Brown-Forman Corporation (NYSE:BFA) (NYSE:BFB) announced
financial results for its first quarter of fiscal 2021 with
reported net sales1 down 2% to $753 million (+3% on an underlying
basis2) compared to the same prior-year period. Further, reported
operating income increased 56% to $387 million (+15% on an
underlying basis) and diluted earnings per share grew 73% to
$0.67.
“I am very pleased with our performance at the start of this
fiscal year and thankful to our 4,800 employees worldwide who made
these results possible,” said Lawson Whiting, President and Chief
Executive Officer. He added, “Despite being faced with significant
ongoing challenges, our business performed well during the quarter
though much uncertainty remains in the current environment. We
believe we are well positioned to navigate the headwinds we face
today and emerge from the COVID-19 environment in a stronger
position.”
First Quarter of Fiscal 2021
Highlights
- Underlying net sales grew 3% (-2% reported)
- The United States and developed international markets grew
underlying net sales 9% (+3% reported) and 12% (+13% reported),
respectively, while underlying net sales in emerging markets
declined 3% (-20% reported)
- Jack Daniel’s family of brands underlying net sales grew 3%
(-2% reported). Underlying net sales growth from Jack Daniel’s
RTDs3, Jack Daniel’s Tennessee Apple, Jack Daniel’s Tennessee
Honey, and Gentleman Jack was partially offset by an unfavorable
channel mix shift in Jack Daniel’s Tennessee Whiskey
- Premium bourbons grew underlying net sales 18% (+15% reported)
driven by Woodford Reserve’s 14% underlying net sales growth (+11%
reported) and sustained high double-digit underlying net sales
growth from Old Forester
- The tequila portfolio grew underlying net sales 16% (flat
reported) led by strong volume-driven underlying net sales growth
from New Mix in Mexico and double-digit underlying net sales growth
from el Jimador. Herradura’s underlying net sales declined 16%
(-25% reported) as double-digit growth in the United States was
more than offset by declines in Mexico
- Non-branded and bulk underlying net sales declined 32% (-31%
reported) primarily reflecting lower demand and pricing for used
barrels
First Quarter of Fiscal 2021 Brand
Results
The Jack Daniel’s family of brands provided positive underlying
net sales growth driven by Jack Daniel’s RTDs, the ongoing launch
of Jack Daniel’s Tennessee Apple, and broad-based volume growth
from Jack Daniel’s Tennessee Honey. Gentleman Jack contributed
volumetric gains in the United States partially offset by
unfavorable channel mix. Underlying net sales declines for Jack
Daniel’s Tennessee Whiskey were driven by lower volumes in emerging
markets and Travel Retail reflecting travel bans and other
restrictions related to COVID-19, along with unfavorable channel
mix in the United States and developed international markets due to
significant restrictions in the on-premise channel.
Brown-Forman’s portfolio of premium bourbon brands, including
Woodford Reserve and Old Forester, maintained their double-digit
underlying net sales growth. Woodford Reserve’s gains were driven
by volumetric growth in the United States, partially offset by
volume declines in Travel Retail. Old Forester’s strong
double-digit underlying net sales growth was powered by ongoing
volumetric gains and favorable mix from the brand’s high-end
expressions.
The company’s tequila brands provided strong underlying net
sales growth led by higher volumes of New Mix supported by
increased consumer demand in Mexico. el Jimador’s underlying net
sales were fueled by higher volumes and pricing in the United
States and Mexico, while Herradura’s underlying net sales decline
was driven by lower volumes and unfavorable mix in Mexico,
partially offset by higher prices, favorable product mix, and
higher volumes in the United States.
First Quarter of Fiscal 2021 Market
Results
From a geographic perspective, underlying net sales growth in
the United States and our developed international markets was
partially offset by declines in Travel Retail, used barrels, and
emerging markets.
