bfb-20240731

United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

Commission File No. 001-00123

Brown-Forman Corporation

(Exact name of Registrant as specified in its Charter)


Delaware		61-0143150
(State or other jurisdiction of		(IRS Employer
incorporation or organization)		Identification No.)

850 Dixie Highway
Louisville,	Kentucky	40210
(Address of principal executive offices)		(Zip Code)

(502) 585-1100

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock (voting), $0.15 par value	BFA	New York Stock Exchange
Class B Common Stock (nonvoting), $0.15 par value	BFB	New York Stock Exchange
1.200% Notes due 2026	BF26	New York Stock Exchange
2.600% Notes due 2028	BF28	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: August 23, 2024


Class A Common Stock (voting), $0.15 par value			169,123,305
Class B Common Stock (nonvoting), $0.15 par value			303,537,316


BROWN-FORMAN CORPORATION
Index to Quarterly Report Form 10-Q

		Page
PART I - FINANCIAL INFORMATION		3

Item 1.	Financial Statements (Unaudited)	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	31

Item 4.	Controls and Procedures	31

PART II - OTHER INFORMATION		32

Item 1.	Legal Proceedings	32

Item 1A.	Risk Factors	32

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32

Item 3.	Defaults Upon Senior Securities	32

Item 4.	Mine Safety Disclosures	32

Item 5.	Other Information	32

Item 6.	Exhibits	32

SIGNATURES		33

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

BROWN-FORMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars in millions, except per share amounts)


	Three Months Ended
	July 31,
		2023		2024
Sales		$	1,326	$	1,211
Excise taxes		288		260
Net sales		1,038		951
Cost of sales		387		386
Gross profit		651		565
Advertising expenses		131		126
Selling, general, and administrative expenses		200		188


Other expense (income), net		(7)		(30)
Operating income		327		281
Non-operating postretirement expense		1		—
Interest income		(2)		(4)
Interest expense		29		32

Income before income taxes		299		253
Income taxes		68		58
Net income		$	231	$	195
Earnings per share:
Basic		$	0.48	$	0.41
Diluted		$	0.48	$	0.41

See notes to the condensed consolidated financial statements.

BROWN-FORMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in millions)


	Three Months Ended
	July 31,
		2023		2024
Net income		$	231	$	195
Other comprehensive income (loss), net of tax:
Currency translation adjustments		39		(42)
Cash flow hedge adjustments		(5)		(2)
Postretirement benefits adjustments		2		1
Net other comprehensive income (loss)		36		(43)
Comprehensive income		$	267	$	152

See notes to the condensed consolidated financial statements.

BROWN-FORMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in millions, except per share amounts)


	April 30, 2024		July 31, 2024
Assets
Cash and cash equivalents	$	446	$	416
Accounts receivable, less allowance for doubtful accounts of $8 at April 30 and $8 at July 31	769		806
Inventories:
Barreled whiskey	1,490		1,541
Finished goods	452		472
Work in process	396		386
Raw materials and supplies	218		197
Total inventories	2,556		2,596

Other current assets	265		263
Total current assets	4,036		4,081
Property, plant and equipment, net	1,074		1,052
Goodwill	1,455		1,464
Other intangible assets	990		997
Equity method investments	270		270
Deferred tax assets	69		63
Other assets	272		278
Total assets	$	8,166	$	8,205
Liabilities
Accounts payable and accrued expenses	$	793	$	669
Dividends payable	—		103
Accrued income taxes	38		93
Short-term borrowings	428		484
Current portion of long-term debt	300		300

Total current liabilities	1,559		1,649
Long-term debt	2,372		2,384
Deferred tax liabilities	315		302
Accrued pension and other postretirement benefits	160		159
Other liabilities	243		246
Total liabilities	4,649		4,740
Commitments and contingencies
Stockholders’ Equity
Common stock:
Class A, voting, $0.15 par value (170,000,000 shares authorized; 170,000,000 shares issued)	25		25
Class B, nonvoting, $0.15 par value (400,000,000 shares authorized; 314,532,000 shares issued)	47		47
Additional paid-in capital	13		12
Retained earnings	4,261		4,250
Accumulated other comprehensive income (loss), net of tax	(221)		(264)
Treasury stock, at cost (11,932,000 and 11,872,000 shares at April 30 and July 31, respectively)	(608)		(605)
Total stockholders’ equity	3,517		3,465
Total liabilities and stockholders’ equity	$	8,166	$	8,205

See notes to the condensed consolidated financial statements.

