Brown-Forman Corporation (NYSE: BFA, BFB) reported financial
results for its fourth quarter and fiscal year ended April 30,
2021. For the fourth quarter, the company’s reported net sales of
$812 million increased 14%1 (+19% on an underlying basis2) compared
to the same prior-year period. In the quarter, reported operating
income decreased 10% to $168 million (+7% on an underlying basis)
and diluted earnings per share declined 6% to $0.25.
For fiscal year 2021, the company’s reported net sales of $3.5
billion grew 3% (+6% on an underlying basis) compared to the same
prior-year period. Reported operating income increased 7% to $1.2
billion (+4% on an underlying basis) and diluted earnings per share
grew 9% to $1.88.
Brown-Forman’s President and Chief Executive Officer Lawson
Whiting stated, “Brown-Forman’s performance in fiscal 2021
demonstrates the resilience of our strategy and our people, and the
strength of our portfolio and our brands. In an unprecedented and
complex environment, we delivered underlying net sales growth
consistent with our long-term expectations. I am proud of this
performance, and the work we did throughout the year to advance our
commitments to environmental sustainability, diversity and
inclusion, and community outreach. We place great care and focus on
being strong stewards of our culture, our brands, and our
communities, and it is evident in this fiscal year’s results.”
Fiscal 2021 Highlights
- Underlying net sales grew 6% (+3% reported)
- Growth across each of the three major International Monetary
Fund (IMF) geographic clusters
- Jack Daniel’s family of brands underlying net sales grew 4%
(+1% reported)
- Premium bourbons maintained double-digit underlying net sales
growth
- The tequila portfolio grew underlying net sales 14% (+9%
reported)
- Sustained investment behind the brand portfolio with underlying
advertising increasing 2% (+4% reported)
- Continued to reshape the portfolio through the sale of Early
Times, Canadian Mist, and Collingwood brands and the acquisition of
Part Time Rangers ready-to-drinks
- Strong free cash flow2 generation of $755 million
- Industry-leading return on invested capital2 of nearly 20%
Fiscal 2021 Brand
Results
Jack Daniel’s family of brands underlying net sales growth was
driven primarily by Jack Daniel’s RTDs3, the international launch
of Jack Daniel’s Tennessee Apple, and volume-driven growth from
Jack Daniel’s Tennessee Honey and Gentleman Jack. These gains were
partially offset by a reduction in Jack Daniel’s Tennessee
Whiskey’s underlying net sales.
- Fiscal 2021 Milestones:
- Jack Daniel’s RTDs depleted over 12 million 9L cases3
- Jack Daniel’s flavors depleted over 3 million 9L cases
- Gentleman Jack depleted over 800 thousand 9L cases
Premium bourbons grew underlying net sales with both Woodford
Reserve and Old Forester maintaining strong double-digit growth.
Once again Woodford Reserve was named a “Hot Brand3” by Impact
Magazine.
The tequila portfolio’s underlying net sales growth was led by
double-digit underlying net sales growth for el Jimador and
Herradura in the United States coupled with strong volume-driven
increases from New Mix in Mexico. These gains were partially offset
by declines for Herradura and el Jimador in Mexico.
Fiscal 2021 Market
Results
Strong underlying net sales growth from our largest market, the
United States3, was driven primarily by our premium bourbons, Jack
Daniel’s RTDs, and higher volumes and prices for our tequilas,
Herradura and el Jimador.
Developed international3 markets delivered double-digit
underlying net sales growth driven by strong growth in Australia,
Germany, France, and the United Kingdom, partially offset by
declines in the on-premise focused markets and markets reliant on
tourism, such as Spain and Czechia.
Emerging markets3 grew underlying net sales in the mid-single
digits propelled by volume gains in Brazil, Mexico, China, and
Poland. These gains were partially offset by declines in tourism
and trading down to lower-priced brands in some markets.
Underlying net sales in Travel Retail3 were down reflecting the
significant impact COVID-19 travel bans and restrictions had on the
channel.
Fiscal 2021 Other P&L
Items
Volumes grew 12% fueled by RTDs and Jack Daniel’s flavors, while
company-wide price/mix had a 6% unfavorable impact reflecting the
portfolio mix shift toward lower-priced brands (Jack Daniel’s RTDs
and New Mix) and the unfavorable channel mix shift (primarily for
Jack Daniel’s Tennessee Whiskey) from the on-premise channel
related to COVID-19 restrictions.
Underlying gross profit increased 3% (-2% reported), while
reported gross margin contracted 270 basis points to 60.5% driven
by higher input costs, lower fixed cost absorption, and the shift
to lower-priced brands noted above.
