Financial Performance - Reported net sales for the first half of fiscal 2022 were $1.9 billion, representing a 9% increase compared to the same period last year [94]. - Reported operating income decreased by 15% to $611 million for the six months ended October 31, 2021 [94]. - Diluted earnings per share for the first half of fiscal 2022 were $0.89, a decrease of 24% from $1.17 in the same period last year [94]. - Reported net sales for the six months ended October 31, 2021, were $1.9 billion, an increase of $162 million, or 9% compared to the same period last year [122]. - JDTW reported net sales increased 14%, driven by broad-based volume growth in the United States and international markets [110]. - JDTA reported net sales increased 55%, fueled by the brand's continued international launch in Brazil and Chile [112]. - Herradura reported net sales increased 41%, driven by increased volumes in the United States and Mexico [114]. - Reported net sales in Brazil increased 31%, fueled by the launch of JDTA and higher volumes of JDTW [104]. - Travel Retail reported net sales increased 38%, driven primarily by higher volumes across much of the portfolio [105]. - Reported net sales in the Rest of Emerging markets increased 50%, led by JDTW gains in Turkey, sub-Saharan Africa, and Chile [104]. Cost and Expenses - Reported cost of sales for the six months ended October 31, 2021, were $0.8 billion, an increase of $65 million, or 9% compared to the same period last year [124]. - Gross profit for the three months ended October 31, 2021, was $590 million, an increase of $9 million, or 2% compared to the same period last year [126]. - For the six months ended October 31, 2021, reported gross profit was $1.1 billion, an increase of $97 million, or 9% year-over-year [127]. - Reported operating expenses for the six months totaled $532 million, an increase of $76 million, or 17% compared to the prior year [131]. - Advertising expenses increased by 24% for the six months, primarily due to the cycling of reduced promotional activity during the same period last year [131]. Margins and Profitability - The gross margin for the three months ended October 31, 2021, increased to 59.3% from 59.0% in the same period last year [126]. - Gross margin for the same period decreased by 0.1 percentage points to 60.1% from 60.2% due to unfavorable cost/mix [127]. - Reported operating income for the six months was $611 million, a decrease of $106 million, or 15% year-over-year, with an operating margin decrease of 9.1 percentage points to 32.1% [132]. Tax and Cash Flow - The effective tax rate is anticipated to be in the range of approximately 22-23% for the fiscal year [99]. - The effective tax rate for the six months was 24.9%, an increase from 16.4% in the same period last year, primarily due to deferred tax benefits recognized in the prior year [134]. - Cash and cash equivalents decreased by $77 million during the six months, with cash provided by operations increasing by $52 million to $335 million [136]. - Cash used for financing activities was $362 million during the six months, compared to $155 million for the same period last year [138]. Strategic Initiatives and Risks - The company uses non-GAAP measures to provide a clearer understanding of underlying performance, adjusting for acquisitions, foreign exchange, and inventory changes [70]. - The company faces substantial competition from new entrants and consolidations in the market, impacting pricing and market share [89]. - The company is significantly dependent on the growth of the Jack Daniel's family of brands for its revenue [89]. - The company anticipates potential disruptions in its distribution network and inventory fluctuations affecting sales [89]. - The company is exposed to risks associated with acquisitions and the integration of new businesses, which may impact financial performance [89]. - The company is implementing risk mitigation strategies to address ongoing supply chain challenges, expecting less significant impacts in the second half of the fiscal year [98]. - Supply chain disruptions, particularly related to glass supply, negatively impacted finished goods inventories and net sales [93]. Dividends - The Board of Directors increased the quarterly cash dividend from $0.1795 to $0.1885 per share and declared a special cash dividend of $1.00 per share [146].
Brown-Forman(BF_A) - 2022 Q2 - Quarterly Report