Financial Performance - The company reported non-GAAP financial measures to provide a clearer understanding of its performance, including organic net sales and organic operating income adjustments[68]. - Reported net sales for the six months ended October 31, 2022, were $2.1 billion, an increase of 11% compared to the same period last year, driven by higher volumes and favorable price/mix[101]. - Reported operating income for the same period was $656 million, an increase of 8% year-over-year, with diluted earnings per share rising to $0.99, an 11% increase from $0.89[101]. - The effective tax rate decreased to 23.7% from 24.9%, contributing to the increase in diluted earnings per share[103]. - Diluted earnings per share for the six months ended October 31, 2022, increased by 11% to $0.99, compared to $0.89 for the same period last year[139]. - The company expects high-single digit organic net sales growth for fiscal 2023, reflecting stronger consumer demand and easing supply chain constraints[142]. Market and Sales Insights - The company suspended commercial operations in Russia, impacting its market rankings and net sales[79]. - The largest developed international markets include Germany, Australia, the UK, France, and Canada, contributing to the company's net sales[79]. - The United States market reported net sales growth of 11%, driven by higher volumes and favorable mix, with significant contributions from Woodford Reserve and JDTW[107]. - Emerging markets saw a 14% increase in reported net sales, with Brazil leading at 44% growth, driven by higher volumes of JDTW[111]. - Travel Retail channel reported a substantial 60% increase in net sales, reflecting a rebound in travel and an estimated net increase in distributor inventories[112]. Product Performance - The "Ready-to-Drink" product category was introduced as a separate aggregation due to its significant growth contribution in recent years[82]. - Woodford Reserve and Old Forester both reported net sales increases of 39%, driven by higher volumes and estimated net increases in distributor inventories[119]. - New Mix reported a significant net sales growth of 48%, fueled by higher volumes and prices in Mexico[120]. - JDTA experienced a decline in reported net sales of 16% due to lower volumes in the United States and the negative effect of foreign exchange[118]. Cost and Expenses - The reported cost of sales for the six months ended October 31, 2022, was $866 million, an increase of $109 million, or 14% compared to the same period last year[127]. - Gross profit for the six months ended October 31, 2022, was $1.2 billion, an increase of $93 million, or 8% compared to the same period last year[130]. - Total operating expenses for the three months ended October 31, 2022, totaled $300 million, an increase of $32 million, or 12% compared to the same period last year[132]. - Advertising expenses increased by 16% for the three months ended October 31, 2022, primarily due to increased investment in JDTW and the launch of Jack Daniel's Bonded[133]. - SG&A expenses rose by 9% for the three months ended October 31, 2022, driven by higher compensation-related expenses and discretionary spending[133]. - Reported advertising expense increased by 19% for the six months ended October 31, 2022, driven by investments in JDTW, Herradura, and new product launches[134]. Operational Challenges - Supply chain disruptions continued to impact the business, although glass supply improved, and overall logistics challenges constrained product movement[98]. - Foreign exchange fluctuations negatively affected results, particularly due to the strengthening of the U.S. dollar against the euro, Turkish lira, and pound sterling[97]. - The company faced challenges from competition, changing consumer preferences, and potential impacts from geopolitical events, including the situation in Ukraine[100]. Financial Adjustments - The company adjusted its financial measures to exclude the estimated net change in distributor inventories, which reflects actual consumer demand more accurately[76]. - The company reported a focus on organic changes in financial measures to ensure consistent performance evaluation over time[69]. - The company aims to enhance understanding of its historical financial performance through the use of non-GAAP measures[70]. - In the first half of fiscal 2022, the company recognized non-cash impairment charges of $9 million for certain fixed assets, which were excluded from organic results[73]. Capital and Cash Flow - Cash provided by operations for the six months ended October 31, 2022, was $316 million, a decline of $19 million from the previous year[149]. - Cash used for investing activities increased to $58 million during the six months ended October 31, 2022, compared to $35 million in the same period last year[150]. - The company has an $800 million commercial paper program to fund short-term operational needs, with no borrowings outstanding under the credit facility as of October 31, 2022[145]. - Planned capital expenditures for fiscal 2023 are in the range of $190 to $210 million[142].
Brown-Forman(BF_B) - 2023 Q2 - Quarterly Report