quarter of fiscal 2025 due to a change in tax calculation methodology[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]. Future Outlook - Organic net sales growth is expected to be in the range of 2% to 4% for fiscal 2025[144]. - Estimated net change in distributor inventories is calculated to assess the impact of inventory changes on organic trends[99]. - The company uses non-GAAP measures to provide a clearer understanding of organic performance, excluding effects of acquisitions, divestitures, and foreign exchange[80]. - The top developed international markets for the company include Germany, Australia, the United Kingdom, France, Canada, and Spain[90].
Brown-Forman(BF_A) - 2025 Q3 - Quarterly Report