The company’s sustained investment in underlying advertising
increased 2% (+4% reported) with a significant acceleration in the
second half of the fiscal year behind Jack Daniel’s “Make It Count”
campaign. Underlying selling, general and administrative expenses
were flat (+4% reported) as the company maintained tight management
of discretionary spend.
Underlying operating income increased 4% (+7% reported), while
diluted earnings per share increased 9% to $1.88, including an
estimated $0.20 per share benefit from the gain on the sale of
Early Times, Canadian Mist, and Collingwood brands.
Financial Stewardship
On May 27, 2021, Brown-Forman declared a regular quarterly cash
dividend of $0.1795 per share on the Class A and Class B common
stock. The quarterly cash dividend is payable on July 1, 2021 to
stockholders of record on June 8, 2021. Brown-Forman has paid
regular quarterly cash dividends for 77 consecutive years and has
increased the regular dividend for 37 consecutive years.
In addition, the company grew free cash flow by $144 million to
$755 million for the fiscal year and announced a $20 million
contribution to the Brown-Forman Foundation.
Fiscal 2022 Outlook
“We are optimistic as we look ahead, as we expect the operating
environment to continue to improve” noted Jane Morreau, Executive
Vice President and Chief Financial Officer. Morreau added, “We
remain confident in the collective strength of our markets and
should benefit from the re-opening of the on-premise channel and
increase in tourism. Additionally, our portfolio remains well
positioned to capitalize on the continuing spirits premiumization
trend. For fiscal 2022, we anticipate mid-single digit growth in
underlying net sales and operating income.”
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
833-962-1472 and asking for the Brown-Forman call. International
callers should dial +1-442-268-1255. The company suggests that
participants dial in ten minutes in advance of the 10:00 a.m. (EST)
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 over 150 years, Brown-Forman Corporation has enriched the
experience of life by responsibly building fine quality beverage
alcohol brands, including Jack Daniel’s Tennessee Whiskey, Jack
Daniel’s Tennessee RTDs, Jack Daniel’s Tennessee Honey, Gentleman
Jack, Jack Daniel’s Tennessee Fire, Jack Daniel’s Tennessee Apple,
Jack Daniel’s Single Barrel, Finlandia, Korbel, el Jimador,
Woodford Reserve, Old Forester, Coopers’ Craft, Herradura, New Mix,
Sonoma-Cutrer, Chambord, Benriach, GlenDronach, Glenglassaugh,
Slane, and Fords Gin. Brown-Forman’s brands are supported by
approximately 4,700 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 April
30, 2020 and 2021
(Dollars in millions, except per
share amounts)
2020
2021
Change
Net sales
$
709
$
812
14%
Cost of sales
256
314
22%
Gross profit
453
498
10%
Advertising expenses
75
121
59%
Selling, general, and administrative
expenses
167
211
26%
Other expense (income), net
24
(2
)
Operating income
187
168
(10%)
Non-operating postretirement expense
2
2
Interest expense, net
19
19
Income before income taxes
166
147
(11%)
Income taxes
38
27
Net income
$
128
$
120
(6%)
Earnings per share:
Basic
$
0.27
$
0.25
(6%)
Diluted
$
0.27
$
0.25
(6%)
Gross margin
63.9
%
61.4
%
Operating margin
26.4
%
20.7
%
Effective tax rate
22.9
%
18.4
%
Cash dividends paid per common share
$
0.1743
$
0.1795
Shares (in thousands) used in the
calculation of earnings per share
Basic
478,148
478,696
Diluted
480,342
480,713
Brown-Forman
Corporation
Unaudited Consolidated Statements
