Financial Performance - In 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 due to a change in tax calculation methodology for the state of Tennessee, retroactively applied to fiscal years 2020 through 2023[88]. - 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 initiatives[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, driven by a 6% decline in 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 decreased by $21 million, or 7%, totaling $260 million, with operating margin declining to 28.2% from 29.6% in the prior year[125]. - The effective tax rate for the period was 22.5%, a decrease from 23.1% year-over-year, attributed to lower state tax impacts[126]. Restructuring and Costs - The company incurred $12 million in restructuring and other charges during the first quarter of fiscal 2026 as part of a plan to reduce structural costs and realign resources[86]. - The restructuring initiative included a 12% workforce reduction and the closure of the Louisville-based Brown-Forman Cooperage, negatively impacting operating expenses[102]. - The company ended its sales, marketing, and distribution relationship with Korbel Champagne Cellars effective June 30, 2025, incurring transaction costs related to this termination[85]. 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 Mexico growing by 14% and Brazil by 31%[107]. - The company reported that its top developed international markets included Germany, Australia, the United Kingdom, France, and Canada, contributing significantly to net sales[91]. - The company emphasizes the importance of consumer takeaway data as a leading indicator of consumer demand trends in the beverage alcohol industry[93]. - Net sales for the Rest of Whiskey category increased by 33%, driven by distributor inventory build in preparation for the launch of JDTB[118]. - New Mix net sales increased by 26%, primarily due to strong growth in Mexico and market share gains[118]. Cash Flow and Liquidity - Cash and cash equivalents increased from $444 million at April 30, 2025, to $471 million at July 31, 2025[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]. Acquisitions and Divestitures - The company acquired Gin Mare Brand, S.L.U. and Mareliquid Vantguard, S.L.U. during fiscal 2023, impacting organic sales measures[82]. - The company divested its Finlandia vodka and Sonoma-Cutrer wine businesses in fiscal 2024, which affected net sales and operating expenses for the non-comparable period[83]. - The company uses non-GAAP measures to provide a clearer understanding of its financial performance, adjusting for acquisitions, divestitures, and foreign exchange fluctuations[81]. Economic Environment - The company faced ongoing macroeconomic and geopolitical uncertainties, which negatively impacted consumer confidence and discretionary spending[104]. - The gross margin increase was attributed to the positive effects of acquisitions and divestitures, despite higher costs and unfavorable price/mix[104]. - 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].
Brown-Forman(BF_B) - 2026 Q1 - Quarterly Report