FinanceLooker

Excrept from filing document 2024-04-30

The aggregate market value as of the last business day of the most recently completed second fiscal quarter of the voting and nonvoting equity held by nonaffiliates of the registrant was approximately 19 400 000 000
Certain matters discussed in this report including the information presented in Part II under Item 7 Management s Discussion and Analysis of Financial Condition and Results of Operations contain statements estimates and projections that are forward looking statements as defined under U S federal securities laws Words such as aim ambition 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 those described in Part I under Item 1A Risk Factors and those described from time to time in our future reports filed with the Securities and Exchange Commission including
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 further legalization of marijuana 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
Substantial competition from new entrants consolidations by competitors and retailers and 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
Unfavorable global or regional economic conditions 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
Negative publicity related to our industry company products brands marketing executive leadership employees Board of Directors family stockholders operations business performance or prospects including labor strikes and work stoppages
Risks associated with being a U S based company with a global business including commercial political and financial risks local labor policies and conditions including labor strikes and work stoppages protectionist trade policies or economic or trade sanctions including additional retaliatory tariffs on American whiskeys 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 kidnapping extortion or other types of violence and health pandemics
Changes in laws regulatory measures or governmental policies especially those affecting production exportation importation marketing and promotion labeling pricing distribution sale or consumption of our beverage alcohol products
Tax rate changes including excise corporate sales or value added taxes property taxes payroll taxes import and export duties and tariffs or changes in related reserves changes in tax rules or accounting standards and the unpredictability and suddenness with which they can occur
Cyber breach or failure or corruption of our key information technology systems or those of our suppliers customers or direct and indirect business partners or failure to comply with personal data protection laws
Certain matters discussed in this report including the information presented in Part II under Item 7 Management s Discussion and Analysis of Financial Condition and Results of Operations include measures that are not measures of financial performance under U S generally accepted accounting principles GAAP These non GAAP measures should not be considered in isolation or as a substitute for any measure derived in accordance with GAAP and also may be inconsistent with similarly titled measures presented by other companies In Part II under Item 7 Management s Discussion and Analysis of Financial Condition and Results of Operations we present the reasons we use these measures under the heading Non GAAP Financial Measures and we reconcile these measures to the most closely comparable GAAP measures under the heading Results of Operations
Brown Forman Corporation the Company Brown Forman we us or our below was incorporated under the laws of the State of Delaware in 1933 successor to a business founded in 1870 as a partnership and later incorporated under the laws of the Commonwealth of Kentucky in 1901 We primarily manufacture distill bottle import export market and sell a wide variety of beverage alcohol products under recognized brands We employ approximately 5 700 people excluding individuals who work on a part time or temporary basis on six continents including approximately
people in Louisville Kentucky USA home of our world headquarters According to International Wine Spirit Research IWSR we are the largest American owned spirits and wine company with global reach We are a controlled company under New York Stock Exchange rules because the Brown family owns more than 50 of our voting stock
Beginning in 1870 with Old Forester Kentucky Straight Bourbon Whisky our founding brand and spanning the generations since we have built a portfolio of more than 40 spirit ready to drink RTD cocktail and wine brands that includes some of the best known and most loved trademarks in our industry The most important and iconic brand in our portfolio is Jack Daniel s Tennessee Whiskey the 1 selling American whiskey in the world
Jack Daniel s Tennessee Whiskey was recently named the most valuable spirits brand in the world in the 2023 Interbrand Best Global Brands rankings and the newly released Glenglassaugh Sandend was named the 2023 Whisky of the Year by
The Jack Daniel s Single Barrel Collection includes Jack Daniel s Single Barrel Select Jack Daniel s Single Barrel Barrel Proof Jack Daniel s Single Barrel Rye Barrel Proof and other Jack Daniel s Single Barrel special release expressions
Our vision in marketing is to be the best brand builder in the industry We build our brands by investing in platforms that we believe create enduring connections with our consumers These platforms cover a wide spectrum of activities including media advertising TV radio print outdoor digital and social consumer and trade promotions sponsorships and visitors center programs at our distilleries We aim to grow our sales and profits by consistently delivering creative responsible marketing programs that drive brand recognition brand trial brand loyalty and ultimately consumer demand around the world
We sell our products in over 170 countries The United States our most important market accounted for 45 of our net sales in fiscal 2024 and the other 55 were outside of the United States The table below shows the percentage of total reported net sales for our top markets in our three most recent fiscal years
For details about net sales in our top markets see Item 7 Management s Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Fiscal 2024 Market Highlights For details about our reportable segment and for additional geographic information about net sales and long lived assets see Note 19 to the Consolidated Financial Statements in Item 8 Financial Statements and Supplementary Data For details on risks related to our global operations see Item 1A Risk Factors
Our distribution network or our route to consumer RTC varies depending on a the laws and regulatory framework for trade in beverage alcohol by market b our assessment of a market s long term attractiveness and competitive dynamics c the relative profitability of distribution options available to us d the structure of the retail and wholesale trade in a market and e our portfolio s development stage in a market As these factors change we evaluate our RTC strategy and from time to time adapt our model
In the United States which generally prohibits spirits and wine manufacturers from selling their products directly to consumers we sell our brands either to distributors or to state governments in states that directly control alcohol sales that then sell to retail customers and consumers
Outside the United States we use a variety of RTC models which can be grouped into three categories owned distribution partner and government controlled markets We own and operate distribution companies for Australia Belgium and Luxembourg Brazil Czechia France Germany Japan Mexico Poland Slovakia South Korea Spain Taiwan Thailand Türkiye and the United Kingdom In these owned distribution markets and in a large portion of the Travel Retail channel we sell our products directly to retailers or wholesalers In many other markets we rely on third parties to distribute our brands generally under fixed term distribution contracts In Canada we sell our products to provincial governments
We believe that our customer relationships are good and that our exposure to concentrations of credit risk is limited due to the diverse geographic areas covered by our operations and our thorough evaluation of each customer In fiscal 2024 our two largest customers accounted for approximately 13 and 11 of consolidated net sales respectively No other customer accounted for 10 or more of our consolidated net sales in fiscal 2024
Trade information indicates that we are one of the largest global suppliers of premium spirits According to IWSR for calendar year 2023 the ten largest global spirits companies controlled over 20 of the total spirits volume sold around the world While we believe that the overall market environment offers considerable growth opportunities for us our industry is and will remain highly competitive We compete against many global regional and local brands in a variety of categories of beverage alcohol but our brands compete primarily in the industry s premium and above price points Our competitors include major global spirits and wine companies such as Bacardi Limited Becle S A B de C V Davide Campari Milano N V Diageo PLC LVMH Moët Hennessy Louis Vuitton SE Pernod Ricard SA Rémy Cointreau and Suntory Global Spirits In addition particularly in the United States we compete with national companies and craft spirit brands many of which entered the market in the last few years
Brand recognition brand provenance quality of product and packaging availability flavor profile and price affect consumers choices among competing brands in our industry Other factors also influence consumers including advertising promotions merchandising at the point of sale expert or celebrity endorsement social media and word of mouth and the timing and relevance of new product introductions Although some competitors have substantially greater resources than we do we believe that our competitive position is strong particularly as it relates to brand awareness quality availability and relevance of new product introductions
malted barley molasses rye sugar and wood could be adversely affected by weather and other forces out of our control that might constrain supply or reduce our inventory below desired levels for optimum production
Whiskeys certain tequilas rums and some other distilled spirits must be aged Because we must produce these distilled spirits years in advance to meet projected future demand our inventories of these products may be larger in relation to sales and total assets than in many other businesses
Our intellectual property includes trademarks copyrights proprietary packaging and trade dress proprietary manufacturing technologies know how and patents Our intellectual property especially our trademarks is essential to our business We register our trademarks broadly around the world focusing primarily on where we sell or expect to sell our products We protect our intellectual property rights vigorously but fairly We have licensed some of our trademarks to third parties for use with services or on products other than alcoholic beverages which we believe enhances the awareness and protection of our brands Depending on the jurisdiction trademarks are valid as long as they are in use and or their registrations are properly maintained We also have various licenses and distribution agreements for the production sale and marketing of our products and for the sale and marketing of products of others These licenses and distribution agreements have varying terms and durations
For details on risks related to the protection of our intellectual property see Item 1A Risk Factors For details on our most important brands see Item 7 Management s Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Fiscal 2024 Brand Highlights
Federal state local and foreign authorities regulate how we produce store transport distribute market and sell our products Some countries and local jurisdictions prohibit or restrict the marketing or sale of distilled spirits in whole or in part
In the United States at the federal level the Alcohol and Tobacco Tax and Trade Bureau of the U S Department of the Treasury regulates the spirits and wine industry with respect to the production blending bottling labeling advertising sales and transportation of beverage alcohol Similar regulatory regimes exist at the state level and in most non U S jurisdictions where we sell our products In addition beverage alcohol products are subject to customs duties excise taxes and or sales taxes in many countries including taxation at the federal state and local level in the United States
Many countries set their own distilling and maturation requirements For example under U S federal and state regulations bourbon and Tennessee whiskeys must be aged in new charred oak barrels we typically age our whiskeys at least three years Mexican authorities regulate the production and bottling of tequilas they mandate minimum aging periods for
two months Irish whiskey must be matured at least three years in a wood cask such as oak on the island of Ireland Scotch whisky must be matured in oak casks for at least three years in Scotland We comply with all of the applicable laws and regulations
Our operations are also subject to various environmental protection statutes and regulations and our policy is to comply with them Complying with these statutes and regulations has not materially impacted our capital expenditures earnings or competitive position and is not expected to have a material impact during fiscal 2025
For more than 150 years Brown Forman and the Brown family have been committed to driving sustainable growth and preserving Brown Forman as a thriving family controlled independent company The image on the left illustrates our highest ambition Nothing Better in the Market surrounded by the values that have guided us for decades integrity respect trust teamwork and excellence In addition to these guiding principles our success depends on several strategic priorities as illustrated in the image on the right the quality of our brands within our portfolio our geographic reach the talent and diversity of our people and the return on our investments Moreover taking an integrated approach means that many aspects of our company contribute to this value creation and are fundamental to our strategy including our commitment to environmental sustainability alcohol and marketing responsibility diversity and inclusion and to building communities in which we live and work We call these efforts Living a Spirit of Commitment
Over the past four fiscal years we faced a challenging volatile environment including supply chain disruptions and a global pandemic Our employees unique mix of agility resilience energy and collaboration enabled us to succeed despite these challenges Our values drive our decisions and our core purpose and our highest ambition continue to guide us as we move forward to a reimagined future with renewed enthusiasm for the opportunities that lie ahead We believe we are well positioned to navigate the ever changing landscape We will make bold moves with a commitment to improve continuously as we work together to deliver sustained long term growth
This Integrated Annual Report on Form 10 K for the fiscal year ended April 30 2024 presents not only our financial performance but also our environmental social and governance strategies commitments and results It provides a more holistic view of Brown Forman our culture our strategic approach to our business and how we achieve results
We seek to build brands and create stockholder value responsibly by delivering strong sustainable growth solid margins and high returns on invested capital We focus on building brands that can be meaningful for our company and our legal drinking age consumers consumers over the longer term We aim to grow our premium spirits portfolio both organically and through innovation Opportunistically and thoughtfully we also consider acquisitions and partnerships that will enhance our capacity to deliver meaningful growth improve margins and increase stockholder returns
We strive to grow our brands and enhance consumers experience with them Even as we do so we remain committed to marketing our brands responsibly and promoting responsible drinking Regulation of our industry is not new and external interest from the World Health Organization and other health bodies has grown over time We uphold high standards of self regulation by adhering to industry guidelines on responsible marketing and advertising We promote alcohol responsibility both independently and with industry organizations such as the International Alliance for Responsible Drinking the Foundation for Advancing Alcohol Responsibility responsibility org in the United States the Portman Group in the United Kingdom DrinkWise in Australia and FISAC in Mexico
The Jack Daniel s family of brands led by Jack Daniel s Tennessee Whiskey JDTW is our most valuable asset the engine of our overall financial performance and the foundation of our leadership position in the American whiskey category
We strive to strengthen the brand s leadership position continually and will work steadfastly to keep JDTW relevant to consumers worldwide We will also pursue opportunities to grow the Jack Daniel s family of brands across markets premium and above price points channels and consumer groups Product innovation continues to contribute meaningfully to our performance Different Jack Daniel s expressions have brought new consumers to the franchise including Jack Daniel s Tennessee Honey 2011 Jack Daniel s Tennessee Fire 2015 Jack Daniel s Tennessee Apple 2019 Jack Daniel s Bonded Tennessee Whiskey and Triple Mash Blended Straight Whiskey 2022 and our most recent launches Jack Daniel s Bonded Tennessee Rye Whiskey and Jack Daniel s American Single Malt 2023 which individually and collectively add great value to the company and to our consumers the world over
In addition to the leadership of our Jack Daniel s family of brands we expect strong worldwide growth from our other whiskey brands particularly Woodford Reserve and Old Forester Woodford Reserve is the leading super premium American whiskey globally
growing volumes at a strong double digit compound annual growth rate since the brand was introduced over 25 years ago Woodford Reserve sold over 1 7 million nine liter cases for the fiscal year ended April 30 2024 We believe the brand is poised for continued growth as the bourbon category continues to grow around the world Old Forester has continued its return to prominence in the United States and in select international markets Innovation has played an important role in the premiumization of both of these brands including the success of high end expressions such as Woodford Reserve Double Oaked and the Old Forester Whiskey Row Series
Outside of our American whiskey brands we believe our portfolio remains well positioned in other high growth categories with meaningful premium brands and a focus on accelerating our super premium portfolio Our tequila portfolio is led by two brands steeped in Mexican heritage Herradura and el Jimador Despite the cyclical cost pressures of agave we remain committed to the growth of our tequila business in the United States and the long term growth prospects of this business globally We believe that our Scotch whiskies The Glendronach Benriach and Glenglassaugh and our Irish whiskey Slane are well positioned in their respective categories We expect them all to contribute meaningfully over the longer term In addition the acquisitions of Gin Mare 2022 and Diplomático 2023 provide us with leadership positions in the super premium and above gin and rum categories respectively and we look to grow these brands globally
Our RTD portfolio continues to evolve globally In June 2022 we jointly announced a global relationship with The Coca Cola Company to introduce the iconic Jack Coke cocktail as a branded ready to drink pre mixed cocktail Since the announcement we have launched the product in over 25 markets including the top RTD markets such as the United States Japan the United Kingdom Mexico and Germany Jack Daniel s Country Cocktails in the United States are produced sold and distributed under our relationship with the Pabst Brewing Company
We appreciate the power of our brands to enrich the experience of life and we believe it is our duty to ensure that our products are marketed with deep respect for our consumers Our mission for alcohol responsibility is to empower mindful choices around beverage alcohol We launched the Pause campaign in 2019 Pause is Brown Forman s driving effort to encourage mindful choices In 2022 we launched our 2030 Alcohol Responsibility strategy to prioritize strategic programs and partnerships in market tools and resources and to continue empowering our employees and business partners We execute our 2030 Alcohol Responsibility strategy through the lens of our Pause campaign to showcase the importance of alcohol responsibility and inspire action among our consumers colleagues and business partners