In the United States, underlying net sales growth was driven
by:
- expanding consumer demand for Jack Daniel’s RTDs, including the
launch of new spirits-based RTDs
- premium bourbons, led by Woodford Reserve and Old Forester
- the ongoing launch of Jack Daniel’s Tennessee Apple
- and Jack Daniel’s Tennessee Honey
This growth was partially offset by declines in Jack Daniel’s
Tennessee Whiskey reflecting an unfavorable channel mix shift from
the on-premise business due to COVID-19 related restrictions and
closures in this channel.
Underlying net sales growth in our developed international
markets was fueled by Jack Daniel’s RTDs, the launch of Jack
Daniel’s Tennessee Apple in a number of countries, and Jack
Daniel’s Tennessee Honey.
Broad-based declines registered in the company’s emerging
markets were led by Russia, Southeast Asia, sub-Saharan Africa, and
India, as COVID-19 driven challenges adversely impacted first
quarter results. Partially offsetting these declines were
underlying net sales growth in Mexico, Brazil, and Poland.
Underlying net sales results in Travel Retail continued to be
significantly impacted by COVID-19 reflecting the unprecedented
continuation of travel bans and other restrictions.
First Quarter of Fiscal 2021 Other
P&L Items
Volumes grew 22% in the first quarter driven by New Mix, the
Jack Daniel’s family of brands, and Woodford Reserve. Company-wide
price/mix decreased 19% reflecting unfavorable portfolio mix with
growth from lower-priced brands (New Mix & Jack Daniel’s RTDs)
and unfavorable channel mix resulting from COVID-19 related
restrictions in the on-premise channel.
Underlying gross profit declined 1% (-7% reported) and reported
gross margin contracted 320 basis points to 61.7% driven by higher
input costs and unfavorable mix primarily reflecting COVID-19
related closures in the on-premise channel and the significant
increase in sales of ready-to-drink products.
The company’s investment in underlying advertising declined 34%
(-33% reported) reflecting the phasing of spending, a reduction in
on-premise activations, and the cancellation of consumer events and
sponsorships given the current environment. The company expects
advertising investments to accelerate over the balance of the
fiscal year. Underlying SG&A declined 10% (-10% reported)
driven by lower discretionary spend as the company maintained its
cost discipline focus.
Underlying operating income increased 15% (+56% reported) driven
primarily by operating expense leverage.
Diluted earnings per share increased 73% to $0.67 including an
estimated $0.19 per share gain from the sale of the Canadian Mist,
Early Times, and Collingwood brands and $0.08 per share benefit
related to a discrete tax item recognized in the quarter.
Financial Stewardship
On July 23, 2020, the Brown-Forman Board of Directors declared a
regular quarterly cash dividend of $0.1743 per share on the Class A
and Class B common stock. This marks the company’s 75th consecutive
year of paying and 36th year of uninterrupted increases in their
regular quarterly cash dividend. The quarterly cash dividend is
payable on October 1, 2020, to stockholders of record on September
4, 2020.
Fiscal Year 2021 Outlook
The company continues to face substantial uncertainty due to the
rapidly evolving environment with the COVID-19 pandemic and its
effect on the global economy. As a result of this ongoing
uncertainty and expected volatility, the company remains unable to
provide quantitative guidance for fiscal year 2021. Jane Morreau,
Executive Vice President and Chief Financial Officer, added, “We
believe that we continue to be in a strong financial position and
that our capacity to generate solid operating cash flows remain
sound, allowing us to navigate this pandemic as circumstances
evolve.” As a result, the company maintains expectations to fully
fund ongoing investments in the business and pay regular dividends.
“Longer term, we are confident about the growth opportunities for
our brands and the resilience of our business. We believe the
actions we have taken solidify our foundation to continue to grow
consistently as we have done for decades,” added Lawson Whiting,
President and Chief Executive Officer.
Conference Call Details
Brown-Forman will host a conference call to discuss these
results at 10:00 a.m. (EDT) today. All interested parties in the
United States are invited to join the conference call by dialing
888-624-9285 and asking for the Brown-Forman call. International
callers should dial +1-706-679-3410. The company suggests that
participants dial in ten minutes in advance of the 10:00 a.m. (EDT)
start of the conference call. A live audio broadcast of the
conference call, and the accompanying presentation slides, will
also be available via Brown-Forman’s Internet website, http://www.brown-forman.com/, through a link to
“Investors/Events & Presentations.” A digital audio recording
of the conference call and the presentation slides will also be
posted on the website and will be available for at least 30 days
following the conference call.