BROWN-FORMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in millions)


	Three Months Ended
	July 31,
	2023		2024
Cash flows from operating activities:
Net income	$	231	$	195
Adjustments to reconcile net income to net cash provided by operations:


Depreciation and amortization	21		22
Stock-based compensation expense	4		4
Deferred income tax provision (benefit)	12		(5)

Change in fair value of contingent consideration	(7)		4
Other, net	(2)		(10)
Changes in assets and liabilities:
Accounts receivable	(15)		(42)
Inventories	(227)		(91)
Other current assets	30		(2)
Accounts payable and accrued expenses	(53)		(104)
Accrued income taxes	28		54
Other operating assets and liabilities	16		(8)
Cash provided by operating activities	38		17
Cash flows from investing activities:



Additions to property, plant, and equipment	(49)		(41)



Proceeds from sale of assets	—		51


Other, net	5		—
Cash provided by (used for) investing activities	(44)		10
Cash flows from financing activities:


Net change in short-term borrowings	153		54




Payments of withholding taxes related to stock-based awards	(4)		(2)


Dividends paid	(99)		(103)


Cash provided by (used for) financing activities	50		(51)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	8		(6)
Net increase (decrease) in cash, cash equivalents, and restricted cash	52		(30)
Cash, cash equivalents, and restricted cash at beginning of period	384		456
Cash, cash equivalents, and restricted cash at end of period	436		426
Less: Restricted cash (included in other current assets) at end of period	(10)		(10)

Cash and cash equivalents at end of period	$	426	$	416
Supplemental information:
Non-cash additions to property, plant and equipment	$	12	$	6
Right-of-use assets obtained in exchange for new lease obligations	$	15	$	15

See notes to the condensed consolidated financial statements.

BROWN-FORMAN CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In these notes, “we,” “us,” “our,” “Brown-Forman,” and the “Company” refer to Brown-Forman Corporation and its consolidated subsidiaries, collectively.

1. Condensed Consolidated Financial Statements

We prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the U.S. Securities and Exchange Commission for interim financial information. In accordance with those rules and regulations, we condensed or omitted certain information and disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP). In our opinion, the accompanying financial statements include all adjustments, consisting only of normal recurring adjustments (unless otherwise indicated), necessary for a fair statement of our financial results for the periods presented in these financial statements. The results for interim periods are not necessarily indicative of future or annual results.

We suggest that you read these condensed financial statements together with the financial statements and footnotes included in our Annual Report on Form 10-K for the fiscal year ended April 30, 2024 (2024 Form 10-K). We prepared the accompanying financial statements on a basis that is substantially consistent with the accounting principles applied in our 2024 Form 10-K.

Accounting standards not yet adopted. In November 2023, the Financial Accounting Standards Board (FASB) issued an updated accounting standard requiring additional disclosures about significant segment expenses and other segment items. The update also requires interim disclosure of segment information that is currently required only on an annual basis. We are required to adopt the updated standard for annual disclosures beginning in fiscal 2025, and for interim disclosures in fiscal 2026, with earlier adoption permitted. The update is to be applied retroactively.

In December 2023, FASB issued an updated accounting standard requiring additional disclosures about income taxes, primarily related to the rate reconciliation and information about income taxes paid. We are required to adopt the new guidance beginning in fiscal 2026, with earlier adoption permitted. The update can be applied either prospectively or retrospectively.

We are currently evaluating the impact that adopting these accounting standards updates will have on our disclosures.

2. Earnings Per Share

We calculate basic earnings per share by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share further includes the dilutive effect of stock-based compensation awards. We calculate that dilutive effect using the “treasury stock method” (as defined by GAAP).

The following table presents information concerning basic and diluted earnings per share:


	Three Months Ended
	July 31,
(Dollars in millions, except per share amounts)		2023		2024


Net income available to common stockholders		$	231	$	195

Share data (in thousands):
Basic average common shares outstanding		479,353		472,637
Dilutive effect of stock-based awards		1,030		304
Diluted average common shares outstanding		480,383		472,941

Basic earnings per share		$	0.48	$	0.41
Diluted earnings per share		$	0.48	$	0.41

We excluded common stock-based awards for approximately 1,285,000 shares and 2,582,000 shares from the calculation of diluted earnings per share for the three months ended July 31, 2023 and 2024, respectively. We excluded those awards because they were not dilutive for those periods under the treasury stock method.

3. Inventories

We value some of our consolidated inventories, including most of our U.S. inventories, at the lower of cost, using the last-in, first-out (LIFO) method or market value. If the LIFO method had not been used, inventories at current cost would have been $512 million higher than reported as of April 30, 2024, and $531 million higher than reported as of July 31, 2024. Changes in the LIFO valuation reserve for interim periods are based on an allocation of the projected change for the entire fiscal year, recognized proportionately over the remainder of the fiscal year.

4. Goodwill and Other Intangible Assets

The following table shows the changes in goodwill (which includes no accumulated impairment losses) and other intangible assets during the three months ended July 31, 2024:


(Dollars in millions)	Goodwill		Other Intangible Assets
Balance at April 30, 2024	$	1,455	$	990






Foreign currency translation adjustment	9		7

Balance at July 31, 2024	$	1,464	$	997

Our other intangible assets consist of trademarks and brand names, all with indefinite useful lives.