The United States remains our largest market and growth there is important to our long term success We expect to foster this growth by emphasizing fast growing spirits categories continuing product and packaging innovation and building brands within growing consumer segments This includes increasing emphasis on inclusive digital and integrated marketing and the growth of our e commerce capabilities to better connect and engage with consumers where they are
Outside the United States our improved routes to consumers continue to increase our competitiveness In fiscal 2024 we established our owned distribution organizations in Japan and Slovakia and announced plans to distribute our own brands in Italy effective May 1 2025 More direct connection with customers and consumers enabled through owned distribution is an important part of our strategic growth
As we work to increase our brands relevance and appeal to diverse consumer groups around the world we believe a diversity of experiences perspectives and mindsets within our own workforce is essential Our vision is to create an environment where leveraging diversity and fostering inclusion occurs naturally giving us a sustainable marketplace advantage By 2030 we aspire to have 50 women in professional and leader level roles globally 40 women in senior leadership positions globally 25 people of color in our United States workforce and 6 self identified LGBTQ employees in our United States workforce Also by 2030 we aspire for 16 of our supplier spend to be with businesses that are woman or minority owned in locations such as the United States the United Kingdom and Australia For more than a decade we have earned a perfect score in the Corporate Equality Index a national benchmarking survey and report on corporate policies and practices related to LGBTQ workplace equality administered by the Human Rights Campaign Foundation We also extended our diversity and inclusion commitment more deeply in our communities especially our hometown of Louisville Kentucky
One of the main drivers of our inclusive culture is the continued growth and leadership of our ten Employee Resource Groups ERGs We believe ERGs are instrumental in enriching our company s culture and our employees experience by
Our core values of integrity respect trust teamwork and excellence form the foundation of our ethics and compliance program Values Drive Decisions is the key theme of this program and we use it to teach our employees to rely on our values when faced with a difficult decision and to speak up if they believe they a colleague or a business partner may have violated the law our Code of Conduct or company policy In 46 countries we offer a third party service to employees and others who choose to speak up anonymously As we train our managers we reinforce our commitment to non retaliation and maintaining a speak up culture
We convey our compliance expectations to employees via our Code of Conduct and our employees certify annually that they will comply with it and report potential violations The Code of Conduct details expectations for 20 different risks links to Q A policies and training and gives contact details for subject matter experts We refresh our Code of Conduct and certification annually and make them available in 12 languages
For over a century and a half we have learned that long term success requires investment and a mindset of sustainability We understand the need to invest in our brands global supply chain facilities homeplace and visitor centers and aging inventory For example in May 2023 we announced a 200 million capital investment to expand our Casa Herradura tequila distillery to meet anticipated consumer demand Additionally during fiscal 2022 we announced a 30 million expansion of our The Glendronach distillery to meet strong demand We also understand the importance of investing in our people communities and the environment We recognize that climate change is a business issue with risks and opportunities As such we are committed to actions that will ensure the long term health of the planet and our business In fiscal 2021 we established a new 2030 Sustainability Strategy to align our efforts with industry best practices and the most current climate science Our goals broaden our focus beyond business operations to include our supply chain where the majority of our environmental footprint resides With this evolving strategy we have a roadmap for continued progress over the next quarter century
In fiscal 2024 we installed a rooftop solar system at our Newbridge bottling plant in Edinburgh Scotland in partnership with YLEM Energy and our Slane Distillery signed a Corporate Power Purchase Agreement with Flogas Enterprise for renewable electricity from a wind farm in Ireland
In fiscal 2024 construction continued on the anaerobic digester at the Jack Daniel Distillery that will convert a portion of the distillery byproducts to renewable energy and fertilizer The project is expected to become operational in fiscal 2025
In fiscal 2024 we continued our work with Waterplan to improve the measurement of water related risk at eight of our facilities and to identify opportunities for water efficiency improvements and water reuse at our Casa Herradura facility We will expand this collaboration in fiscal 2025 to begin measuring water risk in our supply chain and further enhance our water stewardship program
In June 2023 our Woodford Reserve Distillery announced a five year commitment to purchase the rye grown by Kentucky farmers as part of the Rye in Kentucky research being led by the University of Kentucky In fiscal 2024 we met our target to engage with 100 of our direct farmers on regenerative agriculture practices and will continue engaging with direct farmers in fiscal 2025
In June 2023 the Jack Daniel Seed Orchard and our continued relationship with the University of Tennessee celebrated its 25th anniversary In December 2023 the Tennessee Forestry Association supported by Jack Daniel s announced that it received a grant from the National Fish and Wildlife Federation to engage with family forest landowners on sustainable management practices to improve Tennessee s shortleaf pine and white oak forests
We believe we are a responsible and caring corporate citizen and invest in the communities where employees live and work We encourage employees to participate in philanthropic outreach efforts by giving their time and talents to support those non profit organizations most meaningful to them This civic engagement as well as our philanthropic contributions further promotes Brown Forman s caring culture and commitment to the community
We continue to expand our civic engagement in Brown Forman global office locations allowing those employees closest to the needs of their communities to decide how to invest their charitable giving resources We leverage our key community relations partners to stay informed of collaborative opportunities where we work and live and to shape our charitable giving strategy to meet the essential needs of the communities that sustain us We created the Brown Forman Foundation the Foundation in fiscal year 2018 to help fund our ongoing philanthropic endeavors with an emphasis on the communities surrounding Brown Forman s headquarters in Louisville KY The Foundation s resources provide a consistent source of support for charitable giving independent of our annual earnings We work to partner with organizations that support our key focus areas empowering responsible and sustainable living ensuring essential living standards and enhancing arts and cultural living As part of our commitment to be better and do better as neighbors and as corporate citizens the Brown Forman Foundation made a 10 year 50 million commitment to five organizations in west Louisville in fiscal year 2022 which is the
largest investment in its history Our partner organizations include AMPED the Louisville Central Community Center the Louisville Urban League Simmons College of Kentucky and the West End School Together these organizations will advance educational opportunities from early childhood through adult learning
We believe that having a long term focused committed and engaged stockholder base anchored by the Brown family gives us a distinct strategic advantage particularly in a business with multi generational brands and products that must be aged We are committed to continually improving our environmental social and governance performance and acting upon our deeply held values Recognizing the strong cash generating capacity and the capital efficiency of our business we will continue to pursue top tier stockholder return through stockholder friendly capital allocation and socially and environmentally conscious investments to fuel long term growth
We put our values at the forefront of all our decisions and actions in an effort to make our employees feel respected safe and supported so they can make market and sell our products with the finest craftsmanship quality and care What enables our success are the approximately
5 700 people excluding individuals that work on a part time or temporary basis we employ in over 45 countries around the world This includes approximately 3 600 salaried employees and 2 100 hourly employees with the largest percentage of our employees residing within the United States Mexico and the United Kingdom We believe our employee relations are good and our turnover rate is low
We strive to pay our employees fairly and competitively Each fiscal year we review the compensation for all salaried roles both internally and externally ensuring that every employee is paid fairly compared to each other and competitively against the market All roles are priced based on compensation survey data for the market where the employee resides We will continue to refresh our data and monitor pay equity annually
We continually seek opportunities to develop our employees to ensure that we have the capabilities to grow our business We do this through a combination of succession planning planned learning short term assignments international opportunities and thoughtful talent management Given our low turnover we are intentional about moving employees through new roles ensuring that they have the opportunity to learn new skills We track all internal movement and are comfortable that we are providing an appropriate level of growth and development for our employees
We are continuing to pursue our 2030 Diversity Inclusion ambitions as outlined in our Many Spirits One Brown Forman strategy We remain focused on ensuring our workforce mirrors the consumers and communities we serve We regularly monitor our progress with women in senior leadership globally and people of color and LGBTQ salaried employees in the United States We track promotion and lateral movement by gender globally and ethnicity in the United States and based on that data we can confirm that our growth opportunities for women and people of color are proportional to our salaried employee population
To support our culture of inclusion we have continued to build awareness of the foundations of inclusive leadership and inclusive behaviors We also have ten ERGs that help foster an inclusive environment across the organization
We have historically enjoyed low turnover among our salaried population and continue to track our departures given the acceleration in the job market in recent years We analyze our quantitative and qualitative attrition data each quarter and our voluntary turnover among salaried employees remains consistent with our historical levels We will continue to monitor our data carefully
President and Chief Executive Officer since January 2019 Executive Vice President and Chief Operating Officer from October 2017 to December 2018 Executive Vice President and Chief Brands and Strategy Officer from February 2015 to September 2017 Senior Vice President and Chief Brands Officer from January 2013 to January 2015
Executive Vice President and Chief Brands Officer since March 2023 Senior Vice President and Chief Brands Officer from January 2020 to March 2023 Senior Vice President and Managing Director of Jack Daniel s Family of Brands from August 2018 to January 2020 Vice President and General Manager of Mexico from January 2016 to August 2018 Vice President Latin America Marketing and Chief of Staff from October 2009 to January 2016
Executive Vice President General Counsel and Secretary since May 2024 Vice President Associate General Counsel Regional and Corporate Development from October 2022 to April 2024 Vice President Associate General Counsel Europe from May 2018 to October 2022 Vice President Managing Attorney and Assistant Corporate Secretary from September 2013 to May 2018
Executive Vice President and Chief Financial Officer since March 2023 Senior Vice President and Chief Financial Officer from July 2021 to March 2023 Senior Vice President Shareholder Relations Officer Global Commercial Finance and Financial Planning and Analysis from August 2020 to July 2021 Senior Vice President Shareholder Relations Officer from August 2019 to July 2020 Senior Vice President and General Manager Brown Forman Brands from May 2015 to July 2019 Vice President Director of Finance Global Production from October 2013 to April 2015
Executive Vice President Chief Strategic Growth Officer since March 2024 Executive Vice President Chief Strategic Growth Officer and President Europe from January 2023 to March 2024 Senior Vice President President Europe from August 2020 to January 2023 Senior Vice President Managing Director Global Travel Retail and Developed APAC Region from August 2018 to July 2020 Senior Vice President Managing Director Global Travel Retail from May 2015 to July 2018 Vice President Managing Director Jack Daniel s Tennessee Honey from January 2014 to April 2015
Executive Vice President Chief People Places and Communications Officer since March 2023 Senior Vice President Chief People Places and Communications Officer from May 2021 to March 2023 Senior Vice President Chief Human Resources and Corporate Communications Officer from March 2019 to April 2021 Senior Vice President and Chief Human Resources Officer from February 2015 to February 2019 Senior Vice President and Director of Human Resources Business Partnerships from August 2013 to January 2015
Executive Vice President President Emerging International since March 2023 Senior Vice President President Emerging International from August 2020 to March 2023 Senior Vice President President International Division from June 2018 to July 2020 Senior Vice President and President for Europe North Asia and ANZSEA from February 2015 to June 2018 Senior Vice President and Managing Director for Europe from January 2013 to January 2015
Executive Vice President Chief Global Supply Chain and Technology Officer since March 2023 Senior Vice President Chief Global Supply Chain and Technology Officer from March 2022 to March 2023 Senior Vice President Chief Information and Advanced Analytics Officer from January 2015 to February 2022 Vice President Director Technical Services from May 2013 to December 2014
Executive Vice President and President Europe since March 2024 Senior Vice President Managing Director of Germany Czechia Poland and Europe Commercial Strategy from September 2023 to February 2024 Vice President Managing Director of Germany Czechia Poland and Europe Strategy from October 2022 to August 2023 Vice President Managing Director of Germany Czechia and Europe Commercial Strategy from August 2020 to September 2022 Vice President General Manager of Germany and Czechia from September 2017 to July 2020 General Manager of Russia from July 2014 to August 2017
Executive Vice President Chief Inclusion and Global Community Relations Officer since March 2023 Senior Vice President Chief Inclusion and Global Community Relations Officer from June 2022 to March 2023 Vice President and Chief Diversity Officer from February 2022 to June 2022 Vice President and Human Resources Director Global Production Diversity and Inclusion from March 2021 to January 2022 Vice President and Human Resources Director Global Production from August 2017 to February 2021 Vice President and Human Resources Director North America Region from May 2015 to July 2017 Human Resources Director North America Region and Latin America Region from May 2013 to April 2015
Executive Vice President President USA Canada since March 2023 Senior Vice President President USA Canada from July 2022 to March 2023 Vice President General Manager for the United Kingdom Ireland from January 2018 to July 2022 Vice President Director Midwest Division from May 2015 to December 2017 Portfolio Integration Director from September 2014 to May 2015
Senior Vice President and Chief Accounting Officer since August 2018 Vice President and Director Finance North America Region from May 2015 to August 2018 Director NAR Division Finance North America Region from November 2013 to April 2015
Our website address is www brown forman com Our annual reports on Form 10 K quarterly reports on Form 10 Q current reports on Form 8 K and any amendments to these reports are available free of charge on our website as soon as reasonably practicable after we electronically file those reports with the Securities and Exchange Commission SEC The information provided on our website and any other website referenced herein is not part of this report and is therefore not incorporated by reference into this report or any other filing we make with the SEC unless that information is otherwise specifically incorporated by reference
On our website we have posted our Code of Conduct that applies to all our directors and employees and our Code of Ethics that applies specifically to our senior financial officers If we amend or waive any of the provisions of our Code of Conduct or our Code of Ethics applicable to our principal executive officer principal financial officer or principal accounting officer that relates to any element of the definition of code of ethics enumerated in Item 406 b of Regulation S K under the Securities Exchange Act of 1934 Act as amended we intend to disclose these actions on our website We have also posted on our website our Corporate Governance Guidelines and the charters of our Audit Committee Compensation Committee Corporate Governance and Nominating Committee and Executive Committee of our Board of Directors Copies of these materials are available free of charge by writing to our Secretary at 850 Dixie Highway Louisville Kentucky 40210 or emailing Secretary b f com
We believe the following discussion identifies the material risks and uncertainties that could adversely affect our business If any of the following risks were actually to occur our business results of operations cash flows or financial condition could be materially and adversely affected Additional risks not currently known to us or that we currently deem to be immaterial could also materially and adversely affect our business results of operations cash flows or financial condition
The Jack Daniel s family of brands is the primary driver of our revenue and Jack Daniel s is an iconic global trademark with a loyal consumer fan base We invest much effort and many resources to protect and preserve the brand s reputation for authenticity craftsmanship and quality A brand s reputational value is based in large part on consumer perceptions and even an isolated incident that causes harm particularly one resulting in widespread negative publicity could adversely influence these perceptions and erode consumer trust and confidence in the brand Significant damage to the brand equity of the Jack Daniel s family of brands would adversely affect our business Given the importance of Jack Daniel s to our overall success a significant or sustained decline in volume or selling price of our Jack Daniel s products as a result of negative publicity or otherwise would have a negative effect on our financial results Additionally if we are not successful in our efforts to maintain or increase the relevance of the Jack Daniel s brand to current and future consumers our business and operating results could suffer For details on the importance of the Jack Daniel s family of brands to our business see Item 7 Management s Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Fiscal 2024 Brand Highlights
Changes to our route to consumer models and consolidation among beverage alcohol producers distributors wholesalers suppliers and retailers could hinder the marketing sale or distribution of our products