For 150 years, Brown-Forman Corporation has enriched the
experience of life by responsibly building fine quality beverage
alcohol brands, including the Jack Daniel’s Tennessee Whiskey, Jack
Daniel’s Tennessee RTDs, Jack Daniel’s Tennessee Honey, Jack
Daniel’s Tennessee Fire, Gentleman Jack, Jack Daniel’s Single
Barrel, Finlandia, Korbel, el Jimador, Woodford Reserve, Old
Forester, Coopers’ Craft, Herradura, New Mix, Sonoma-Cutrer,
Chambord, BenRiach, GlenDronach, Slane, and Fords Gin.
Brown-Forman’s brands are supported by approximately 4,800
employees and sold in more than 170 countries worldwide. For more
information about the company, please visit http://www.brown-forman.com/.
Important Information on Forward-Looking Statements:
This press release contains statements, estimates, and
projections that are “forward-looking statements” as defined under
U.S. federal securities laws. Words such as “aim,” “anticipate,”
“aspire,” “believe,” “can,” “continue,” “could,” “envision,”
“estimate,” “expect,” “expectation,” “intend,” “may,” “might,”
“plan,” “potential,” “project,” “pursue,” “see,” “seek,” “should,”
“will,” “would,” and similar words indicate forward-looking
statements, which speak only as of the date we make them. Except as
required by law, we do not intend to update or revise any
forward-looking statements, whether as a result of new information,
future events, or otherwise. By their nature, forward-looking
statements involve risks, uncertainties, and other factors (many
beyond our control) that could cause our actual results to differ
materially from our historical experience or from our current
expectations or projections. These risks and uncertainties include,
but are not limited to:
- Impact of health epidemics and pandemics, including the
COVID-19 pandemic, and the resulting negative economic impact and
related governmental actions
- Risks associated with being a U.S.-based company with global
operations, including commercial, political, and financial risks;
local labor policies and conditions; protectionist trade policies,
or economic or trade sanctions, including additional retaliatory
tariffs on American spirits and the effectiveness of our actions to
mitigate the negative impact on our margins, sales, and
distributors; compliance with local trade practices and other
regulations; terrorism; and health pandemics
- Failure to comply with anti-corruption laws, trade sanctions
and restrictions, or similar laws or regulations
- Fluctuations in foreign currency exchange rates, particularly a
stronger U.S. dollar
- Changes in laws, regulatory measures, or governmental policies
– especially those that affect the production, importation,
marketing, labeling, pricing, distribution, sale, or consumption of
our beverage alcohol products
- Tax rate changes (including excise, sales, VAT, tariffs,
duties, corporate, individual income, dividends, or capital gains)
or changes in related reserves, changes in tax rules or accounting
standards, and the unpredictability and suddenness with which they
can occur
- Unfavorable global or regional economic conditions,
particularly related to the COVID-19 pandemic, and related economic
slowdowns or recessions, low consumer confidence, high
unemployment, weak credit or capital markets, budget deficits,
burdensome government debt, austerity measures, higher interest
rates, higher taxes, political instability, higher inflation,
deflation, lower returns on pension assets, or lower discount rates
for pension obligations
- Dependence upon the continued growth of the Jack Daniel’s
family of brands
- Changes in consumer preferences, consumption, or purchase
patterns – particularly away from larger producers in favor of
small distilleries or local producers, or away from brown spirits,
our premium products, or spirits generally, and our ability to
anticipate or react to them; legalization of marijuana use on a
more widespread basis; shifts in consumer purchase practices from