of Operations
For the Twelve Months Ended April
30, 2020 and 2021
(Dollars in millions, except per
share amounts)
2020
2021
Change
Net sales
$
3,363
$
3,461
3%
Cost of sales
1,236
1,367
11%
Gross profit
2,127
2,094
(2%)
Advertising expenses
383
399
4%
Selling, general, and administrative
expenses
642
671
4%
Gain on sale of business
—
(127
)
Other expense (income), net
11
(15
)
Operating income
1,091
1,166
7%
Non-operating postretirement expense
5
6
Interest expense, net
77
79
Income before income taxes
1,009
1,081
7%
Income taxes
182
178
Net income
$
827
$
903
9%
Earnings per share:
Basic
$
1.73
$
1.89
9%
Diluted
$
1.72
$
1.88
9%
Gross margin
63.2
%
60.5
%
Operating margin
32.4
%
33.7
%
Effective tax rate
18.0
%
16.5
%
Cash dividends paid per common share
$
0.6806
$
0.7076
Shares (in thousands) used in the
calculation of earnings per share
Basic
477,765
478,527
Diluted
480,409
480,677
Brown-Forman
Corporation
Unaudited Condensed Consolidated
Balance Sheets
(Dollars in millions)
April 30, 2020
April 30, 2021
Assets:
Cash and cash equivalents
$
675
$
1,150
Accounts receivable, net
570
753
Inventories
1,685
1,751
Other current assets
335
263
Total current assets
3,265
3,917
Property, plant, and equipment, net
848
832
Goodwill
756
779
Other intangible assets
635
676
Other assets
262
318
Total assets
$
5,766
$
6,522
Liabilities:
Accounts payable and accrued expenses
$
517
$
679
Accrued income taxes
30
34
Short-term borrowings
333
205
Total current liabilities
880
918
Long-term debt
2,269
2,354
Deferred income taxes
177
169
Accrued postretirement benefits
297
219
Other liabilities
168
206
Total liabilities
3,791
3,866
Stockholders’ equity
1,975
2,656
Total liabilities and stockholders’
equity
$
5,766
$
6,522
Brown-Forman
Corporation
Unaudited Condensed Consolidated
Statements of Cash Flows
For the Twelve Months Ended April
30, 2020 and 2021
(Dollars in millions)
2020
2021
Cash provided by operating activities
$
724
$
817
Cash flows from investing activities:
Proceeds from sale of business
—
177
Acquisition of business, net of cash
acquired
(22
)
(14
)
Additions to property, plant, and
equipment
(113
)
(62
)
Other
(6
)
(3
)
Cash provided by (used for) investing
activities
(141
)
98
Cash flows from financing activities:
Net change in short-term borrowings
178
(126
)
Acquisition of treasury stock
(1
)
—
Dividends paid
(325
)
(338
)
Other
(43
)
(21
)
Cash used for financing activities
(191
)
(485
)
Effect of exchange rate changes on cash
and cash equivalents
(24
)
45
Net increase (decrease) in cash and cash
equivalents
368
475
Cash and cash equivalents, beginning of
period
307
675
Cash and cash equivalents, end of
period
$
675
$
1,150
Schedule A
Brown-Forman
Corporation
Supplemental Statement of
Operations Information (Unaudited)
Three Months Ended
Twelve Months Ended
Fiscal Year Ended
April 30, 2021
April 30, 2021
April 30, 2020
Reported change in net sales
14%
3%
1%
Acquisitions and divestitures
2%
—%
—%
Foreign exchange
(3)%
(1)%
1%
Estimated net change in distributor
inventories
6%
4%
(2)%
Underlying change in net sales2
19%
6%
—%
Reported change in gross profit
10%
(2)%
(2)%
Acquisitions and divestitures
2%
1%
—%
Foreign exchange
(3)%
(1)%
—%
Estimated net change in distributor
inventories
8%
4%
(2)%
Underlying change in gross
profit2
17%
3%
(3)%
Reported change in advertising
expenses
59%
4%
(3)%
Foreign exchange
(6)%
(2)%
1%
Underlying change in advertising
expenses2
53%
2%
(2)%
Reported change in SG&A
26%
4%
—%
Acquisitions and divestitures
(1)%
—%
(1)%
Foundation
(12)%
(3)%
—%
Foreign exchange