We use various business models to market and distribute our products in different countries around the world In the United States we sell our products either to distributors for resale to retail outlets or e commerce retailers or in those states that control alcohol sales to state governments who then sell them to retail customers and consumers In our non U S markets we use a variety of route to consumer models including in many markets reliance on third parties to distribute market and sell our products We own and operate distribution companies for 16 international markets Transitioning from a third party
distribution model to an owned distribution model involves a significant undertaking and subjects us to risks associated with that geographic region If we are unsuccessful in our route to consumer strategies including any transition to owned distribution the sale and marketing of our products could be disrupted
Changes to any of our route to consumer models or distribution partners in important markets could result in temporary or longer term sales disruption higher costs and harm to other business relationships we might have with that partner Disruption of our distribution network or fluctuations in our product inventory levels at distributors wholesalers or retailers could negatively affect our results for a particular period Moreover other suppliers as well as wholesalers and retailers of our brands offer products that compete directly with ours for shelf space promotional displays and consumer purchases Pricing including price promotions discounting couponing and free goods marketing new product introductions entry into our distribution networks and other competitive behavior by other suppliers and by wholesalers and traditional and e commerce retailers could adversely affect our growth business and financial results While we seek to take advantage of the efficiencies and opportunities that large retail customers can offer they often seek lower pricing and increased purchase volume flexibility offer competing private label products and represent a large number of other competing products If the buying power of these large retail customers continues to increase it could negatively affect our financial results Further while we believe we have sufficient scale to succeed relative to our major competitors we nevertheless face a risk that continuing consolidation of large beverage alcohol companies could put us at a competitive disadvantage
Consolidation whether domestically or internationally among spirits producers distributors wholesalers suppliers or retailers and the increased growth of the e commerce environment across the consumer product goods market has created and could continue to create a more challenging competitive landscape for our products Consolidation at any level could hinder the distribution and sale of our products as a result of reduced attention and resources allocated to our brands both during and after transition periods because our brands might represent a smaller portion of the new business portfolio Furthermore consolidation of distributors may lead to the erosion of margins Changes in distributors strategies including a reduction in the number of brands they carry the allocation of shelf space for our competitors brands or private label products may adversely affect our growth business financial results and market share Our competitors may respond to industry and economic conditions and shifts in consumer behaviors more rapidly or effectively than we do To remain competitive we must be agile and efficient in adopting digital technologies and building analytical capabilities which our competitors may be able to achieve with more agility and resources
Changes in consumer preferences and purchases any decline in the social acceptability of our products or governmental adoption of policies disadvantageous to beverage alcohol could negatively affect our business results
We are a branded consumer products company in a highly competitive market and our success depends substantially on our continued ability to offer consumers appealing high quality products Consumer preferences and purchases may shift often in unpredictable ways as a result of a variety of factors including health and wellness trends changes in economic conditions demographic and social trends public health policies and initiatives changes in government regulation of beverage alcohol products concerns or regulations related to product safety legalization of cannabis and its use on a more widespread basis in the markets where we operate and changes in trends related to travel leisure dining gifting entertaining and beverage consumption As a result consumers may begin to shift their consumption and purchases from our premium and super premium products or away from alcoholic beverages entirely This shift includes consumption at home as a result of various factors including shifts in social trends and shifts in the channels for the purchases of our products These shifts in consumption and purchasing channels could adversely impact our profitability Consumers also may begin to prefer the products of competitors or may generally reduce their demand for brands produced by larger companies Over the past several decades the number of small local distilleries in the United States has grown significantly This growth is being driven by a trend of consumers showing increasing interest in locally produced regionally sourced products As more brands enter the market increased competition could negatively affect demand for our premium and super premium American whiskey brands including Jack Daniel s In addition we could experience unfavorable business results if we fail to attract consumers from diverse backgrounds and ethnicities in all markets where we sell our products
Expansion into new product categories by other suppliers or innovation by new entrants into the market could increase competition in our product categories For example we have observed an increase in diversification by various consumer goods companies such as the entrance of both traditional beer and soft drink companies into the ready to drink market and the entrance of both beer and spirits companies into the cannabis market expanding the potential for competition in the spirits market from various sectors of the consumer goods industry Increased competition may among other things negatively impact our ability to maintain or gain market share increase pricing pressure which inhibits our ability to adequately respond to inflationary changes in commodities used in making our products require increases in marketing and promotional activities and negatively impact the market for our premium and super premium products To continue to succeed we must anticipate or react effectively to shifts in demographics our competition consumer behavior consumer preferences drinking tastes and drinking occasions
Our long term plans call for the continued growth of the Jack Daniel s family of brands If these plans do not succeed or if we otherwise fail to develop or implement effective business portfolio and brand strategies our growth business or financial results could suffer More broadly if consumers shift away from spirits particularly brown spirits such as American whiskey and bourbon our premium priced brands or our ready to drink products our financial results could be adversely affected
We believe that new products line extensions label and bottle changes product reformulations and similar product innovations by both our competitors and us will increase competition in our industry Product innovation particularly for our core brands is a significant element of our growth strategy however there can be no assurance that we will continue to develop and implement successful line extensions packaging formulation or flavor changes or new products
Unsuccessful implementation or short lived popularity of our product innovations could result in inventory write offs and other costs could reduce profits from one year to the next and could also damage consumers perception of our brands Our inability to attract consumers to our product innovations relative to our competitors products especially over time could negatively affect our growth business and financial results
Some of our largest brands including Jack Daniel s and our tequilas are distilled at single locations A catastrophic event causing physical damage disruption or failure at any one of our major distillation or bottling facilities including facilities that support the production of our premium brands such as Woodford Reserve and Old Forester could adversely affect our business Further because whiskeys rums and some tequilas are aged for various periods we maintain a substantial inventory of aged and maturing products in warehouses at a number of different sites The loss of a substantial amount of aged inventory through fire other natural or man made disaster contamination or otherwise could significantly reduce the supply of the affected product or products These and other supply or supply chain disruptions could prevent us from meeting consumer demand for the affected products in the short and medium term In addition to catastrophic events identified above supply disruptions could include the temporary inability to make our products at normal levels or at all We could also experience disruptions if our suppliers are unable to deliver supplies Our business continuity plans may not prevent business disruption and reconstruction of any damaged facilities could require a significant amount of time and resources
There is an inherent risk of forecasting imprecision in determining the quantity of aged and maturing products to produce and hold in inventory in a given year for future sale The forecasting strategies we use to balance product supply with fluctuations in consumer demand may not be effective for particular years or products For example in addition to our American and Irish whiskeys rums and some tequilas which are aged for various periods our Scotch whisky brands require long term maturation an average of 12 years with limited releases of 30 years or more making forecasts of demand for such products in future periods subject to significant uncertainty Our tequila supply also depends on the growth cycle of agave plants which take approximately six to seven years to reach full maturity requiring us to make forecasts of demand for our tequilas over a long time horizon to determine in advance how much agave to plant or otherwise source Factors that affect our ability to forecast accurately include changes in business strategy market demand consumer preferences macroeconomic conditions introductions of competing products and other changes in market conditions Additionally our supply of aged products can deviate from expectations due to changes in forecasted maturation loss Such forecasting errors could lead to our inability to meet the objectives of our business strategy failure to meet future demand or a future surplus of inventory and consequent write down in value of such inventory A failure to accurately forecast demand for our products or efficiently manage inventory could have a material adverse effect on our business and financial results Further we cannot be certain that we will be successful in using various levers such as pricing changes to create the desired balance of available supply and consumer demand for particular years or products As a consequence we may be unable to meet consumer demand for the affected products for a period of time Furthermore not having our products in the market consistently may adversely affect our brand equity and future sales
Our products use materials and ingredients that we purchase from suppliers Our ability to make and sell our products depends on the availability of the raw materials product ingredients finished products wood glass and PET bottles cans bottle closures packaging and other materials used to produce and package them Without sufficient quantities of one or more key materials our business and financial results could suffer For instance only a few glass producers make bottles on a scale sufficient for our requirements and a single producer supplies most of our glass requirements During the recent global supply chain challenges our primary glass provider could not produce sufficient quantities to meet our needs which increased our cost
to produce constrained supply of some of our products and adversely affected our financial results In response to these events we took action to diversify suppliers of our raw materials including glass Our glass supply as well as global supply chains have stabilized However similar supply chain challenges may occur in the future making it difficult and more expensive to produce and deliver our products For example a disruption in the supply of American white oak logs staves heading or steel it could constrain our ability to produce or procure the new charred oak barrels in which we age our whiskeys If any of our key suppliers were no longer able to meet our timing quality or capacity requirements ceased doing business with us or significantly raised prices and we could not promptly develop alternative cost effective sources of supply or production our operations and financial results could suffer
Higher costs or insufficient availability of suitable grain agave water molasses wood glass closures and other input materials or higher associated labor costs or insufficient availability of labor may adversely affect our financial results Similarly when energy costs rise our transportation freight and other operating costs such as distilling and bottling expenses also may increase Our freight cost and the timely delivery of our products could be adversely affected by a number of factors including driver or equipment shortages higher fuel costs weather conditions traffic congestion ocean freight lane disruptions shipment container availability rail shutdowns increased government regulation and other matters that could reduce the profitability of our operations Our financial results may be adversely affected if we cannot pass along energy freight or other input cost increases through higher prices to our customers without reducing demand or sales For example during the COVID 19 pandemic and subsequent economic recovery we experienced supply chain disruptions in connection with the availability of timely modes of transportation to ship our products globally which resulted in higher costs and delays in supplying some of our products
International or domestic geopolitical or other events including the imposition of any tariffs or quotas by governmental authorities on any raw materials that we use in the production of our products could adversely affect the supply and cost of these raw materials to us While we do not currently expect our production operations to be directly impacted by conflicts around the world changes in global grain and commodity pricing and availability may impact the markets where we operate If we cannot offset higher raw material costs with higher selling prices increased sales volume or reductions in other costs our profitability could be adversely affected
Weather acute or chronic climate change impacts fires diseases and other agricultural uncertainties that affect the health yield quality or price of the various raw materials used in our products also present risks for our business including in some cases potential impairment in the recorded value of our inventory Increasing average temperatures could also affect the maturation and yield of our aged inventory over time Changes in weather patterns or intensity can disrupt our supply chain as well which may affect production operations insurance costs and coverage and the timely delivery of our products
Water is an essential component of our products so the quality and quantity of available water is critical to our ability to operate our business If extended droughts become more common or severe or if our water supply is interrupted for other reasons high quality water could become scarce in some key production regions for our products which in turn could adversely affect our business and financial results
From time to time we acquire or invest in additional brands or businesses We expect to continue to seek acquisition and investment opportunities that we believe will increase long term stockholder value but we may not be able to find investment opportunities or purchase brands or businesses at acceptable prices and terms Acquisitions and investments involve risks and uncertainties including paying more than a brand or business is ultimately determined to be worth potential difficulties integrating acquired brands and personnel the possible loss of key customers or employees most knowledgeable about the acquired business implementing and maintaining consistent U S public company standards controls procedures policies and information systems exposure to unknown liabilities business disruption and management distraction or departure We have in the past and could in the future incur restructuring charges or record impairment losses on the value of goodwill or other intangible assets resulting from previous acquisitions or the risk of potential losses on equity investments which may also negatively affect our financial results
From time to time we also consider disposing of assets or businesses that may no longer meet our financial or strategic objectives In selling assets or businesses we may not get prices or terms as favorable as we anticipated We could also encounter difficulty in finding buyers on acceptable terms in a timely manner which could delay accomplishment of our strategic objectives Expected cost savings from reduced overhead relating to the sold assets may not materialize The overhead reductions could temporarily disrupt our other business operations Any of these outcomes could negatively affect our financial results
Our business operations cash flows and financial results have previously been and in the future could be impacted by health epidemics pandemics and similar outbreaks such as the COVID 19 pandemic Any future epidemic pandemic or other outbreak could cause negative impacts such as a a global or U S recession or other economic crisis b credit and capital markets volatility and access to these markets including by our suppliers and customers c volatility in demand for our products d changes in accessibility to our products due to illness quarantines stay at home orders travel restrictions retail restaurant bar and hotel closures social distancing requirements and other government action e changes in consumer behavior and preferences and f disruptions in raw material supply in our manufacturing operations or in our distribution and supply chain In addition we may incur increased costs and otherwise be negatively affected if a significant portion of our workforce or the workforces within our distribution or supply chain cannot work or work effectively including because of illness quarantines stay at home orders social distancing requirements other government action facility closures or other restrictions Accordingly a future widespread health epidemic or pandemic could materially and adversely affect our business our operations our cash flows and our financial results
Unfavorable global or regional economic conditions may be triggered by numerous developments beyond our control including geopolitical events health crises and other events that trigger economic volatility on a global or regional basis Those types of unfavorable economic conditions could adversely affect our business and financial results In particular a significant deterioration in economic conditions including economic slowdowns or recessions increased unemployment levels inflationary pressures or disruptions to credit and capital markets could lead to decreased consumer confidence in certain countries and consumer spending more generally thus reducing consumer demand for our products For example since 2021 the United States and the European Union have experienced a rapid increase in inflation levels Such heightened inflationary levels may negatively impact consumer disposable income and discretionary spending and in turn reduce consumer demand for our premium products and increase our costs Unfavorable economic conditions could also cause governments to increase taxes on beverage alcohol to attempt to raise revenue reducing consumers willingness to make discretionary purchases of beverage alcohol products or pay for premium brands such as ours
Unfavorable economic conditions could also adversely affect our suppliers distributors customers and retailers who in turn could experience cash flow challenges more costly or unavailable financing credit defaults and other financial hardships Such financial hardships could lead to distributor or retailer destocking disruption in raw material supply increase in bad debt expense or increased levels of unsecured credit that we may need to provide to customers Other potential negative consequences to our business from unfavorable economic conditions include higher interest rates an increase in the rate of inflation deflation exchange rate fluctuations credit or capital market instability or lower returns on pension assets or lower discount rates for pension obligations possibly requiring higher contributions to our pension plans