traditional to e-commerce retailers; bar, restaurant, travel, or
other on-premise declines; shifts in demographic or health and
wellness trends; or unfavorable consumer reaction to new products,
line extensions, package changes, product reformulations, or other
product innovation
- Decline in the social acceptability of beverage alcohol in
significant markets
- Production facility, aging warehouse, or supply chain
disruption
- Imprecision in supply/demand forecasting
- Higher costs, lower quality, or unavailability of energy,
water, raw materials, product ingredients, labor, or finished
goods
- Significant additional labeling or warning requirements or
limitations on availability of our beverage alcohol products
- Competitors’ and retailers’ consolidation or other competitive
activities, such as pricing actions (including price reductions,
promotions, discounting, couponing, or free goods), marketing,
category expansion, product introductions, or entry or expansion in
our geographic markets or distribution networks
- Route-to-consumer changes that affect the timing of our sales,
temporarily disrupt the marketing or sale of our products, or
result in higher fixed costs
- Inventory fluctuations in our products by distributors,
wholesalers, or retailers
- Risks associated with acquisitions, dispositions, business
partnerships, or investments – such as acquisition integration,
termination difficulties or costs, or impairment in recorded
value
- Counterfeiting and inadequate protection of our intellectual
property rights
- Product recalls or other product liability claims, product
tampering, contamination, or quality issues
- Significant legal disputes and proceedings, or government
investigations
- Cyber breach or failure or corruption of key information
technology systems, or failure to comply with personal data
protection laws
- Negative publicity related to our company, products, brands,
marketing, executive leadership, employees, board of directors,
family stockholders, operations, business performance, or
prospects
- Failure to attract or retain key executive or employee
talent
- Our status as a family “controlled company” under New York
Stock Exchange rules, and our dual-class share structure
For further information on these and other risks, please refer
to our public filings, including the “Risk Factors” section of our
annual report on Form 10-K and quarterly reports on Form 10-Q filed
with the Securities and Exchange Commission.
Brown-Forman Corporation
Unaudited Consolidated Statements of Operations For the Three
Months Ended July 31, 2019 and 2020 (Dollars in millions, except
per share amounts)
2019
2020
Change
Net sales
$
766
$
753
(2%)
Cost of sales
268
288
7%
Gross profit
498
465
(7%)
Advertising expenses
92
62
(33%)
Selling, general, and administrative
expenses
164
148
(10%)
Gain on sale of business
—
(127
)
Other expense (income), net
(6
)
(5
)
Operating income
248
387
56%
Non-operating postretirement expense
1
1
Interest expense, net
19
20
Income before income taxes
228
366
61%
Income taxes
42
42
Net income
$
186
$
324
74%
Earnings per share:
Basic
$
0.39
$
0.68
73%
Diluted
$
0.39
$
0.67
73%
Gross margin
64.9
%
61.7
%
Operating margin
32.4
%
51.4
%
Effective tax rate
18.2
%
11.6
%
Cash dividends per common share:
Paid
$
0.1660
$
0.1743
Shares (in thousands) used in the
calculation of earnings per share
Basic
477,369
478,327
Diluted
480,088
480,429
Brown-Forman Corporation
Unaudited Condensed Consolidated Balance Sheets (Dollars in
millions)
April 30,
2020
July 31,
2020
Assets:
Cash and cash equivalents
$
675
$
908
Accounts receivable, net
570
721
Inventories
1,685
1,741
Other current assets
335
276
Total current assets
3,265
3,646
Property, plant, and equipment, net
848
834
Goodwill
756
760
Other intangible assets
635
657
Other assets
262
294
Total assets
$
5,766
$
6,191
Liabilities:
Accounts payable and accrued expenses
$
517
$
545