(3)%
(1)%
2%
Underlying change in SG&A2
11%
—%
1%
Reported change in operating
income
(10)%
7%
(5)%
Acquisitions and divestitures
4%
(10)%
—%
Foundation
10%
2%
—%
Chambord Impairment
(6)%
(1)%
1%
Foreign exchange
(8)%
(2)%
—%
Estimated net change in distributor
inventories
16%
9%
(3)%
Underlying change in operating
income2
7%
4%
(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)
Twelve Months Ended April 30,
2021
% Change vs. Prior Year
Period
Brand3
Depletions (Millions)
Depletions3
Net Sales
9-Liter
Drinks Equivalent3
9-Liter
Drinks Equivalent3
Reported
Acquisitions and Divestitures
Foreign
Exchange
Estimated
Net Change in Distributor Inventories
Underlying2
Whiskey
31.6
20.4
12%
4%
3%
1%
(1)%
4%
7%
Jack Daniel’s family of brands
29.4
18.2
12%
2%
1%
—%
(1)%
4%
4%
Jack Daniel’s Tennessee Whiskey
12.5
12.5
(4)%
(4)%
(8)%
—%
(1)%
4%
(4)%
Jack Daniel’s RTD and RTP
12.5
1.2
32%
32%
39%
—%
(2)%
(3)%
34%
Jack Daniel’s Tennessee Honey
2.1
2.1
10%
10%
14%
—%
(1)%
(2)%
11%
Gentleman Jack
0.8
0.8
15%
15%
11%
—%
(1)%
2%
13%
Jack Daniel’s Tennessee Fire
0.6
0.6
4%
4%
(3)%
—%
—%
7%
3%
Jack Daniel’s Tennessee Apple
0.6
0.6
120%
120%
24%
—%
(2)%
76%
98%
Other Jack Daniel’s Whiskey Brands
0.3
0.3
0%
0%
1%
—%
(2)%
6%
6%
Woodford Reserve
1.3
1.3
18%
18%
16%
—%
—%
5%
20%
Rest of Whiskey
0.9
0.9
13%
13%
8%
18%
(1)%
6%
30%
Tequila
10.3
2.9
20%
1%
9%
—%
4%
1%
14%
el Jimador
1.3
1.3
(5)%
(5)%
2%
—%
1%
4%
7%
Herradura
0.6
0.6
(2)%
(2)%
15%
—%
2%
(1)%
15%
Rest of Tequila
8.5
1.1
27%
11%
11%
—%
9%
1%
21%
Wine
2.1
2.1
10%
10%
10%
—%
—%
3%
14%
Vodka
2.4
2.4
(14)%
(14)%
(18)%
—%
—%
2%
(16)%
Rest of Portfolio
0.5
0.5
1%
1%
37%
(4)%
(26)%
(1)%
6%
Non-Branded and Bulk
NM
NM
NM
NM
(23)%
(6)%
(1)%
—%
(31)%
Total Portfolio
46.9
28.3
12%
2%
3%
—%
(1)%
4%
6%
Other Brand
Aggregations
American whiskey
31.2
20.0
12%
4%
3%
—%
(1)%
4%
6%
Premium bourbons
1.7
1.7
19%
19%
19%
—%
—%
5%
23%
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)
Twelve Months Ended April 30,
2021
Geographic
Area3
Net Sales
Reported
Acquisitions and Divestitures
Foreign
Exchange
Estimated
Net Change in Distributor Inventories
Underlying2
United States
3%
1%
—%
6%
10%
Developed International
13%
—%
(6)%
3%
10%
Australia
35%
—%
(8)%
—%
27%
Germany
21%
—%
(4)%
—%
17%
United Kingdom
14%
—%
(10)%
2%
6%
France
17%
—%
(5)%
—%
12%
Canada
2%
1%
2%
3%
8%
Rest of Developed International
(10)%
—%
(4)%
8%
(6)%
Emerging
1%
—%
4%
1%
6%
Mexico
(4)%
—%
9%
—%
5%
Poland
9%
—%
(1)%
—%
7%
Brazil
37%
—%
28%
(1)%
64%
Russia
(11)%
1%
2%
8%
—%
Rest of Emerging
(2)%
—%
1%
(1)%
(2)%
Travel Retail
(50)%
—%
—%
1%
(48)%
Non-Branded and Bulk
(23)%
(6)%
(1)%
—%
(31)%
Total
3%
—%
(1)%
4%
6%
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 D
Brown-Forman
Corporation
Supplemental Free Cash Flow
Information (Unaudited)
(Dollars in millions)
Twelve Months Ended
April 30, 2020
April 30, 2021
Cash provided by operating
activities
$
724
$
817
Additions to property, plant, and
equipment
(113
)
(62
)
Free Cash Flow2
$
611
$
755
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 1 - Percentage growth rates are compared to the same
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, C, and D 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; and (e) underlying operating
income. To calculate these measures, we adjust, as applicable, for
(1) acquisitions and divestitures, (2) foreign exchange, (3)
estimated net changes in distributor inventories, (4) a non-cash
write-down of the Chambord brand name, and (5) a commitment to our
charitable foundation. We explain these adjustments below.