The success of our brands depends on the positive image that consumers have of them We could decide to or be required to recall products due to suspected or confirmed product contamination product tampering spoilage regulatory non compliance food safety issues or other quality issues Any of these events could adversely affect our financial results Actual contamination whether deliberate or accidental could lead to inferior product quality and even illness injury or death of consumers potential liability claims and material loss Should a product recall become necessary or we voluntarily recall a product in the event of contamination damage or other quality issue sales of the affected product or our broader portfolio of brands could be adversely affected A significant product liability judgment or widespread product recall may negatively impact sales and our business and financial results Even if a product liability claim is unsuccessful or is not fully pursued resulting negative publicity could adversely affect our reputation with existing and potential customers and our corporate and brand image
Unfavorable publicity whether accurate or not related to our industry or to us or our products brands marketing executive leadership employees Board of Directors family stockholders operations current or anticipated business performance or environmental or social efforts could negatively affect our corporate reputation stock price ability to attract and retain high quality talent or the performance of our brands and business Adverse publicity or negative commentary on social media whether accurate or not particularly any that go viral could cause consumers or other stakeholders to react by disparaging or avoiding our brands or company which could materially negatively affect our financial results Additionally investor advocacy groups institutional investors other market participants stockholders employees consumers customers influencers and policymakers have focused increasingly on the environmental social and governance or sustainability
positions and practices of companies If our positions or practices do not meet investor or other stakeholder expectations and standards which continue to evolve our corporate reputation stock price ability to attract and retain high quality talent and the performance of our brands and business may be negatively affected Stakeholders and others who disagree with our company s actions positions or statements may speak negatively or advocate against the company with the potential to harm our reputation or business through negative publicity adverse government treatment or other means
Our success depends on the efforts and abilities of our senior management team other key employees and our high quality employee base as well as our ability to attract motivate reward develop and retain them Difficulties in hiring or retaining key executive or other employee talent or the unexpected loss of experienced employees resulting in the depletion of our institutional knowledge base could have an adverse impact on our business performance reputation financial condition or results of operations Given changing demographics immigration laws and policies remote working trends and demand for talent globally we may not be able to find the people with the right skills at the right time and in the right location to achieve our business objectives
Our products are sold in more than 170 countries accordingly we are subject to risks associated with doing business globally including commercial political and financial risks In addition we are subject to potential business disruption caused by military conflicts potentially unstable governments or legal systems social racial civil or political upheaval or unrest local labor policies and conditions including labor strikes and work stoppages possible expropriation nationalization or confiscation of assets problems with repatriation of foreign earnings economic or trade sanctions closure of markets to imports anti American sentiment terrorism kidnapping extortion or other types of violence in or outside the United States and health crises Violent crime is increasing in markets around the globe including the United States If a violent event should occur at one of our sites it could disrupt business operations impair brand reputation increase insurance and security expenses and adversely affect the price of our stock
Additionally we may be subject to tariffs imposed on our products by other countries such as the tariffs imposed in 2018 following the United States tariffs on steel and aluminum In response to these U S tariffs a number of countries imposed retaliatory tariffs on U S imports including on American whiskey products which negatively affected our business until they were removed or suspended in late fiscal 2022 and early fiscal 2023 The imposition of tariffs custom duties or other restrictions or barriers on imports and exports or the deterioration of economic relations between the United States and other countries could increase the cost of our products and to the extent that we absorb the costs of tariffs result in higher cost of goods sold and lower gross profit and margins They could also limit the availability of our products and prompt consumers to seek alternative products Our success will depend in part on our ability to overcome the challenges we encounter with respect to these risks and other factors affecting U S export companies with a global business
Some of the countries where we do business have a higher risk of corruption than others While we are committed to doing business in accordance with all applicable laws including anti corruption laws and global trade restrictions we remain subject to the risk that an employee or one of our many direct or indirect business partners may take action determined to be in violation of international trade money laundering anti corruption or other laws sanctions or regulations including the U S Foreign Corrupt Practices Act of 1977 the U K Bribery Act 2010 or equivalent local laws Any determination that our operations or activities are not in compliance with applicable laws or regulations particularly those related to anti corruption and international economic or trade sanctions could result in investigations interruption of business loss of business partner relationships suspension or termination of credit agreements licenses and permits our own or those of our partners imposition of fines legal or equitable sanctions negative publicity and management distraction or departure Further our obligation to comply with applicable anti corruption economic and trade sanctions or other laws or regulations our Code of Conduct Code of Ethics for Senior Financial Officers and our other policies could result in higher operating costs delays or even competitive disadvantages as compared to competitors based in different parts of the world
The global scope of our business means that foreign currency exchange rate fluctuations relative to the U S dollar influence our financial results In many markets outside the United States we sell our products and pay for some goods
services and labor costs primarily in local currencies Because our foreign currency revenues exceed our foreign currency expense we have a net exposure to changes in the value of the U S dollar relative to those currencies Over time our reported financial results will be negatively impacted by a stronger U S dollar and will be benefited by a weaker one We hedge some of our foreign currency exposure through the use of foreign currency derivatives or other means However even in those cases we do not fully eliminate our foreign currency exposure For details on how foreign exchange affects our business see Item 7A Quantitative and Qualitative Disclosures about Market Risk Foreign currency exchange rate risk
Our business is subject to extensive regulatory requirements regarding production exportation importation marketing and promotion labeling distribution pricing and trade practices among others Changes in laws regulatory measures or governmental policies or the manner in which current ones are interpreted could subject us to governmental investigations cause us to incur material additional costs or liabilities and jeopardize the growth of our business in the affected market Specifically governments could prohibit impose or increase limitations on advertising and promotional activities or times or locations where beverage alcohol may be sold or consumed or adopt other measures that could limit our opportunities to reach consumers or sell our products Some countries historically have banned all television newspaper magazine and digital commerce advertising for beverage alcohol products Additional regulation of this nature could substantially reduce consumer awareness of our products in the affected markets and make the introduction of new products more challenging
Additional regulation in the United States and other countries addressing the risks and impacts of climate change use of water and other environmental and social issues could increase our operating costs Increasing regulation of greenhouse gas emissions could increase the cost of energy including fuel required to operate our facilities or transport and distribute our products thereby substantially increasing the production distribution and supply chain costs associated with our products
Our business is sensitive to changes in both direct and indirect taxes New tax rules accounting standards or pronouncements and changes in interpretation of existing rules standards or pronouncements could have a material adverse effect on our business and financial results As a multinational company based in the United States we are more exposed to the impact of changes in U S tax legislation and regulations than most of our major competitors especially changes that affect the effective corporate income tax rate For example in August 2022 the U S enacted the Inflation Reduction Act of 2022 which among other provisions implemented a 15 minimum tax on book income of certain large corporations Additional tax proposals sponsored by the current U S presidential administration could lead to U S tax changes including significant increases to the U S corporate income tax rate and the minimum tax rate on certain earnings of foreign subsidiaries While we are unable to predict whether any of these changes will ultimately be enacted if these or similar proposals are enacted into law they could negatively impact our effective tax rate and reduce net earnings
At the global level potential changes in tax rules or the interpretation of tax rules arising out of the Base Erosion and Profit Shifting project initiated by the Organization for Economic Co operation and Development OECD include increased residual profit allocations to market jurisdictions and the implementation of a global minimum tax rate In December 2021 the OECD issued Pillar Two model rules which would establish a global per country minimum tax of 15 and the European Union has approved a directive requiring member states to incorporate similar provisions into their respective domestic laws The directive requires the rules to initially become effective for fiscal years starting on or after December 31 2023 While it is uncertain whether the United States will enact legislation to adopt Pillar Two numerous countries have enacted legislation or have indicated their intent to adopt legislation to implement certain aspects of Pillar Two effective January 1 2024 with general implementation of the remaining global minimum tax rules by January 1 2025 The OECD and implementing countries are expected to continue to revise their legislation and release additional guidance We continue to evaluate the potential impact of the developments on our consolidated financial statements and related disclosures and based on our preliminary calculations we do not expect the impact to be material The adoption of these or other proposals could have a material adverse impact on our net income and cash flows in the future Furthermore changes in the earnings mix or applicable foreign tax laws could also negatively impact our net income and tax flows
Our business operations are also subject to numerous duties or taxes not based on income sometimes referred to as indirect taxes These indirect taxes include excise taxes sales or value added taxes property taxes payroll taxes import and export duties and tariffs Increases in or the imposition of new indirect taxes on our operations or products would increase the cost of our products or materials used to produce our products or to the extent levied directly on consumers make our products less affordable which could negatively affect our financial results by reducing purchases of our products and encouraging consumers to switch to lower priced or lower taxed product categories As governmental entities look for increased sources of
revenue they may increase taxes on beverage alcohol products In fiscal 2024 we have observed excise tax increases in markets that include France Portugal Romania and Türkiye Additionally in fiscal 2024 Australia has continued to make an annual increase in excise taxes based on the consumer price index
Increased social and political attention has been directed at the beverage alcohol industry For example there remains continued attention focused largely on public health concerns related to alcohol abuse including drunk driving underage drinking and the negative health impacts of the abuse and misuse of beverage alcohol While most people who drink alcoholic beverages do so in moderation it is commonly known and well reported that excessive levels or inappropriate patterns of drinking can lead to increased risk of a range of health conditions and for certain people can result in alcohol dependence Some academics public health officials and critics of the alcohol industry in the United States Europe and other parts of the world continue to seek governmental measures to make beverage alcohol more expensive less available or more difficult to advertise and promote If future scientific research indicates more widespread serious health risks associated with alcohol consumption particularly with moderate consumption or if for any reason the social acceptability of beverage alcohol declines significantly sales of our products could be adversely affected
Various jurisdictions have adopted or may seek to adopt significant additional product labeling or warning requirements or impose limitations on the availability of our products relating to the content or perceived adverse health consequences of some of our products Several such labeling regulations or laws require warnings on any product with substances that the jurisdiction lists as potentially associated with cancer or birth defects Our products already raise health and safety concerns for some regulators and heightened requirements could be imposed For example in February 2021 the European Union published its Europe Beating Cancer Plan The European Union is ultimately expected to issue a proposal for mandatory health warnings on beverage alcohol product labels Such campaigns could result in additional governmental regulations concerning the production marketing labeling or availability of our products any of which could damage our reputation make our premium brands unrecognizable or reduce demand for our products which could adversely affect our profitability If additional or more severe requirements of this type are imposed on one or more of our major products under current or future health environmental or other laws or regulations they could inhibit sales of such products Further we cannot predict whether our products will become subject to increased rules and regulations which if enacted could increase our costs or adversely impact sales
Our brand names trademarks and related intellectual property rights are critical assets and our business depends on protecting them online and in the countries where we do business We may not succeed in protecting our intellectual property rights in a given market or in challenging those who infringe our rights or imitate or counterfeit our products Although we believe that our intellectual property rights are legally protected in the markets where we do business the ability to register and enforce intellectual property rights varies from country to country In some countries for example it may be more difficult to successfully stop counterfeiting or look alike products either because the law is inadequate or even though satisfactory legal options may exist it may be difficult to obtain and enforce sanctions against counterfeiters We may not be able to register our trademarks in every country where we want to sell a particular product and we may not obtain favorable decisions by courts or trademark offices
Many global spirits brands including some of our brands experience problems with product counterfeiting and other forms of trademark infringement We combat counterfeiting by working with other companies in the spirits industry through our membership in the Alliance Against Counterfeit Spirits AACS and with brand owners in other industries via our membership in React an anti counterfeiting network organization While we believe AACS and React are effective organizations they are not active in every market and their efforts are subject to obtaining the cooperation of local authorities and courts in the markets where they are active Despite the efforts of AACS React and our own teams lower quality and counterfeit products that could be harmful to consumers could reach the market and adversely affect our intellectual property rights brand equity corporate reputation and financial results In addition the industry as a whole could suffer negative effects related to the manufacture sale and consumption of illegally produced beverage alcohol
Major private or governmental litigation challenging the production marketing promotion distribution or sale of beverage alcohol or specific brands could affect our ability to sell our products Because litigation and other legal proceedings
can be costly to defend even actions that are ultimately decided in our favor could have a negative impact on our business reputation or financial results Lawsuits have been brought against beverage alcohol companies alleging problems related to alcohol abuse negative health consequences from drinking problems from alleged marketing or sales practices and underage drinking While these lawsuits have been largely unsuccessful in the past others may succeed in the future We could also experience employment related or cybersecurity related class actions environmental claims commercial disputes product liability actions stemming from a beverage or container production defect a whistleblower suit or other major litigation that could adversely affect our business results particularly if there is negative publicity
As discussed throughout these risk factors governmental actions around the world are a continuing compliance risk for global companies such as ours In addition as a U S public company we are exposed to the risk of securities related class action suits particularly following a precipitous drop in the share price of our stock Adverse developments in major lawsuits concerning these or other matters could result in management distraction and have a material adverse effect on our business
We rely on information technology IT systems to manage our business operations A cyber breach a failure or corruption of one or more of our key information technology systems networks processes associated sites or service providers or a failure to comply with personal data protection laws could have a material adverse impact on our business
As a company with complex IT systems we have been a target of cyberattacks and other hacking activities in the past and we expect to continue to be a target in the future While past cyberattacks and hacking activities have not materially impacted our business or disrupted our operations increased IT security threats and more sophisticated cybercrimes and cyberattacks including computer viruses and other malicious codes ransomware unauthorized access attempts denial of service attacks phishing social engineering hacking and other types of attacks pose a risk to the security and availability of our IT systems networks and services including those that are managed hosted provided or used by third parties as well as the confidentiality availability and integrity of our data and the data of our customers partners consumers employees stockholders suppliers and others As a result we may experience material disruptions or suffer material adverse effects in the future from cyberattacks or other hacking activities Furthermore our increasingly mobile hybrid and global workforce further increases our attack surface