Dividends payable
—
84
Accrued income taxes
30
73
Short-term borrowings
333
389
Total current liabilities
880
1,091
Long-term debt
2,269
2,316
Deferred income taxes
177
156
Accrued postretirement benefits
297
297
Other liabilities
168
181
Total liabilities
3,791
4,041
Stockholders’ equity
1,975
2,150
Total liabilities and stockholders’
equity
$
5,766
$
6,191
Brown-Forman Corporation
Unaudited Condensed Consolidated Statements of Cash Flows For the
Three Months Ended July 31, 2019 and 2020 (Dollars in millions)
2019
2020
Cash provided by operating activities
$
72
$
91
Cash flows from investing activities:
Proceeds from sale of business
—
177
Acquisition of business, net of cash
acquired
(22
)
—
Additions to property, plant, and
equipment
(21
)
(15
)
Cash provided by (used for) investing
activities
(43
)
162
Cash flows from financing activities:
Net change in short-term borrowings
67
55
Acquisition of treasury stock
(1
)
—
Dividends paid
(79
)
(83
)
Other
(13
)
(9
)
Cash used for financing activities
(26
)
(37
)
Effect of exchange rate changes on cash
and cash equivalents
(3
)
17
Net increase in cash and cash
equivalents
—
233
Cash and cash equivalents, beginning of
period
307
675
Cash and cash equivalents, end of
period
$
307
$
908
Schedule A
Brown-Forman
Corporation
Supplemental Information
(Unaudited)
Three Months
Ended
Fiscal Year
Ended
July 31, 2020
April 30, 2020
Reported change in net sales
(2)%
1%
Foreign exchange
—%
1%
Estimated net change in distributor
inventories
5%
(2)%
Underlying change in net sales
3%
—%
Reported change in gross profit
(7)%
(2)%
Estimated net change in distributor
inventories
5%
(2)%
Underlying change in gross
profit
(1)%
(3)%
Reported change in advertising
expenses
(33)%
(3)%
Acquisitions and divestitures
(1)%
—%
Foreign exchange
—%
1%
Underlying change in advertising
expenses
(34)%
(2)%
Reported change in SG&A
(10)%
—%
Acquisitions and divestitures
—%
(1)%
Foreign exchange
1%
2%
Underlying change in SG&A
(10)%
1%
Reported change in operating
income
56%
(5)%
Acquisitions and divestitures
(51)%
—%
Chambord Impairment
—%
1%
Foreign exchange
(1)%
—%
Estimated net change in distributor
inventories
11%
(3)%
Underlying change in operating
income
15%
(6)%
Note: Totals may differ due to
rounding
See "Note 2 - Non-GAAP Financial Measures" for details on our
use of Non-GAAP financial measures, how these measures are
calculated and the reasons why we believe this information is
useful to readers.
Schedule B
Brown-Forman Corporation
Supplemental Brand Information (Unaudited) Three Months Ended July
31, 2020
% Change vs. Prior Year
Period
Brand3
Depletions3
Net Sales2
9-Liter
Drinks
Equivalent3
Reported
Acquisitions
and
Divestitures
Foreign
Exchange
Estimated
Net
Change
in
Distributor
Inventories
Underlying
Whiskey
14%
3%
(1)%
—%
—%
5%
4%
Jack Daniel’s family of brands
15%
2%
(2)%
—%
—%
5%
3%
Jack Daniel’s Tennessee Whiskey
(7)%
(7)%
(17)%
—%
—%
7%
(10)%
Jack Daniel’s RTD and RTP
38%
38%
35%
—%
2%
—%
37%
Jack Daniel’s Tennessee Honey
17%
17%
21%
—%
(2)%
(3)%
16%
Gentleman Jack
17%
17%
17%
—%
—%
(3)%
14%
Jack Daniel’s Tennessee Fire
0%
0%
(10)%
—%
—%
7%
(3)%
Other Jack Daniel’s Whiskey Brands
157%
157%
83%
—%
(4)%
18%
97%
Woodford Reserve
15%
15%
11%
—%
—%
4%
14%
Rest of Whiskey
4%
4%
5%
—%
—%
5%
10%
Tequila
69%
12%
—%
—%
8%
8%
16%
el Jimador
3%
3%
(2)%
—%
3%
10%
11%
Herradura
(22)%
(22)%
(25)%
—%
2%
7%
(16)%
Rest of Tequila
93%
45%
38%
—%
23%
2%
63%
Wine
7%
7%
3%
—%
—%
7%
10%
Vodka
(20)%
(20)%
(27)%
—%
3%
(1)%
(24)%
Rest of Portfolio
(5)%
(5)%
38%
(4)%
(30)%
(7)%
(4)%
Non-Branded and Bulk
NM
NM
(31)%
—%
(1)%
—%
(32)%
Total Portfolio
22%
2%
(2)%
—%
—%
5%
3%
Other Brand
Aggregations
American whiskey
15%
3%
(1)%
—%
—%
5%
4%
Premium bourbons
16%
16%
15%
—%
—%
4%
18%
See "Note 2 - Non-GAAP Financial Measures" for details on our
use of Non-GAAP financial measures, how these measures are
calculated and the reasons why we believe this information is
useful to readers.