- “Acquisitions and divestitures.” This adjustment removes (a)
the gain or loss recognized on sale of divested brands, (b) any
non-recurring effects related to our acquisitions and divestitures
(e.g., transaction costs and integration costs), and (c) 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
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 pre-tax
gain of $127 million. During the third quarter of fiscal 2021, we
acquired Part Time Rangers Holdings Limited, which owns Part Time
Rangers RTDs. See Note 14 to the Condensed Consolidated Financial
Statements in our Quarterly Report on Form 10-Q for the quarter
ended January 31, 2021, for details. This adjustment removes (a)
transaction and integration costs related to the acquisitions and
divestitures, (b) operating activity for The 86 Company for the
non-comparable period, which is activity in the first quarter of
fiscal 2021, (c) the gain on sale of Early Times, Canadian Mist,
and Collingwood, (d) operating activity for the non-comparable
period for Early Times, Canadian Mist, and Collingwood, which is
activity in the second, third, and fourth quarters for both fiscal
2020 and fiscal 2021, and (e) operating activity for Part Time
Rangers Holdings Limited for the non-comparable period, which is
activity in the third and fourth quarters of fiscal 2021. 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
(see Note 3 - Definitions - Other Metrics below) 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.
- “Foundation.” In the fourth quarter of fiscal 2021, we
committed $20 million to the Brown-Forman Foundation (the
Foundation) to support the company’s charitable giving program in
the communities where our employees live and work. This adjustment
removes the $20 million commitment to the Foundation from our
underlying SG&A expenses and underlying operating income to
present our underlying results on a comparable basis.
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.
Free cash flow. This measure refers
to the cash provided by operating activities less additions to
property, plant, and equipment on the Unaudited Condensed
Consolidated Statements of Cash Flows above. In Schedule D, we
provide this calculation for the relevant time periods. We use this
non-GAAP measure in evaluating the Company’s financial performance,
which measures our ability to generate additional cash from our
business operations. Free cash flow should be considered in
addition to, rather than as a substitute for, net income as a
measure of our performance and net cash provided by operating
activities as a measure of our liquidity.
Return on Invested Capital (ROIC).
This measure refers to the sum of net income and after-tax interest
expense, divided by average invested capital. Average invested
capital equals assets less liabilities, excluding interest-bearing
debt, and is calculated using the average of the most recent 13
month-end balances. After-tax interest expense equals interest
expense multiplied by one minus our effective tax rate. We use this
non-GAAP measure because we consider return on average invested
capital to be a meaningful indicator of how effectively and
efficiently we invest capital in our business.
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 2021 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 Australia, Germany, the United
Kingdom, France, and Canada. 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, Brazil, 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 2021 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, the Woodford Reserve family of brands (Woodford
Reserve), the Old Forester family of brands (Old Forester),
GlenDronach, Benriach, Glenglassaugh, Slane Irish Whiskey, and
Coopers’ Craft. Also includes the Early Times, Canadian Mist, and
Collingwood brands, which we divested during the first quarter of
fiscal 2021.
- “American whiskey” includes the Jack Daniel’s family of brands,
premium bourbons (defined below), super-premium American whiskey
(defined below), and Early Times, which we divested during the
first quarter of fiscal 2021.
- “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 No. 27 Gold
Tennessee Whiskey, Jack Daniel’s Sinatra Select, and Jack Daniel’s
Bottled-in-Bond.
- “Jack Daniel’s RTD and RTP” products include all RTD line
extensions of Jack Daniel’s, such as 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 American Serve, Jack Daniel’s Tennessee Honey RTD,
Jack Daniel’s Berry, Jack Daniel’s Lynchburg Lemonade, Jack
Daniel’s Whiskey & Seltzer, and the seasonal Jack Daniel’s
Winter Jack RTP.
- “Jack Daniel’s flavors” includes JDTH, JDTF, and JDTA.
- “Premium bourbons” includes Woodford Reserve, Old Forester, and
Coopers’ Craft.
- “Super-premium American whiskey” includes Woodford Reserve,
Gentleman Jack, JDSB, JDTR, Jack Daniel’s No. 27 Gold Tennessee
Whiskey, and Jack Daniel’s Sinatra Select.
- “Tequila” includes the Herradura family of brands (Herradura),
el Jimador, New Mix, Pepe Lopez, and Antiguo.
- “Vodka” includes Finlandia.
- “Wine” includes Korbel Champagnes 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.
- “Impact Magazine Hot Brand.” To be recognized, a brand must
have shown double-digit growth in each year from 2018-2020, be an
established brand with at least 15% growth in 2020, or be a top 10
brand with at least 5% growth in 2020 and 15% growth since 2017.
The minimum volume requirement is 200,000 cases.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210609005486/en/
Rob Frederick Vice President Brown-Forman Brand &
Communications 502-774-7707 Sue Perram Director Investor Relations
502-774-6862
Brown Forman (NYSE:BFB)
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