In the ordinary course of our business we receive process transmit and store information relating to identifiable individuals personal data primarily employees and former employees beneficiaries of employees or former employees customers and consumers As a result we are subject to various U S federal and state and foreign laws and regulations relating to personal data Such laws and regulations include the California Consumer Protection Act the California Privacy Rights Act data protection and AI regulations in the European Union and other similar regulations that may change or be added to frequently
Unauthorized access to our IT network or that of our service providers suppliers customers or other direct or indirect business partners could result in failure of our IT systems networks or services to function properly This could lead to the loss or unauthorized disclosure of our business strategy or other confidential information disruptions to our business operations misappropriation of personal data and reputational competitive or business harm Each of these events may adversely affect our business operations or financial results or may cause financial and reputational damage undermine consumer confidence subject us to government enforcement actions including fines or result in private litigation against us which could result in loss of revenue increased costs liability for monetary damages fines or criminal prosecution
We are a controlled company under New York Stock Exchange rules Controlled companies are exempt from New York Stock Exchange listing standards that require a board composed of a majority of independent directors a fully independent nominating corporate governance committee and a fully independent compensation committee We may avail ourselves of the exemption from having a board composed of a majority of independent directors and we utilize the exemption from having a fully independent nominating corporate governance committee Notwithstanding the available exemption our Compensation Committee is composed exclusively of independent directors As a result of our use of some controlled company exemptions our corporate governance practices differ from those of non controlled companies which are subject to all of the New York Stock Exchange corporate governance requirements
We have two classes of common stock Our Class A common stock is entitled to full voting powers including in the elections of directors while our Class B common stock may not vote except as provided by the laws of Delaware We have had two classes of common stock since 1959 when our stockholders approved the issuance of two shares of Class B non voting
common stock to every holder of our voting common stock Dual class share structures have come under the scrutiny of major indices institutional investors and proxy advisory firms with some calling for the reclassification of non voting common stock
A majority of our voting stock is controlled by members of the Brown family and collectively they have the ability to control the outcome of stockholder votes including the election of all of our directors and the approval or rejection of any merger change of control or other significant corporate transactions We believe that having a long term focused committed and engaged stockholder base provides us with a distinct strategic advantage particularly in a business with aged products and multi generational brands This advantage could be eroded or lost however should Brown family members cease collectively to be controlling stockholders of the Company
We believe that it is in the interests of all stockholders that we remain independent and family controlled and we believe the Brown family stockholders share these interests Thus our common stock dual class share structure as it has existed since 1959 is perpetual and we do not have a sunset provision in our Restated Certificate of Incorporation or By laws that provides for the eventual reclassification of the non voting common stock to voting common stock However the Brown family s interests may not always be aligned with other stockholders interests By exercising their control the Brown family could cause the Company to take actions that are at odds with the investment goals or interests of institutional short term non voting or other non controlling investors or that have a negative effect on our stock price Further because the Brown family controls the majority of our voting stock Brown Forman might be a less attractive takeover target which could adversely affect the market price of both our voting and our non voting common stock And the difference in voting rights for our common stock could also adversely and disproportionately affect the value of our Class B non voting common stock to the extent that investors view or any potential future purchaser of our Company views the superior voting rights and control represented by the Class A common stock to have value
Our Chief Information Security Officer CISO leads our Global Information Security team reports to the Chief Information Officer CIO and meets regularly with other members of senior management Our CISO holds advanced degrees in Computer Science and Business Administration in addition to relevant IT and cybersecurity certifications from organizations such as the EC Council ISACA and CSA She has served in various IT roles for over 20 years including leading the IT Security function
Our Global Information Security Team is responsible for the information security strategy policy security engineering operations and cyber threat detection and response Our Global Information Security Team which includes a security operations center seeks to protect the company against reasonably foreseeable cyber threats and risks The cybersecurity team members have the qualifications and certifications for their roles They also have relevant industry experience in selecting deploying and operating cybersecurity technologies initiatives and processes globally We also rely on threat intelligence as well as other information obtained from governmental public or private sources including external consultants that we engage
We have made significant investments in people processes and technology to protect the confidentiality integrity and availability of our IT systems As part of that effort we utilize the National Institute of Standards and Technology Cybersecurity Framework as a guide for our security controls We are also continuing to advance towards an architecture based on Zero Trust principles where we continuously validate the identity and security posture of every user device application or network component trying to leverage our IT resources In addition our employees undergo annual security awareness training to improve their understanding of cybersecurity threats and their ability to identify and escalate potential threats
In the event of an incident we leverage a multi layered set of plans that include Endpoint Detection and Response software Security Information and Event Management tools for detection and a Cybersecurity Incident Response Plan and Disaster Recovery Response Plan for recovery The recovery plans outline the steps to be followed from incident detection to mitigation recovery and notification including notifying designated functional leadership teams the Disclosure Committee the General Counsel other senior leadership and the Board of Directors as appropriate These designated leaders assess various factors including operational financial legal regulatory reputational impacts on the Company to determine the materiality of the incident and the appropriate response
We have established a tiered risk management strategy that helps us to evaluate our ability to protect assets data and systems by identifying assessing and prioritizing associated risk through among other tools the use of a non affiliated third party assessor audits by our internal audit team tabletop exercises penetration and vulnerability testing and simulations We report the results of these assessments to the Audit Committee of the Board of Directors
We rely on third party service providers to deliver our products and services to our customers including many of our technology initiatives A cybersecurity incident at a supplier subcontractor or joint venture partner could materially adversely impact us We evaluate third party providers from a cybersecurity risk perspective which may include an assessment of that service provider s cybersecurity posture through a questionnaire and include security and privacy addenda to our contracts where applicable However we rely on the third parties we use to implement security programs commensurate with their risk and we cannot ensure in all circumstances that their efforts will be successful
Our systems periodically experience directed attacks intended to lead to interruptions and delays in our service and operations as well as loss misuse or theft of personal information of third parties employees and their beneficiaries and customers and other data These incidents have not had a material impact on our services system or business during the past reporting period However despite our capabilities processes and other security measures we employ we may not be aware of all vulnerabilities or might not accurately assess the risk of an incident Additional information on cybersecurity risks we face can be found in Item 1A Risk Factors which should be read in conjunction with the foregoing information
The Board of Directors oversees management s processes for identifying and mitigating risks including cybersecurity risks to help align our risk exposure with our strategic objectives The Board of Directors has delegated oversight of risks related to cybersecurity to the Audit Committee The Audit Committee regularly reports on its activities and findings with respect to risks from cybersecurity threats to the full Board of Directors
The Audit Committee oversees our cybersecurity posture to assess key strategic operational and compliance risks Our CIO and CISO update the Audit Committee on a quarterly basis regarding cyber risks the threat landscape reports on our security roadmap risk mitigation and governance and any cybersecurity incidents
The Company s Information Technology Enterprise Security Internal Audit as well as the Legal and Privacy teams work closely to identify issues and incidents in a timely manner and report them to senior leadership the Board of Directors and appropriate regulatory bodies as appropriate Assessing identifying and managing cybersecurity risks are integrated into our overall enterprise risk management ERM framework that provides risk quantification scenario analysis to determine the potential impact on the enterprise and processes to manage risk within the parameters of the organization s risk appetite Additionally ERM provides support to the decision making process to enable cybersecurity risk owners to accomplish the desired level of asset protection and alignment consistent with the organization s strategy The ERM work is presented annually to the Audit Committee and Board of Directors including the management of top risks and the review of emerging risks
bottling plants an RTD canning plant warehousing operations a cooperage visitors centers and retail shops We also have agreements with other parties for contract production in Australia Belgium China Ireland Latvia Mexico the Netherlands New Zealand South Africa Spain the United Kingdom the United States and Venezuela
In addition to our Company owned production locations and our corporate offices in Louisville Kentucky we lease office space for use in our sales marketing and administrative operations in the United States and in over 50 other locations around the world The lease terms expire at various dates and are generally renewable We believe that our facilities are in good condition and are adequate for our business
We operate in a litigious environment and we are sued in the normal course of business We do not anticipate that any pending suits will have individually or in the aggregate a material adverse effect on our financial position results of operations or liquidity
Our Class A and Class B common stock is traded on the New York Stock Exchange under the symbols BFA and BFB respectively As of May 31 2024 we had 2 334 holders of record of Class A common stock and 4 382 holders of record of Class B common stock Because of overlapping ownership between classes as of May 31 2024 we had only 4 732 distinct common stockholders of record
The graph below compares the cumulative total shareholder return of our Class B common stock for the last five fiscal years with the total return of the Standard Poor s S P 500 Index and S P 500 Consumer Staples Index The information presented assumes an initial investment of 100 on April 30 2019 and that all dividends were reinvested The graph shows the value that each of these investments would have had on April 30 in the years since 2019
This Management s Discussion and Analysis of Financial Condition and Results of Operations MD A is intended to help the reader better understand Brown Forman our operations our financial results and our current business environment Please read this MD A in conjunction with our Consolidated Financial Statements and the accompanying Notes contained in Item 8 Financial Statements and Supplementary Data Consolidated Financial Statements
We use some financial measures in this report 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
We present changes in certain measures or line items of the statements of operations that are adjusted to an organic basis We use organic change for the following measures of the statements of operations a organic net sales b organic cost of sales c organic gross profit d organic advertising expenses e organic selling general and administrative SG A expenses f organic other expense income net g organic operating expenses
and h organic operating income To calculate these measures we adjust as applicable for 1 acquisitions and divestitures 2 impairment charges 3 other items and 4 foreign exchange We explain these adjustments below
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 transition and integration costs or income and c the effects of operating activity related to acquired and divested brands for periods not comparable year over year non comparable periods Excluding non comparable periods allows us to include the effects of acquired and divested brands only to the extent that results are comparable year over year
During the third quarter of fiscal 2023 we acquired Gin Mare Brand S L U and Mareliquid Vantguard S L U which owned the Gin Mare brand Gin Mare This adjustment removes a the transaction transition and integration costs related to the acquisition b operating activity for the non comparable periods which is activity in the first and second quarters of fiscal 2024 and c fair value adjustments to Gin Mare s earn out contingent consideration liability that is payable in cash no earlier than July 2024 and no later than July 2027
During the third quarter of fiscal 2023 we acquired a International Rum and Spirits Distributors Unipessoal Lda b Diplomático Branding Unipessoal Lda c International Bottling Services S A d International Rum Spirits Marketing Solutions S L and e certain assets of Destilerias Unidas Corp which collectively own the Diplomático Rum brand and related assets Diplomático This adjustment removes a the transaction transition and integration costs related to the acquisition and b operating activity for the non comparable periods which is primarily activity in the first three quarters of fiscal 2024
During the third quarter of fiscal 2024 we sold the Finlandia vodka business which resulted in a pre tax gain of 92 million and entered into a related transition services agreement TSA for this business
non comparable period which is activity in the third and fourth quarters of fiscal 2023 and d net sales cost of sales and operating expenses recognized pursuant to the TSA related to distribution services in certain markets
During the fourth quarter of fiscal 2024 we sold the Sonoma Cutrer wine business in exchange for an ownership percentage of 21 4 in The Duckhorn Portfolio Inc Duckhorn along with 50 million cash and entered into a related TSA for this business This transaction resulted in a pre tax gain of 175 million This adjustment removes the transaction costs related to the divestiture and the gain on sale of the Sonoma Cutrer wine business
During the third quarter of fiscal 2023 we recognized a non cash impairment charge of 96 million for the Finlandia brand name During the fourth quarter of fiscal 2024 we recognized a non cash impairment charge of 7 million for an immaterial discontinued brand name We believe that these adjustments allow for us to understand our organic results on a comparable basis
During the fourth quarter of fiscal 2024 we committed 23 million to the Brown Forman Foundation and Dendrifund the Foundation and Dendrifund to support the communities where our employees live and work This adjustment removes the commitment to the Foundation from our organic SG A expenses and organic operating income to present our organic results on a comparable basis
In fiscal 2021 we entered into a partnership with the Pabst Brewing Company for the supply sales and distribution of Jack Daniel s Country Cocktails in the United States while Brown Forman continued to produce certain products During fiscal 2024 this production fully transitioned to Pabst Brewing Company for the Jack Daniel s Country Cocktails products This adjustment removes the non comparable operating activity related to the sales of Brown Forman produced Jack Daniel s Country Cocktails products during the fourth quarter of fiscal 2023 and fiscal 2024
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 organic trend both positively and negatively In this report 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
We use the non GAAP measure organic change along with other metrics 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 investment community We provide reconciliations of the organic change in certain line items of the statements of operations to their nearest GAAP measures in the tables under Results of Operations Fiscal 2024 Highlights and Results of Operations Year Over Year Comparisons We have consistently applied the adjustments within our reconciliations in arriving at each non GAAP measure
We believe these non GAAP measures are useful to readers and investors because they enhance the understanding of our historical financial performance and comparability between periods When we provide guidance for organic change in certain measures of the statements of operations we do not provide guidance for the corresponding GAAP change as the GAAP measure will include items that are difficult to quantify or predict with reasonable certainty such as foreign exchange which could have a significant impact to our GAAP income statement measures
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 five quarter 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 it to be a meaningful indicator of how effectively and efficiently we invest capital in our business
In fiscal 2023 we changed the methodology used to determine average invested capital Previously average invested capital was computed using the average of the most recent 13 month end balances Average invested capital is now calculated using the average of the most recent five quarter end balances which are disclosed in the relevant quarterly reports on Form 10 Q and Annual Reports on Form 10 K Return on average invested capital computed using the new methodology does not materially differ from the result computed using the previous methodology for fiscal 2023 The new methodology was consistently applied to return on average invested capital for each period presented
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 beverage alcohol category Below we define the geographic and brand aggregations used in this report
In Results of Operations Fiscal 2024 Market Highlights we provide supplemental information for our top markets ranked by percentage of reported net sales In addition to markets listed by country name we include the following aggregations
markets are advanced economies as defined by the IMF excluding the United States Our top developed international markets were Germany Australia the United Kingdom France Canada and Spain This aggregation represents our net sales of branded products to these markets
