Financial Performance - Reported net sales for the three months ended July 31, 2022, were $1.0 billion, an increase of 11% compared to the same period last year, driven by higher volumes and favorable price/mix[92] - Reported operating income increased by 19% to $343 million for the three months ended July 31, 2022, with diluted earnings per share rising 30% to $0.52[92] - Reported net sales for the three months ended July 31, 2022, were $1.0 billion, an increase of $101 million, or 11% year-over-year, driven by higher volumes of New Mix, JDTW, and JD RTDs[116] - JDTH reported a 26% increase in net sales, primarily due to volumetric growth in the United States, with a positive impact from an estimated net increase in distributor inventories[108] - Woodford Reserve's net sales increased by 38%, driven by higher volumes and prices in the United States[110] - The gross margin for the period ended July 31, 2022, was 61.8%, an increase of 0.8 percentage points from the prior year, attributed to favorable price/mix and the removal of tariffs on American whiskey[120] - Operating income for the three months ended July 31, 2022, totaled $343 million, reflecting a 19% increase compared to the same period last year[122] - The company anticipates mid-single digit organic net sales growth for fiscal 2023, supported by strong consumer demand[127] - Projected reported gross margin for fiscal 2023 is expected to increase slightly, considering the net effect of inflation and the removal of tariffs[128] - Diluted earnings per share for the three months ended July 31, 2022, were $0.52, a 30% increase from $0.40 in the same period last year[125] - Operating expenses for the three months ended July 31, 2022, totaled $279 million, an increase of 6% year-over-year[121] - The effective tax rate for the three months ended July 31, 2022, was 23.6%, down from 28.5% in the prior year[123] Sales and Market Trends - The company sold its Early Times, Canadian Mist, and Collingwood brands during fiscal 2021, impacting net sales and operating expenses for the first quarter of fiscal 2022[61] - Reported net sales in the Travel Retail channel increased by 77%, driven by higher volumes as travel rebounded from COVID-19 restrictions[103] - Reported net sales in Canada increased by 34%, led by higher volumes of JDTW, with an estimated net increase in distributor inventories positively impacting results[99] - Reported net sales in Germany increased by 13%, fueled by volumetric gains of JDTW and JD RTDs, despite foreign exchange headwinds[99] - Reported net sales in Chile surged by 91%, driven by growth of JDTW and JDTH, with an estimated net increase in distributor inventories positively impacting results[102] Operational Challenges - Supply chain disruptions continued to affect the business, with logistics and transportation challenges increasing input and transportation costs[89] - The strengthening of the U.S. dollar negatively impacted results, particularly against the euro, Turkish lira, pound sterling, and Polish zloty[88] - The company faced substantial competition from new entrants and pricing actions, which could affect future performance[86] - Cash flows were affected by higher levels of inventory due to increased input costs and supply chain disruptions[137] Strategic Initiatives - The company introduced "Ready-to-Drink" as a new brand aggregation due to its growth contribution in recent years[73] - The company uses "organic change" to measure performance, excluding impacts from acquisitions, divestitures, foreign exchange, and impairment charges[64] - The company believes that consumer takeaway data is a leading indicator of consumer demand trends[82] - The company calculates the "estimated net change in distributor inventories" to understand the impact of distributor inventory changes on organic trends[84] - The company emphasizes the importance of understanding fluctuations in distributor inventories, particularly in the U.S. market[67] - The company aims to provide reconciliations of "organic change" to GAAP measures to enhance understanding of financial performance[64] Cash Flow and Liquidity - Cash and cash equivalents were $899 million as of July 31, 2022, with approximately 62% held by foreign subsidiaries[130] - Cash provided by operations was $173 million, a decline of $12 million from the same period last year, primarily due to increased working capital[137] - Cash used for investing activities increased to $34 million during the three months ended July 31, 2022, compared to $15 million for the same period last year, reflecting increased capital spending[138] - Cash used for financing activities was $94 million during the three months ended July 31, 2022, a decrease of $47 million from $141 million in the same period last year[139] - The company has an $800 million commercial paper program with no borrowings under the program as of April 30, 2022, and July 31, 2022[131] - The company expects to meet planned short-term liquidity needs largely through cash generated from operations and borrowings under the commercial paper program[135] - The company believes its current liquidity position and ability to generate positive cash flows will be sufficient to meet future financial commitments[136] - Significant short-term cash requirements include funding operations, repayment of a note maturing in 2023, and capital investments[134] Risk Management - The company has suspended commercial operations in Russia, which is no longer considered one of its largest markets[70] - The company faces market risks from changes in foreign currency exchange rates, commodity prices, and interest rates, managed through procurement strategies and financial instruments[141] - The company reported a non-cash impairment charge of $6 million for certain fixed assets during the first quarter of fiscal 2022[63]
Brown-Forman(BF_B) - 2023 Q1 - Quarterly Report