Note: Totals may differ due to rounding
Schedule C
Brown-Forman Corporation
Supplemental Geographic Information (Unaudited) Three Months Ended
July 31, 2020
Geographic
Area3
Net Sales2
Reported
Foreign
Exchange
Estimated
Net
Change
in
Distributor
Inventories
Underlying
United States
3%
—%
5%
9%
Developed International
13%
(5)%
5%
12%
United Kingdom
46%
(25)%
2%
24%
Germany
20%
(3)%
—%
17%
Australia
29%
—%
—%
28%
France
22%
(3)%
—%
19%
Rest of Developed International
(24)%
—%
13%
(10)%
Emerging
(20)%
10%
7%
(3)%
Mexico
9%
21%
—%
29%
Poland
1%
5%
—%
6%
Russia
(33)%
6%
(11)%
(38)%
Rest of Emerging
(36)%
7%
15%
(14)%
Travel Retail
(59)%
—%
(5)%
(63)%
Non-Branded and Bulk
(31)%
(1)%
—%
(32)%
Total
(2)%
—%
5%
3%
See "Note 2 - Non-GAAP Financial Measures" for details on our
use of Non-GAAP financial measures, how these measures are
calculated and the reasons why we believe this information is
useful to readers.
Note: Totals may differ due to rounding
Note 1 - Percentage growth rates are compared to
prior-year periods, unless otherwise noted.
Note 2 - Non-GAAP Financial Measures
Use of Non-GAAP Financial
Information. We use certain financial measures in this press
release that are not measures of financial performance under U.S.
generally accepted accounting principles (GAAP). These non-GAAP
measures, defined below, should be viewed as supplements to (not
substitutes for) our results of operations and other measures
reported under GAAP. Other companies may not define or calculate
these non-GAAP measures in the same way. Reconciliations of these
non-GAAP measures to the most closely comparable GAAP measures are
presented on Schedules A, B, and C of this press release.
“Underlying change” in measures of
statements of operations. We present changes in certain
measures, or line items, of the statements of operations that are
adjusted to an “underlying” basis. We use “underlying change” for
the following measures of the statements of operations: (a)
underlying net sales; (b) underlying gross profit; (c) underlying
advertising expenses; (d) underlying selling, general, and
administrative (SG&A) expenses; (e) underlying operating
income. To calculate these measures, we adjust, as applicable, for
(a) acquisitions and divestitures, (b) foreign exchange, (c)
estimated net changes in distributor inventories, and (d) a
non-cash write-down of the Chambord brand name. We explain these
adjustments below.
- “Acquisitions and divestitures.” This adjustment removes (a)
any non-recurring effects related to our acquisitions and
divestitures (e.g., transaction costs and integration costs), and
(b) the effects of operating activity related to acquired and
divested brands for periods not comparable year over year
(non-comparable periods). By excluding non-comparable periods, we
therefore include the effects of acquired and divested brands only
to the extent that results are comparable year over year. In fiscal
2020, we acquired 100% of the voting interests in The 86 Company,
which owns Fords Gin. During the first quarter of fiscal 2021, we
sold our Early Times, Canadian Mist, and Collingwood brands and
related assets, which resulted in a one-time pre-tax gain of $127
million. This adjustment removes (a) transaction and integration
costs related to the acquisition and divestiture, (b) operating
activity for The 86 Company for the non-comparable period, which is
activity in the first quarter of fiscal 2021, and (c) the gain on
sale of Early Times, Canadian Mist, and Collingwood. We believe
that these adjustments allow for us to better understand our
underlying results on a comparable basis.