markets are emerging and developing economies as defined by the IMF Our top emerging markets were Mexico Poland and Brazil This aggregation represents our net sales of branded products to these markets
In Results of Operations Fiscal 2024 Brand Highlights we provide supplemental information for our top brands ranked by percentage of reported net sales In addition to brands listed by name we include the aggregations outlined below
In fiscal 2023 we began presenting Ready to Drink products as a separate aggregation due to its more significant contribution to our growth in recent years and industry wide category growth trends Whiskey no longer contains Jack Daniel s ready to drink RTD and ready to pour RTP and Tequila no longer includes New Mix These brands are now included in the Ready to Drink brand aggregation
includes all whiskey spirits and whiskey based flavored liqueurs The brands included in this category are the Jack Daniel s family of brands excluding the Ready to Drink products defined below the Woodford Reserve family of brands Woodford Reserve the Old Forester family of brands Old Forester The Glendronach Glenglassaugh Benriach Slane Irish Whiskey and Coopers Craft
products include all RTD line extensions of Jack Daniel s such as Jack Daniel s Cola Jack Daniel s Coca Cola RTD Jack Daniel s Country Cocktails Jack Daniel s Double Jack and other malt and spirit based Jack Daniel s RTDs along with Jack Daniel s Winter Jack RTP
includes Jack Daniel s Tennessee Whiskey JDTW JD RTD RTP Jack Daniel s Tennessee Honey JDTH Gentleman Jack Jack Daniel s Tennessee Apple JDTA Jack Daniel s Tennessee Fire JDTF Jack Daniel s Single Barrel Collection JDSB Jack Daniel s Bonded Tennessee Whiskey Jack Daniel s Sinatra Select Jack Daniel s Tennessee Rye Whiskey JDTR Jack Daniel s Triple Mash Blended Straight Whiskey Jack Daniel s Bottled in Bond Jack Daniel s American Single Malt Jack Daniel s 12 Year Old Jack Daniel s 10 Year Old and other Jack Daniel s expressions
This is a term commonly used in the beverage alcohol industry to describe volume Depending on the context depletions usually means either a where Brown Forman is the distributor shipments directly to retail or wholesale customers or b where Brown Forman is not the distributor shipments from distributor customers to retailers and wholesalers We believe that depletions measure volume in a way that more closely reflects consumer demand than our shipments to distributor customers do
When discussing trends in the market we refer to consumer takeaway a term commonly used in the beverage alcohol industry that refers to the purchase of product by consumers from retail outlets including products purchased through e commerce 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 consumer demand trends
We generally recognize revenue when our products are shipped or delivered to customers In the United States and certain other markets our customers are distributors that sell downstream to retailers and consumers We believe that our distributors downstream sales more closely reflect actual consumer demand than do our shipments to distributors Our shipments increase distributors inventories while distributors depletions as described above reduce their inventories Therefore it is possible that our shipments do not coincide with distributors downstream depletions and merely reflect changes in distributors inventories Because changes in distributors inventories could affect our trends we believe it is useful for investors to understand those changes in the context of our operating results
For both the current year period and the comparable prior year period we calculate a depletion based amount by a dividing the organic dollar amount e g organic net sales by the corresponding shipment volumes to arrive at a shipment per case amount and b multiplying the resulting shipment per case amount by the corresponding depletion volumes We subtract the year over year percentage change of the depletion based amount from the year over year percentage change of the organic amount to calculate the estimated net change in distributor inventories
A positive difference is interpreted as a net increase in distributors inventories which implies that organic trends could decrease as distributors reduce inventories whereas a negative difference is interpreted as a net decrease in distributors inventories which implies that organic trends could increase as distributors rebuild inventories
Below we discuss the significant developments in our business during fiscal 2023 and fiscal 2024 These developments relate to acquisitions and divestitures Finlandia brand name impairment tariffs supply chain disruptions innovation and capital deployment
During the third quarter of fiscal 2023 we acquired the Gin Mare brand and the Diplomático brand and related assets for a combined purchase price of 1 2 billion In fiscal 2023 these brands positively contributed to our reported net sales growth and negatively impacted our reported operating income growth The negative effect on fiscal 2023 reported operating income was largely driven by transaction expenses of 44 million related to the termination of certain distribution contracts certain post closing costs and expenses In fiscal 2024 these brands positively contributed to our reported net sales growth and reported operating income
During the third quarter of fiscal 2024 we sold the Finlandia vodka business for 196 million cash and entered into a related TSA for this business This transaction resulted in a pre tax gain of 92 million The TSA negatively impacted our reported gross margin during fiscal 2024
During the fourth quarter of fiscal 2024 we sold the Sonoma Cutrer wine business in exchange for an ownership percentage of 21 4 in Duckhorn along with 50 million cash and entered into a related TSA for this business This transaction resulted in a pre tax gain of 175 million
During the third quarter of fiscal 2023 we recognized a non cash impairment charge of 96 million for the Finlandia brand name largely due to macroeconomic conditions including rising interest rates and increasing costs
The removal of the European Union and United Kingdom tariffs on American whiskey tariffs positively affected our results during fiscal 2023 Tariffs include the combined effect of tariff related costs whether arising as a reduction of reported net sales or as an increase in reported cost of sales For fiscal 2023 we estimated that lower costs associated with tariffs a reduced our reported cost of sales growth by approximately four percentage points and b increased gross margin by approximately one and a half percentage points
In fiscal 2023 we announced our global relationship with The Coca Cola Company to introduce the Jack Daniel s Coca Cola RTD to select markets around the world We discuss the impact of the continued product launch on our fiscal 2024 results where relevant below
During fiscal 2021 our Board of Directors approved a 125 million capital investment to expand our bourbon making capacity in Kentucky We completed this project in fiscal 2024 We also built two additional barrel warehouses at our Woodford Reserve distillery during fiscal 2024 to support the continued growth of Woodford Reserve
During fiscal 2022 our Board of Directors approved a 50 million capital investment to expand our scotch making capacity in Scotland We expect to complete this project in fiscal 2026 We also built an additional barrel warehouse at our The Glendronach distillery during fiscal 2023 and two additional barrel warehouses at our Glenglassaugh distillery during fiscal 2024 to support the continued growth of those brands
During fiscal 2023 our Board of Directors approved an 85 million capital investment to expand our JDTW capacity in Tennessee We also built four additional barrel warehouses at our Jack Daniel s distillery during fiscal 2023 and fiscal 2024 to support the continued growth of JDTW
During fiscal 2023 we acquired the Gin Mare brand and the Diplomático brand and related assets During fiscal 2024 we sold the Finlandia vodka business and Sonoma Cutrer wine business See Notes 13 and 14 to the Consolidated Financial Statements for more information
We delivered reported net sales of 4 2 billion a decrease of 1 compared to fiscal 2023 The decline in reported net sales was driven by lower volumes largely offset by favorable price mix and the positive effect of acquisitions and divestitures An estimated net decrease in distributor inventories negatively impacted reported net sales
We delivered reported gross profit of 2 5 billion an increase of 1 compared to fiscal 2023 Gross margin increased to 60 5 in fiscal 2024 up 1 5 percentage points from 59 0 in fiscal 2023 The increase in gross margin was primarily driven by favorable price mix and lower supply chain disruption related costs partially offset by higher input costs and the negative effect of foreign exchange
We delivered reported operating income of 1 4 billion an increase of 25 compared to fiscal 2023 driven primarily by the positive effect of acquisitions and divestitures the gains on sale of the Finlandia vodka business and the Sonoma Cutrer wine business favorable price mix the absence of the prior year period Finlandia non cash impairment and lower supply chain disruption related costs partially offset by operating expense growth the negative effect of foreign exchange and the 23 million commitment to the Foundation and Dendrifund
Our return on average invested capital increased to 17 3 in fiscal 2024 compared to 15 3 in fiscal 2023 This increase was driven by higher reported operating income and the benefit of a lower effective tax rate partially offset by higher invested capital
See Non GAAP Financial Measures above for details on our use of organic change and return on average invested capital including how we calculate these measures and why we think this information is useful to readers
The following table shows net sales results for our top markets summarized by geographic area for fiscal 2024 compared to fiscal 2023 We discuss results of the markets most affecting our performance below the table
reported net sales declined 4 driven by lower volumes largely reflecting an estimated net decrease in distributor inventories The decline was partially offset by higher prices across our portfolio led by el Jimador and Woodford Reserve and the growth of our super premium Jack Daniel s expressions
reported net sales increased 10 led by the launch of the Jack Daniel s Coca Cola RTD the positive effect of foreign exchange and the acquisitions of Diplomático and Gin Mare partially offset by lower volumes of Jack Daniel s Cola
reported net sales declined 11 driven by lower volumes of Jack Daniel s Cola which we previously distributed due to the introduction of the Jack Daniel s Coca Cola RTD that we do not distribute in this market as well as lower JDTW volumes The decline was partially offset by the positive effect of foreign exchange
declined 4 primarily driven by lower volumes across our portfolio in Japan due to an estimated net decrease in distributor inventories in preparation for the transition to owned distribution beginning April 1 2024 This decline was partially offset by the acquisitions of Gin Mare and Diplomático
reported net sales increased 5 driven by higher volumes of JDTA along with the positive effect of foreign exchange These gains were partially offset by lower volumes of JDTW reflecting an estimated net decrease in distributor inventories and JD RTD declines
declined 6 driven by the negative effect of foreign exchange reflecting the strengthening of the dollar primarily against the Turkish lira and lower JDTW volumes in the United Arab Emirates due to a net decrease in distributor inventories These declines were partially offset by JDTW growth in Türkiye
reported net sales increased 8 driven by growth of our super premium American whiskey portfolio and the acquisitions of Gin Mare and Diplomático An estimated net increase in distributor inventories positively impacted reported net sales
decreased 6 led by declines in Japan the United States the United Arab Emirates and Sub Saharan Africa along with the negative effect of foreign exchange primarily reflecting the strengthening of the dollar against the Turkish lira These declines were partially offset by higher prices and volumes in Türkiye An estimated net decrease in distributor inventories negatively impacted reported net sales
declined 10 driven by lower volumes in the United States largely due to an estimated net decrease in distributor inventories and the negative effect of foreign exchange The decline was partially offset by higher prices in Türkiye
brands reported net sales declined 6 led by lower volumes of Jack Daniel s Cola RTD partially offset by the continued launch of the Jack Daniel s Coca Cola RTD An estimated net decrease in distributor inventories in the United States negatively impacted reported net sales
reported net sales declined 10 driven by lower volumes in the United States and Mexico partially offset by the positive effect of foreign exchange An estimated net decrease in distributor inventories negatively impacted reported net sales
reported net sales were flat as Korbel California Champagne declines in the United States were offset by higher volumes of Sonoma Cutrer An estimated net increase in distributor inventories positively impacted reported net sales During the fourth quarter of fiscal 2024 we sold our Sonoma Cutrer wine business See Note 14 to the Condensed Consolidated Financial Statements and Non GAAP Financial Measures above for details
reported net sales declined 16 due to lower volumes During the third quarter of fiscal 2024 we sold our Finlandia vodka business See Note 14 to the Condensed Consolidated Financial Statements and Non GAAP Financial Measures above for details
Commentary below compares fiscal 2024 to fiscal 2023 results A comparison of fiscal 2023 to fiscal 2022 results may be found in Part II Item 7 Management s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10 K for the fiscal year ended April 30 2023 2023 Form 10 K
of 4 2 billion decreased 1 or 50 million in fiscal 2024 compared to fiscal 2023 driven by lower volumes largely offset by favorable price mix and the positive effect of acquisitions and divestitures Lower volumes were led by Jack Daniel s Cola due to the introduction of the Jack Daniel s Coca Cola RTD and JDTW reflecting an estimated net decrease in distributor inventories Price mix largely reflects higher prices across much of our portfolio led by JDTW most notably in Türkiye in response to high inflation and currency devaluation See Results of Operations Fiscal 2024 Market Highlights and Results of Operations Fiscal 2024 Brand Highlights above for details on the factors contributing to the change in reported net sales for fiscal 2024
of 1 7 billion decreased 82 million or 5 in fiscal 2024 compared to fiscal 2023 driven by lower volumes partially offset by cost mix Lower volumes were led by Jack Daniel s Cola due to the introduction of the Jack Daniel s Coca Cola RTD and JDTW reflecting an estimated net decrease in distributor inventories Cost mix reflects a higher input costs b the negative effect of foreign exchange and c the negative effect of acquisitions and divestitures partially offset by the absence of the significant prior year supply chain disruption related costs
of 2 5 billion increased 32 million or 1 in fiscal 2024 compared to fiscal 2023 Gross margin increased to 60 5 in fiscal 2024 up 1 5 percentage points from 59 0 in fiscal 2023 The increase in gross margin was primarily driven by favorable price mix and lower supply chain disruption related costs partially offset by higher input costs and the negative effect of foreign exchange
totaled 1 4 billion an increase of 12 million or 1 in fiscal 2024 compared to fiscal 2023 The increase in reported operating expenses was driven by elevated SG A expense advertising expense growth and the negative effect of foreign exchange The increase was largely offset by the absence of a non cash impairment charge for the Finlandia brand name in the prior year as well as the absence of post closing costs and expenses in connection with the acquisitions of Diplomático and Gin Mare in the prior year
Reported advertising expenses increased 4 in fiscal 2024 driven by increased investment in JDTW advertising expense for the recently acquired Gin Mare and Diplomático brands and advertising expense associated with the launch of Jack Daniel s Coca Cola RTD
was 1 4 billion in fiscal 2024 an increase of 287 million or 25 compared to fiscal 2023 Operating margin increased 7 2 percentage points to 33 8 in fiscal 2024 from 26 7 in fiscal 2023 driven primarily by the positive effect of acquisitions and divestitures gains on sale of the Finlandia vodka business and the Sonoma Cutrer wine business favorable price mix the absence of the prior year period Finlandia non cash impairment and lower supply chain disruption related costs partially offset by operating expense growth the negative effect of foreign exchange and the commitment to the Foundation and Dendrifund
for fiscal 2024 was 21 2 compared to 23 0 in fiscal 2023 The decrease in our effective tax rate was driven primarily by the decreased impact of foreign operations and state taxes and the beneficial impact of tax rate differences on the sale of the Finlandia vodka business which was partially offset by the absence of the net benefit from the reversal of the valuation allowances and the impact of the prior fiscal year tax true ups in fiscal 2024 See Note 12 to the Consolidated Financial Statements for details
We anticipate a return to growth for organic net sales and organic operating income in fiscal 2025 driven by gains in international markets and the benefit of normalizing inventory trends This outlook is tempered by our belief that global macroeconomic and geopolitical uncertainties will continue to create a challenging operating environment Accordingly we expect the following in fiscal 2025
We generate strong cash flows from operations which enable us to meet current obligations fund capital expenditures and return cash to our stockholders through regular dividends and from time to time through share repurchases and special dividends We believe our investment grade credit ratings A1 by Moody s and A by S P provide us with financial flexibility when accessing global debt capital markets and allow us to reserve adequate debt capacity for investment opportunities and unforeseen events
Our operating cash flows are supplemented by cash and cash equivalent balances as well as access to other liquidity sources Cash and cash equivalents were 374 million at April 30 2023 and 446 million at April 30 2024 As of April 30 2024 approximately 50 of our cash and cash equivalents were held by our foreign subsidiaries whose earnings we expect to
reinvest indefinitely outside of the United States We continue to evaluate our future cash deployment and may decide to repatriate additional cash held by our foreign subsidiaries This may require us to provide for and pay additional taxes
We have a 900 million commercial paper program that we use together with our cash flow from operations to fund our short term operational needs See Note 7 to the Consolidated Financial Statements for outstanding commercial paper balances interest rates and days to maturity at April 30 2023 and April 30 2024 The average balances interest rates and original maturities during 2023 and 2024 are presented below
Our commercial paper program is supported by available commitments under our undrawn 900 million bank credit facility that expires on May 26 2028 Although unlikely under extreme market conditions one or more participating banks may not be able to fund its commitments under our credit facility To manage this counterparty credit risk we partner with banks that have investment grade credit ratings limit the amount of exposure we have with each bank and monitor each bank s financial conditions
Our most significant short term cash requirements relate primarily to funding our operations such as expenditures for raw materials production and distribution advertising and promotion and current taxes dividend payments and capital investments Our most significant longer term cash requirements primarily include payments related to our long term debt employee benefit obligations and deferred tax liabilities see Notes 7 10 and 12 to the Consolidated Financial Statements
While we expect to meet our planned short term liquidity needs largely through cash generated from operations and borrowings under our commercial paper program a sustained market deterioration resulting in declines in net sales and profit could require us to evaluate alternative sources of liquidity If we have additional liquidity needs we believe that we could access financing in the debt capital markets