5. Equity Method Investments

Our equity method investments include a 21.4% ownership of the common stock of The Duckhorn Portfolio, Inc. (“Duckhorn”), which we obtained as partial consideration for our sale of the Sonoma-Cutrer wine business to Duckhorn on April 30, 2024. Our other equity method investments are immaterial.

The carrying amount of our investment in Duckhorn was $267 million as of both April 30, 2024, and July 31, 2024. The $267 million carrying amount reflects the fair value of the common stock, based on its quoted market price at the April 30, 2024 closing date of the transaction. The difference between the carrying amount of the investment and our proportionate share of the net assets of Duckhorn was not material. As of July 31, 2024, the fair value of the investment was $229 million. We concluded that, at July 31, 2024 the decline in fair value of the investment below its carrying value was temporary and, therefore, did not record any impairment.

We will recognize our share of Duckhorn’s earnings on a three-month lag, beginning August 1, 2024. Thus, our operating income for the three months ending October 31, 2024, will reflect our share of Duckhorn’s earnings reported for the three months ended July 31, 2024.

In connection with our sale of the Sonoma-Cutrer wine business to Duckhorn, we agreed to a lock-up provision under which we are restricted from selling or otherwise disposing of our equity investment in Duckhorn. The restriction period will terminate no later than October 31, 2025.

Also, effective April 30, 2024, we entered into a transition services agreement (TSA) with Duckhorn related to the sale of the Sonoma-Cutrer wine business. Our cost of sales for the three months ended July 31, 2024, included $22 million for Sonoma-Cuter products purchased from Duckhorn under the TSA. Fees earned for transition services provided to Duckhorn under the TSA were immaterial.

6. Contingencies

We operate in a litigious environment, and we are sued in the normal course of business. Sometimes plaintiffs seek substantial damages. Significant judgment is required in predicting the outcome of these suits and claims, many of which take years to adjudicate. We accrue estimated costs for a contingency when we believe that a loss is probable and we can make a reasonable estimate of the loss, and then adjust the accrual as appropriate to reflect changes in facts and circumstances. We do not believe it is reasonably possible that these existing loss contingencies, individually or in the aggregate, would have a material adverse effect on our financial position, results of operations, or liquidity. No material accrued loss contingencies were recorded as of July 31, 2024.

7. Debt

Our long-term debt (net of unamortized discount and issuance costs) consisted of:


(Principal and carrying amounts in millions)	April 30, 2024		July 31, 2024


3.50% senior notes, $300 principal amount, due April 15, 2025	$	300	$	300
1.20% senior notes, €300 principal amount, due July 7, 2026	321		324
2.60% senior notes, £300 principal amount, due July 7, 2028	375		383
4.75% senior notes, $650 principal amount, due April 15, 2033	643		643
4.00% senior notes, $300 principal amount, due April 15, 2038	295		296
3.75% senior notes, $250 principal amount, due January 15, 2043	248		248
4.50% senior notes, $500 principal amount, due July 15, 2045	490		490

	2,672		2,684
Less current portion	300		300
	$	2,372	$	2,384

Our short-term borrowings consisted of borrowings under our commercial paper program, as follows:


(Dollars in millions)	April 30, 2024	July 31, 2024
Commercial paper (par amount)	$429	$485
Average interest rate	5.49%	5.50%
Average remaining days to maturity	12	17

8. Stockholders’ Equity

The following table shows the changes in stockholders’ equity by quarter during the three months ended July 31, 2023:


(Dollars in millions)	Class A Common Stock		Class B Common Stock		Additional Paid-in Capital		Retained Earnings		AOCI		Treasury Stock		Total
Balance at April 30, 2023	$	25	$	47	$	1	$	3,643	$	(235)	$	(213)	$	3,268


Net income							231						231
Net other comprehensive income (loss)									36				36
Declaration of cash dividends							(197)						(197)

Stock-based compensation expense					4								4
Stock issued under compensation plans											3		3
Loss on issuance of treasury stock issued under compensation plans					(4)		(3)						(7)
Balance at July 31, 2023	$	25	$	47	$	1	$	3,674	$	(199)	$	(210)	$	3,338

The following table shows the changes in stockholders’ equity by quarter during the three months ended July 31, 2024:


(Dollars in millions)	Class A Common Stock		Class B Common Stock		Additional Paid-in Capital		Retained Earnings		AOCI		Treasury Stock		Total
Balance at April 30, 2024	$	25	$	47	$	13	$	4,261	$	(221)	$	(608)	$	3,517

Net income							195						195
Net other comprehensive income (loss)									(43)				(43)
Declaration of cash dividends							(206)						(206)

Stock-based compensation expense					4								4
Stock issued under compensation plans											3		3
Loss on issuance of treasury stock issued under compensation plans					(5)								(5)

Balance at July 31, 2024	$

SEC Form 10-Q filed by Brown Forman Corporation