- “Foreign exchange.” We calculate the percentage change in
certain line items of the statements of operations in accordance
with GAAP and adjust to exclude the cost or benefit of currency
fluctuations. Adjusting for foreign exchange allows us to
understand our business on a constant-dollar basis, as fluctuations
in exchange rates can distort the underlying trend both positively
and negatively. (In this press release, “dollar” always means the
U.S. dollar unless stated otherwise.) To eliminate the effect of
foreign exchange fluctuations when comparing across periods, we
translate current-year results at prior-year rates and remove
transactional and hedging foreign exchange gains and losses from
current- and prior-year periods.
- “Estimated net change in distributor inventories.” This
adjustment refers to the estimated net effect of changes in
distributor inventories on changes in certain line items of the
statements of operations. For each period compared, we use volume
information from our distributors to estimate the effect of
distributor inventory changes in certain line items of the
statements of operations. We believe that this adjustment reduces
the effect of varying levels of distributor inventories on changes
in certain line items of the statements of operations and allows us
to understand better our underlying results and trends.
- “Chambord impairment.” During fiscal 2020, we recognized a
non-cash impairment charge of $13 million for our Chambord brand
name.
We use the non-GAAP measures “underlying change” to: (a)
understand our performance from period to period on a consistent
basis; (b) compare our performance to that of our competitors; (c)
calculate components of management incentive compensation; (d) plan
and forecast; and (e) communicate our financial performance to the
board of directors, stockholders, and the investment community. We
have consistently applied the adjustments within our
reconciliations in arriving at each non-GAAP measure.
When we provide guidance for underlying change for certain
measures of the statements of operations we do not provide guidance
for the corresponding GAAP change because the GAAP measure will
include items that are difficult to quantify or predict with
reasonable certainty, including the estimated net change in
distributor inventories and foreign exchange, each of which could
have a significant impact to our GAAP income statement
measures.
Note 3 - Definitions
From time to time, to explain our results of operations or to
highlight trends and uncertainties affecting our business, we
aggregate markets according to stage of economic development as
defined by the International Monetary Fund (IMF), and we aggregate
brands by spirits category. Below, we define aggregations used in
this press release.
Geographic Aggregations.
In Schedule C, we provide supplemental information for our
largest markets ranked by percentage of total fiscal 2020 net
sales. In addition to markets that are listed by country name, we
include the following aggregations:
- “Developed International” markets are “advanced economies” as
defined by the IMF, excluding the United States. Our largest
developed international markets are the United Kingdom, Germany,
Australia, and France. This aggregation represents our net sales of
branded products to these markets.
- “Emerging” markets are “emerging and developing economies” as
defined by the IMF. Our largest emerging markets are Mexico,
Poland, and Russia. This aggregation represents our net sales of
branded products to these markets.
- “Travel Retail” represents our net sales of branded products to
global duty-free customers, other travel retail customers, and the
U.S. military regardless of customer location.
- “Non-branded and bulk” includes our net sales of used barrels,
bulk whiskey and wine, and contract bottling regardless of customer
location.
Brand Aggregations.
In Schedule B, we provide supplemental information for our
largest brands ranked by percentage of total fiscal 2020 net sales.
In addition to brands that are listed by name, we include the
following aggregations:
- “Whiskey” includes all whiskey spirits and whiskey-based
flavored liqueurs, ready-to-drink (RTD), and ready-to-pour products
(RTP). The brands included in this category are the Jack Daniel's
family of brands, Woodford Reserve family of brands (Woodford
Reserve), GlenDronach, BenRiach, Glenglassaugh, Old Forester
(family of brands), Slane Irish Whiskey, and Coopers’ Craft. Also
includes the Early Times, Canadian Mist, and Collingwood brands,
which we divested on July 31, 2020.
- “American whiskey” includes the Jack Daniel’s family of brands,
premium bourbons (defined below), super-premium American whiskey
(defined below), and Early Times.