We believe our current liquidity position supplemented by our ability to generate positive cash flows from operations in the future and our ample debt capacity enabled by our strong short term and long term credit ratings will be sufficient to meet all of our future financial commitments
Cash provided by operations of 647 million during fiscal 2024 increased 7 million from fiscal 2023 primarily reflecting a smaller increase in cash used for working capital compared to the prior fiscal year
Cash provided by investing activities was 49 million during fiscal 2024 compared to 1 355 million used for investing activities during fiscal 2023 The 1 404 million change largely reflects 1 195 million in cash used to acquire Gin Mare and Diplomático during fiscal 2023 and proceeds of 246 million received from the divestitures of Finlandia and Sonoma Cutrer during fiscal 2024 The change also reflects a 45 million increase in capital expenditures due largely to additional capital spending on projects to expand the capacity of our whiskey and tequila production facilities during fiscal 2024
Cash used for financing activities was 618 million during fiscal 2024 compared to 239 million in cash provided by financing activities during fiscal 2023 The 857 million change largely reflects a 400 million increase in share repurchases a 398 million decrease in net proceeds from long term debt a 42 million decrease in net proceeds from short term borrowings and a 26 million increase in dividend payments
A discussion of our cash flows for fiscal 2023 compared to fiscal 2022 may be found in Part II Item 7 Management s Discussion and Analysis of Financial Condition and Results of Operations of our 2023 Form 10 K
In November 2023 our Board of Directors approved a 6 increase in the quarterly cash dividend on our Class A and Class B common stock from 0 2055 per share to 0 2178 per share effective with the regular quarterly dividend paid on January 2 2024 As a result the indicated annual cash dividend increased from 0 8220 per share to 0 8712 per share
On May 23 2024 our Board of Directors declared a regular quarterly cash dividend on our Class A and Class B common stock of 0 2178 per share The dividend is payable on July 1 2024 to stockholders of record on June 7 2024
In October 2023 our Board of Directors authorized the repurchase of up to 400 million excluding brokerage fees and excise taxes of outstanding shares of Class A and Class B common stock from October 2 2023 through October 1 2024 the Repurchase Program subject to market and other conditions
Under the Repurchase Program we repurchased 175 632 Class A shares at an average price of 59 35 per share and 6 736 658 Class B shares at an average price of 57 83 per share for a total cost of 400 million The program was completed in December 2023
Our financial statements reflect some estimates involved in applying the following critical accounting policies that entail uncertainties and subjectivity Using different estimates or policies could have a material effect on our operating results and financial condition
When we acquire a business we allocate the purchase price to the assets and liabilities of the acquired business including intangible brand names and trademarks brand names based on estimated fair value We do not amortize our brand names all of which we consider to have indefinite lives
We assess our brand names for impairment at least annually or more frequently if circumstances indicate the carrying amount may be impaired A brand name is impaired when its carrying amount exceeds its estimated fair value in which case we write down the brand name to its estimated fair value We estimate the fair value of a brand name using the relief from royalty method We also consider market values for similar assets when available Considerable management judgment is necessary to estimate fair value including making assumptions about future cash flows net sales discount rates and royalty rates
We have the option before quantifying the fair value of a brand name to evaluate qualitative factors to assess whether it is more likely than not that the brand name is impaired If we determine that is not the case then we are not required to quantify the fair value That assessment also takes considerable management judgment
Based on our assumptions we believe none of our brand names are impaired as of April 30 2024 The carrying amounts of the recently acquired Gin Mare and Diplomático brand names approximate their fair values based on the relief from royalty method using current assumptions Reasonably possible changes in those assumptions could result in future impairment of either of those brand names For example we estimate that all else equal a 15 decline in projected net sales would result in an impairment charge of 25 million for the Gin Mare brand name and 35 million for the Diplomático brand name We also estimate that all else equal a 1 percentage point increase in the discount rate would result in an impairment charge of 29 million for the Gin Mare brand name and 44 million for the Diplomático brand name
We sponsor various defined benefit pension plans and postretirement plans providing retiree health care and retiree life insurance benefits Benefits are based on factors such as years of service and compensation level during employment We expense the benefits expected to be paid over employees expected service This requires us to make assumptions to determine the net benefit costs and obligations such as discount rates return on plan assets the rate of salary increases expected service and health care cost trend rates We review these assumptions annually and modify them based on current rates and trends when appropriate The assumptions also reflect our historical experience and management s best judgment regarding future expectations We believe the discount rates and expected return on plan assets are the most significant assumptions
The discount rate used to measure the benefit obligations is determined at the beginning of each fiscal year using a yield curve based on the interest rates of high quality debt securities with maturities corresponding to the expected timing of our benefit payments The service cost and interest cost components are measured by applying the specific spot rates along that yield curve The expected return on pension plan assets reflects expected capital market returns for each asset class that are based on historical returns adjusted for the expected effects of diversification
The following table compares the assumed discount rates and expected return on assets used in determining net periodic benefit cost for fiscal 2024 to those to be used in determining that cost for fiscal 2025
Using these assumptions we estimate our pension and other postretirement benefit cost for fiscal 2025 will be approximately 18 million compared to 21 million for fiscal 2024 Decreasing the assumed discount rates by 50 basis points would increase the total fiscal 2025 cost by approximately 4 million Increasing the assumed discount rates by 50 basis points
would decrease the total fiscal 2025 cost by approximately 2 million Decreasing increasing the assumed return on plan assets by 50 basis points would increase decrease the total fiscal 2025 cost by approximately 3 million
Significant judgment is required in evaluating our tax positions We establish liabilities when some positions are likely to be challenged and may not succeed despite our belief that our tax return positions are fully supportable We adjust these liabilities in light of changing circumstances such as the progress of a tax audit We believe current liabilities are appropriate for all known contingencies but this situation could change
Years can elapse before we can resolve a particular matter for which we may have established a tax liability Although predicting the final outcome or the timing of resolution of any particular tax matter can be difficult we believe our liabilities reflect the likely outcome of known tax contingencies Unfavorable settlement of any particular issue could require use of our cash and increase our effective tax rate Conversely a favorable resolution could result in reduced cash tax payments the reversal of previously established liabilities or some combination of these results which could reduce our effective tax rate
Our enterprise risk management process is intended to ensure that we take risks knowingly and thoughtfully and that we balance potential risks and rewards Our integrated enterprise risk management framework is designed to identify evaluate communicate and appropriately mitigate risks across our operations
We face market risks arising from changes in foreign currency exchange rates commodity prices and interest rates We manage market risks through procurement strategies as well as the use of derivative and other financial instruments Our risk management program is governed by policies that authorize and control the nature and scope of transactions that we use to mitigate market risks Our policy permits the use of derivative financial instruments to mitigate market risks but prohibits their use for speculative purposes
Foreign currency fluctuations affect our net investments in foreign subsidiaries and foreign currency denominated cash flows In general we expect our cash flows to be negatively affected by a stronger dollar and positively affected by a weaker dollar Our most significant foreign currency exposures include the euro the British pound and the Australian dollar We manage our foreign currency exposures through derivative financial instruments principally foreign currency forward contracts and debt denominated in foreign currency We had outstanding currency derivatives with notional amounts totaling 747 million and 566 million at April 30 2023 and 2024 respectively
We estimate that a hypothetical 10 weakening of the dollar compared to exchange rates of hedged currencies as of April 30 2024 would decrease the fair value of our then existing foreign currency derivative contracts by approximately 45 million This hypothetical change in fair value does not consider the expected inverse change in the underlying foreign currency exposures
Commodity price changes can affect our production and supply chain costs Our most significant commodities exposures include wood corn agave malted barley rye and natural gas We manage some of these exposures through forward purchase contracts
Interest rate changes affect a the fair value of our fixed rate debt and b cash flows and earnings related to our variable rate debt and interest bearing investments In addition to currently outstanding debt any potential future debt offerings would be subject to interest rate risk
As of April 30 2024 our cash and cash equivalents 446 million and short term commercial paper borrowings 429 million were exposed to interest rate changes Based on the then existing balances of our variable rate debt and interest bearing investments a hypothetical one percentage point increase in interest rates would result in a negligible change in net interest expense
See Notes 15 and 16 to the Consolidated Financial Statements for details on our foreign currency exchange rate risk See Critical Accounting Policies and Estimates in Item 7 Management s Discussion and Analysis of Financial Condition and Results of Operations for a discussion of our pension and other postretirement plans exposure to interest rate risks Also see Item 1A Risk Factors for details on how economic conditions affecting market risks also affect the demand for and pricing of our products and how we are affected by exchange rate fluctuations
Our management is responsible for preparing presenting and ensuring the integrity of the financial information presented in this report The consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States including amounts based on management s best estimates and judgments In management s opinion the consolidated financial statements fairly present the Company s financial position results of operations and cash flows
The Audit Committee of the Board of Directors comprising only independent directors meets regularly with our external auditors the independent registered public accounting firm Ernst Young LLP EY with our internal auditors and with representatives of management to review accounting internal control structure and financial reporting matters Our internal auditors and EY have full access to the Audit Committee As set forth in our Code of Conduct and Corporate Governance Guidelines we are firmly committed to adhering to the highest standards of moral and ethical behavior in our business activities
Management is also responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a 15 f and 15d 15 f under the Securities Exchange Act of 1934 as amended Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States Because of its inherent limitations internal control over financial reporting may not prevent or detect misstatements
issued by the Committee of Sponsoring Organizations of the Treadway Commission Based on this assessment management concluded that our internal control over financial reporting was effective as of April 30 2024 EY which audited and reported on the Company s consolidated financial statements has audited the effectiveness of our internal control over financial reporting as of April 30 2024 as stated in their report
We have audited the accompanying consolidated balance sheets of Brown Forman Corporation and Subsidiaries the Company as of April 30 2024 and 2023 the related consolidated statements of operations comprehensive income stockholders equity and cash flows for each of the three years in the period ended April 30 2024 and the related notes and financial statement schedule listed in the Index at Item 15 a 2 collectively referred to as the consolidated financial statements In our opinion the consolidated financial statements present fairly in all material respects the financial position of the Company at April 30 2024 and 2023 and the results of its operations and its cash flows for each of the three years in the period ended April 30 2024 in conformity with U S generally accepted accounting principles
We also have audited in accordance with the standards of the Public Company Accounting Oversight Board United States PCAOB the Company s internal control over financial reporting as of April 30 2024 based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission 2013 framework and our report dated June 14 2024 expressed an unqualified opinion thereon
These financial statements are the responsibility of the Company s management Our responsibility is to express an opinion on the Company s financial statements based on our audits We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audits in accordance with the standards of the PCAOB Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement whether due to error or fraud Our audits included performing procedures to assess the risks of material misstatement of the financial statements whether due to error or fraud and performing procedures that respond to those risks Such procedures included examining on a test basis evidence regarding the amounts and disclosures in the financial statements Our audits also included evaluating the accounting principles used and significant estimates made by management as well as evaluating the overall presentation of the financial statements We believe that our audits provide a reasonable basis for our opinion
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that 1 relates to accounts or disclosures that are material to the financial statements and 2 involved our especially challenging subjective or complex judgments The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements taken as a whole and we are not by communicating the critical audit matter below providing a separate opinion on the critical audit matter or on the account or disclosures to which it relates
At April 30 2024 the balance of the Company s other intangible assets with indefinite lives was 990 million As discussed in Notes 1 and 4 to the consolidated financial statements other intangible assets with indefinite lives include intangible brand names and trademarks brand names and are assessed for impairment at least annually or more frequently if circumstances indicate the carrying amount may be impaired The Company s annual impairment test did not result in an impairment of the Gin Mare and Diplomático brand names indefinite lived intangible assets The Company estimated the fair value of the Gin Mare and Diplomático brand names indefinite lived intangible assets using the relief from royalty method
Auditing management s estimate of the fair value of the Gin Mare and Diplomático brand names was complex due to the significant judgment required to determine the fair value of the brand names The fair value estimates were sensitive to significant assumptions used in the valuation process such as net sales discount rates and royalty rates
We obtained an understanding evaluated the design and tested the operating effectiveness of controls that address the risks of material misstatement over the Company s process to estimate the fair value of the the Gin Mare and Diplomático brand names including controls over management s review of the selection of assumptions described above used in the valuation models
To test the estimated fair value of the Company s Gin Mare and Diplomático brand names we performed audit procedures that included among others assessing methodologies used in the valuation models and testing the significant assumptions discussed above This included comparing the significant assumptions used by management to observable market data current industry and economic trends changes in the Company s business model and customer base historical operating results and other relevant factors that would affect the significant assumptions We assessed management s historical estimates and performed sensitivity analyses of assumptions to evaluate the changes in the fair value of the brand names that would result from changes in the assumptions We also involved valuation specialists to assist in evaluating valuation methodologies and certain assumptions used in the models
We have audited Brown Forman Corporation and Subsidiaries internal control over financial reporting as of April 30 2024 based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission 2013 framework the COSO criteria In our opinion Brown Forman Corporation and Subsidiaries the Company maintained in all material respects effective internal control over financial reporting as of April 30 2024 based on the COSO criteria
We also have audited in accordance with the standards of the Public Company Accounting Oversight Board United States PCAOB the consolidated balance sheets of the Company as of April 30 2024 and 2023 the related consolidated statements of operations comprehensive income stockholders equity and cash flows for each of the three years in the period ended April 30 2024 and the related notes and financial statement schedule listed in the Index at Item 15 a 2 and our report dated June 14 2024 expressed an unqualified opinion thereon
The Company s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management s Report on Internal Control over Financial Reporting Our responsibility is to express an opinion on the Company s internal control over financial reporting based on our audit We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audit in accordance with the standards of the PCAOB Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects
Our audit included obtaining an understanding of internal control over financial reporting assessing the risk that a material weakness exists testing and evaluating the design and operating effectiveness of internal control based on the assessed risk and performing such other procedures as we considered necessary in the circumstances We believe that our audit provides a reasonable basis for our opinion
A company s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles A company s internal control over financial reporting includes those policies and procedures that 1 pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company 2 provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company and 3 provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of the company s assets that could have a material effect on the financial statements
Because of its inherent limitations internal control over financial reporting may not prevent or detect misstatements Also projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate
We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States GAAP We also apply the following accounting policies when preparing our consolidated financial statements
