Financial Performance - For the first quarter of fiscal 2026, the company recognized a gain of $12 million from the sale of the Alabama cooperage, which was adjusted from operating income[84]. - A net benefit of $18 million was recognized related to the collection of substitution drawback claims filed with the U.S. Government between fiscal 2016 and 2019[88]. - The company reported a franchise tax refund of $13 million during the first quarter of fiscal 2025 due to a change in tax calculation methodology in Tennessee[85]. - Net sales for the three months ended July 31, 2025, were $924 million, a decrease of 3% compared to the same period last year, driven by the negative effects of acquisitions and divestitures and foreign exchange[104]. - Gross profit for the same period was $552 million, a decrease of 2%, while gross margin increased by 0.4 percentage points to 59.8%[104]. - Operating income decreased by 7% to $260 million, impacted by foreign exchange, absence of prior-year franchise tax refund, and restructuring initiative[104]. - Diluted earnings per share for the three months ended July 31, 2025, were $0.36, a decrease of 13% from $0.41 in the same period last year[104]. - For the three months ended July 31, 2025, net sales totaled $924 million, a decrease of $27 million, or 3% year-over-year, primarily due to unfavorable price/mix, partially offset by a 3% increase in volume[120]. - Organic net sales are expected to decline in the low-single digit range for fiscal 2026, alongside a similar decline in organic operating income[129]. - Gross profit for the period was $552 million, a decrease of $12 million, or 2%, with gross margin increasing to 59.8% from 59.4% year-over-year[123]. - Operating income totaled $260 million, a decrease of $21 million, or 7%, with operating margin declining to 28.2% from 29.6% in the same period last year[125]. - Diluted earnings per share decreased 13% to $0.36 from $0.41 year-over-year, driven by a decrease in operating income and an increase in non-operating postretirement expense[127]. - The effective tax rate for the period was 22.5%, down from 23.1% in the prior year, influenced by lower state tax impacts[126]. Restructuring and Charges - The company incurred $12 million in restructuring and other charges during the first quarter of fiscal 2026 as part of a plan to reduce the structural cost base by approximately 12%[86]. - The restructuring initiative included a 12% workforce reduction and the closure of the Louisville-based Brown-Forman Cooperage, negatively impacting operating expenses[102]. Market Performance - The United States market experienced an 8% decline in net sales, primarily due to the absence of the Sonoma-Cutrer prior-year TSA and lower volumes of JDTW and Herradura[107]. - Emerging markets saw a 20% increase in net sales, with Brazil leading at a 31% increase driven by growth in JDTW and JDTA[107]. - The top developed international markets for the company included Germany, Australia, the United Kingdom, France, and Canada, contributing significantly to net sales[91]. - The company emphasizes consumer takeaway as a leading indicator of consumer demand trends, which is derived from retail sales value data[93]. Acquisitions and Divestitures - The company acquired Gin Mare Brand, S.L.U. during fiscal 2023, which impacted the financial results for the first quarter of fiscal 2026[82]. - The company divested its Finlandia vodka and Sonoma-Cutrer wine businesses in fiscal 2024, affecting net sales and operating expenses for the non-comparable period[83]. - The company sold the Sonoma-Cutrer wine business, which negatively impacted net sales and operating income but positively affected gross margin[100]. - The company ended its sales, marketing, and distribution relationship with Korbel Champagne Cellars effective June 30, 2025, which included transaction costs related to this termination[93]. Cash Flow and Liquidity - Cash and cash equivalents were $471 million as of July 31, 2025, with approximately 54% held by foreign subsidiaries[132]. - Cash provided by operations was $160 million for the three months ended July 31, 2025, an increase of $143 million from the same period last year[137]. - Cash used for financing activities increased to $138 million during the three months ended July 31, 2025, compared to $51 million in the prior-year period, primarily due to an $84 million increase in net repayments of short-term borrowings[139]. - Cash provided by investing activities decreased to $2 million during the three months ended July 31, 2025, down from $10 million in the same period last year, largely due to an $18 million decrease in proceeds from cooperage asset sales[138]. - The company expects to meet its short-term liquidity needs through cash generated from operations and borrowings under its commercial paper program[135]. - The company believes its current liquidity position and ability to generate positive cash flows will be sufficient to meet all expected future financial commitments[136]. Risk Management - The company faces market risks from changes in foreign currency exchange rates, commodity prices, and interest rates, and manages these risks through procurement strategies and financial instruments[141]. Capital Expenditures - The company anticipates capital expenditures in the range of $125 to $135 million for fiscal 2026[129].
Brown-Forman(BF_A) - 2026 Q1 - Quarterly Report