- “Jack Daniel’s family of brands” includes Jack Daniel’s
Tennessee Whiskey (JDTW), Jack Daniel’s RTD and RTP products (JD
RTD/RTP), Jack Daniel’s Tennessee Honey (JDTH), Gentleman Jack,
Jack Daniel’s Tennessee Fire (JDTF), Jack Daniel’s Tennessee Apple
(JDTA), Jack Daniel’s Single Barrel Collection (JDSB), Jack
Daniel’s Tennessee Rye Whiskey (JDTR), Jack Daniel’s Sinatra
Select, Jack Daniel’s No. 27 Gold Tennessee Whiskey, and Jack
Daniel’s Bottled-in-Bond.
- “Jack Daniel’s RTD and RTP” products include Jack Daniel’s
& Cola, Jack Daniel’s Country Cocktails, Jack Daniel’s &
Diet Cola, Jack & Ginger, Jack Daniel’s Double Jack, Gentleman
Jack & Cola, Jack Daniel’s Lynchburg Lemonade, Jack Daniel’s
American Serve, Jack Daniel’s Tennessee Honey RTD, Jack Daniel’s
Berry, Jack Daniel’s Cider, Jack Daniel’s Whiskey & Seltzer,
and the seasonal Jack Daniel’s Winter Jack RTP.
- “Premium bourbons” includes Woodford Reserve, Old Forester, and
Coopers’ Craft.
- “Super-premium American whiskey” includes Woodford Reserve,
JDSB, Gentleman Jack, JDTR, Jack Daniel’s Sinatra Select, and Jack
Daniel’s No. 27 Gold Tennessee Whiskey.
- “Tequila” includes el Jimador, Herradura family of brands
(Herradura), New Mix, Pepe Lopez, and Antiguo.
- “Vodka” includes Finlandia.
- “Wine” includes Korbel Champagne and Sonoma-Cutrer wines.
- “Non-branded and bulk” includes our net sales of used barrels,
bulk whiskey and wine, and contract bottling regardless of customer
location.
Other Metrics.
- “Depletions.” We generally record revenues when we ship our
products to our customers. “Depletions” is a term commonly used in
the beverage alcohol industry to describe volume. Depending on the
context, “depletions” means either (a) our shipments directly to
retail or wholesale customers for owned distribution markets or (b)
shipments from our distributor customers to retailers and
wholesalers in other markets. We believe that depletions measure
volume in a way that more closely reflects consumer demand than our
shipments to distributor customers do. In this document, unless
otherwise specified, we refer to “depletions” when discussing
volume.
- “Drinks-equivalent.” Volume is discussed on a nine-liter
equivalent unit basis (nine-liter cases) unless otherwise
specified. At times, we use a “drinks-equivalent” measure for
volume when comparing single-serve ready-to-drink or ready-to-pour
brands to a parent spirits brand. “Drinks-equivalent” depletions
are RTD and RTP nine-liter cases converted to nine-liter cases of a
parent brand on the basis of the number of drinks in one nine-liter
case of the parent brand. To convert RTD volumes from a nine-liter
case basis to a drinks-equivalent nine-liter case basis, RTD
nine-liter case volumes are divided by 10, while RTP nine-liter
case volumes are divided by 5.
- “Consumer takeaway.” When discussing trends in the market, we
refer to consumer takeaway, a term commonly used in the beverage
alcohol industry. Consumer takeaway refers to the purchase of
product by consumers from retail outlets, including products
purchased through e-premise channels, as measured by volume or
retail sales value. This information is provided by third parties,
such as Nielsen and the National Alcohol Beverage Control
Association (NABCA). Our estimates of market share or changes in
market share are derived from consumer takeaway data using the
retail sales value metric. We believe consumer takeaway is a
leading indicator of how consumer demand is trending.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200902005527/en/
Rob Frederick Vice President Brown-Forman Brand &
Communications 502-774-7707
Leanne Cunningham Senior Vice President Shareholder Relations
Officer 502-774-7287
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