Our consolidated financial statements include the accounts of all subsidiaries in which we have a controlling financial interest We use the equity method to account for investments in entities that we do not control but over whose operating and financial policies we have the ability to exercise significant influence We eliminate all intercompany transactions
To prepare financial statements that conform with GAAP our management must make informed estimates that affect how we report revenues expenses assets and liabilities including contingent assets and liabilities Actual results could differ from these estimates
Accounts receivable are recorded net of an allowance for expected credit losses allowance for doubtful accounts We determine the allowance using information such as customer credit history and financial condition historical loss experience and macroeconomic factors We write off account balances against the allowance when we have exhausted our collection efforts The allowance for doubtful accounts was 7 and 8 at April 30 2023 and 2024 respectively
Inventories are valued at the lower of cost or net realizable value Approximately 49 of our consolidated inventories are valued using the last in first out LIFO cost method which we use for the majority of our U S inventories We value the remainder of our inventories primarily using the first in first out FIFO cost method FIFO cost approximates current replacement cost If we had used the FIFO method for all inventories they would have been 429 and 512 higher than reported at April 30 2023 and 2024 respectively
Because we age most of our whiskeys in barrels for three years or more we bottle and sell only a portion of our whiskey inventory each year Following industry practice we classify all barreled whiskey as a current asset We include warehousing insurance ad valorem taxes and other carrying charges applicable to barreled whiskey in inventory costs
We state property plant and equipment at cost less accumulated depreciation We calculate depreciation on a straight line basis using our estimates of useful life which are 20 40 years for buildings and improvements 3 10 years for machinery equipment vehicles furniture and fixtures and 3 7 years for capitalized software
We assess our property plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying value of those assets may not be recoverable When we do not expect to recover the carrying value of an asset or asset group through undiscounted future cash flows we write it down to its estimated fair value We determine fair value using discounted estimated future cash flows considering market values for similar assets when available
When we retire or dispose of property plant and equipment we remove its cost and accumulated depreciation from our balance sheet and reflect any gain or loss in operating income We expense the costs of repairing and maintaining our property plant and equipment as we incur them
When we acquire a business we first allocate the purchase price to identifiable assets and liabilities including intangible brand names and trademarks brand names based on estimated fair value We then record any remaining purchase price as goodwill We do not amortize goodwill or other intangible assets with indefinite lives We consider all of our brand names to have indefinite lives
We assess our goodwill and other indefinite lived intangible assets for impairment at least annually or more frequently if circumstances indicate the carrying amount may be impaired Goodwill is impaired when the carrying amount of the related reporting unit exceeds its estimated fair value in which case we write down the goodwill by the amount of the excess limited to the carrying amount of the goodwill We estimate the reporting unit s fair value using discounted estimated future cash flows or market information Similarly a brand name is impaired when its carrying amount exceeds its estimated fair value in which case we write down the brand name to its estimated fair value We estimate the fair value of a brand name using the relief from
royalty method We also consider market values for similar assets when available Considerable management judgment is necessary to estimate fair value including the selection of assumptions about future cash flows net sales discount rates and royalty rates
We have the option before quantifying the fair value of a reporting unit or brand name to evaluate qualitative factors to assess whether it is more likely than not that our goodwill or brand names are impaired If we determine that is not the case then we are not required to quantify the fair value That assessment also takes considerable management judgment
Our net sales predominantly reflect global sales of beverage alcohol consumer products We sell these products under contracts with different types of customers depending on the market The customer is most often a distributor wholesaler or retailer
Each contract typically includes a single performance obligation to transfer control of the products to the customer Depending on the contract control is transferred when the products are either shipped or delivered to the customer at which point we recognize the transaction price for those products as net sales The transaction price recognized at that point reflects our estimate of the consideration to be received in exchange for the products The actual amount may ultimately differ due to the effect of various customer incentives and trade promotion activities In making our estimates we consider our historical experience and current expectations as applicable Subsequent adjustments recognized for changes in estimated transaction prices are typically not material
Net sales exclude taxes we collect from customers that are imposed by various governments on our sales and are reduced by payments to customers unless made in exchange for distinct goods or services with fair values approximating the payments Net sales include any amounts we bill customers for shipping and handling activities related to the products We recognize the cost of those activities in cost of sales during the same period in which we recognize the related net sales Sales returns which are permitted only in limited situations are not material Customer payment terms generally range from 30 to 90 days There are no significant amounts of contract assets or liabilities
We use stock based awards as part of our incentive compensation for eligible employees and directors We recognize the grant date fair value of an award as compensation expense on a straight line basis over the requisite service period which typically corresponds to the vesting period for the award Upon forfeiture of an award prior to vesting we reverse any previously recognized compensation expense related to that award We classify stock based compensation expense within selling general and administrative expenses
As we recognize compensation expense for a stock based award we concurrently recognize a related deferred tax asset The subsequent vesting or exercise of the award will generally result in an actual tax benefit that differs from the deferred tax asset that had been recorded The excess deficiency of the actual tax benefit over under the previously recorded tax asset is recognized as income tax benefit expense on the date of vesting or exercise
We base our annual provision for income taxes on the pre tax income reflected in our consolidated statement of operations We establish deferred tax liabilities or assets for temporary differences between GAAP and tax reporting bases and later adjust them to reflect changes in tax rates expected to be in effect when the temporary differences reverse We record a valuation allowance as necessary to reduce a deferred tax asset to the amount that we believe is more likely than not to be realized We do not provide deferred income taxes on undistributed earnings of foreign subsidiaries that we expect to indefinitely reinvest We record a deferred tax charge in prepaid taxes for the difference between GAAP and tax reporting bases with respect to the elimination of intercompany profit in ending inventory
We assess our uncertain income tax positions in two steps First we evaluate whether the tax position will more likely than not based on its technical merits be sustained upon examination including resolution of any related appeals or litigation For a tax position that does not meet this first criterion we recognize no tax benefit For a tax position that does meet the first criterion we recognize a tax benefit in an amount equal to the largest amount of benefit that we believe has more than a 50 likelihood of being realized upon ultimate resolution We record interest and penalties on uncertain tax positions as income tax expense
We report all gains and losses from foreign currency transactions those denominated in a currency other than the entity s functional currency in current income The U S dollar is the functional currency for most of our consolidated entities The local currency is the functional currency for some of our consolidated foreign entities We translate the financial statements of those foreign entities into U S dollars using the exchange rate in effect at the balance sheet date to translate assets and liabilities and using the average exchange rate for the reporting period to translate income and expenses We record the resulting translation adjustments in other comprehensive income loss
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 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
We excluded common stock based awards for approximately 691 000 shares 1 107 000 shares and 1 689 000 shares from the calculation of diluted earnings per share for 2022 2023 and 2024 respectively because they were not dilutive for those periods under the treasury stock method
During fiscal 2023 we recognized a non cash impairment charge of 96 for the Finlandia brand name largely reflecting the effects of higher discount rates and input costs on its valuation During fiscal 2024 we recorded a 7 impairment charge related to the write off of the carrying amount of an immaterial discontinued brand name The impairment charges are included in other expense income net in the accompanying consolidated statements of operations
As of April 30 2024 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 the sale of the Sonoma Cutrer wine business to Duckhorn Note 14 The 267 carrying amount of the investment reflects the fair value of the common stock based on its quoted market price at the April 30 2024 closing date of the transaction As of April 30 2024 the difference between the carrying amount of the investment and our proportionate share of the net assets of Duckhorn was not material
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 are recorded as of April 30 2024
Represents net sales of branded products to advanced economies as defined by the International Monetary Fund IMF excluding the United States Our top developed international markets are Germany Australia the United Kingdom France Canada and Spain
Includes all whiskey spirits and whiskey based flavored liqueurs The brands included in this category are the Jack Daniel s family of brands excluding the ready to drink products outlined below the Woodford Reserve family of brands the Old Forester family of brands The Glendronach Glenglassaugh Benriach Slane Irish Whiskey and Coopers Craft
Includes Finlandia Vodka which was divested on November 1 2023 Net sales for the second half of fiscal 2024 were recognized pursuant to the transition services agreement related to distribution services in certain markets
We sponsor various defined benefit pension plans as well as postretirement plans providing retiree health care and retiree life insurance benefits Below we discuss our obligations related to these plans the assets dedicated to meeting the obligations and the amounts we recognized in our financial statements as a result of sponsoring these plans
We provide eligible employees with pension and other postretirement benefits based on factors such as years of service and compensation level during employment The pension obligation shown below projected benefit obligation consists of a benefits earned by employees to date based on current salary levels accumulated benefit obligation and b benefits to be received by employees as a result of expected future salary increases The obligation for medical and life insurance benefits is not affected by future salary increases The following table shows how the present value of our projected benefit obligations changed during each of the last two years
Service cost represents the present value of the benefits attributed to service rendered by employees during the year Interest cost is the increase in the present value of the obligation due to the passage of time Net actuarial loss gain is the change in value of the obligation resulting from experience different from that assumed or from a change in an actuarial assumption We discuss actuarial assumptions used at the end of this note Plan amendments can also change the value of the obligation
As shown in the previous table the change in the value of our pension and other postretirement benefit obligations also includes the effect of benefit payments and retiree contributions Expected benefit payments net of retiree contributions over the next 10 years are as follows
We invest in specific assets to fund our pension benefit obligations Our investment goal is to earn a total return that over time will grow assets sufficiently to fund our plans liabilities after providing appropriate levels of contributions and accepting prudent levels of investment risk To achieve this goal plan assets are invested primarily in funds or portfolios of funds managed by outside managers Investment risk is managed by company policies that require diversification of asset classes manager styles and individual holdings We measure and monitor investment risk through quarterly and annual performance reviews and through periodic asset liability studies
Asset allocation is the most important method for achieving our investment goals and is based on our assessment of the plans long term return objectives and the appropriate balances needed for liquidity stability and diversification As of April 30 2024 our target asset allocation is a mix of 26 public equity investments 59 fixed income investments and 15 alternative investments
This limited partnership interest was initially valued at cost and has been adjusted to fair value as determined in good faith by management of the partnership using various factors and does not meet the requirements for reporting at the net asset value NAV The valuation requires significant judgment due to the absence of quoted market prices and the inherent lack of liquidity This limited partnership has a term expiring in September 2024
Commingled trust fund valuations are based on the NAV of the funds as determined by the fund administrators and reviewed by us NAV represents the underlying assets owned by the fund minus liabilities and divided by the number of shares or units outstanding Generally for commingled trust funds other than real estate redemptions are permitted daily with no notice period The real estate fund is redeemable quarterly with 110 days
These limited partnership interests were initially valued at cost and have been adjusted using NAV per audited financial statements Investments are generally not eligible for immediate redemption and have original terms averaging 10 to 13 years although those periods may be extended
The following table shows how the total fair value of all pension plan assets changed during each of the last two years We do not have assets set aside for postretirement medical or life insurance benefits
The following table shows the components of the pension cost recognized during each of the last three years The amount for each year includes amortization of the prior service cost credit and net actuarial loss gain included in accumulated other comprehensive loss as of the beginning of the year
We determine the expected return on plan assets by applying our long term rate of return assumption to the market related value of plan assets adjusted by earnings on contributions and benefit payments expected to be made during the year We calculate the market related value of plan assets by amortizing actual versus expected returns over five years
We amortize prior service costs and net actuarial gains or losses on straight line basis over the average remaining service period of the employees expected to receive benefits under the plan However for net actuarial gains or losses we use a corridor approach that amortizes them only to the extent the gain or loss exceeds 10 of the greater of the projected benefit obligation or market related value of plan assets
The settlement charges recognized during 2022 and 2023 were triggered by fiscal year to date lump sum payments under certain pension plans surpassing total annual service and interest cost for those plans
We recognize prior service cost credit and net actuarial loss gain in other comprehensive income or loss OCI during the period in which they arise These amounts are later amortized from accumulated OCI into pension and other postretirement benefit cost over future periods as described above The following table shows the pre tax effect of these amounts on OCI during each of the last three years
We use various assumptions to determine the obligations and cost related to our pension and other postretirement benefit plans The weighted average assumptions used in computing benefit plan obligations as of the end of the last two years were as follows
We determine the assumed discount rates using a yield curve based on the interest rates of high quality debt securities with maturities corresponding to the expected timing of our benefit payments We measure the service cost and interest cost components by applying the specific spot rates along the yield curve used to measure the benefit obligation at the beginning of the period
The expected return on plan assets represents the long term rate of return that we assume will be earned over the life of the pension assets The assumption reflects expected capital market returns for each asset class which are based on historical returns adjusted for the expected effects of diversification
We also sponsor various defined contribution benefit plans that together cover substantially all U S employees Employees can make voluntary contributions in accordance with their respective plans which include a 401 k tax deferral option We match a percentage of each employee s contributions in accordance with plan terms We expensed 13 14 and 14 for matching contributions during 2022 2023 and 2024 respectively
The information presented above for defined benefit plans and defined contribution benefit plans reflects amounts for U S plans only Information about similar international plans is not presented due to immateriality
The Brown Forman 2022 Omnibus Compensation Plan Plan is our incentive compensation plan designed to reward participants including eligible executive officers other employees and non employee directors for company performance Under the Plan we can grant stock based incentive awards for up to 12 412 433 shares of common stock to eligible participants until July 28 2032 As of April 30 2024 awards for approximately 11 269 000 shares remain available for issuance under the Plan We try to limit the source of shares delivered to participants under the Plan to treasury shares that we purchase from time to time on the open market in connection with a publicly announced share repurchase program in private transactions or otherwise
We grant SSARs at an exercise price equal to the closing market price of the underlying stock on the grant date SSARs become exercisable after three years from the first day of the fiscal year of grant and generally are exercisable for seven years after that date The following table presents information about SSARs outstanding as of April 30 2024 and for the year then ended
We use the Black Scholes pricing model to calculate the grant date fair value of a SSAR The weighted average grant date fair values and related valuation assumptions for the SSARS granted during each of the last three years were as follows
The expected term is based on past exercise experience for similar awards The risk free interest rate is based on zero coupon U S Treasury rates as of the date of grant Expected volatility and dividend yield are based on historical data with consideration of other factors when applicable
The PBRSUs vest at the end of a three year performance period that begins on the first day of the fiscal year of grant For PBRSU granted in fiscal 2022 and 2023 performance is measured in full by comparing the three year cumulative total shareholder return TSR of our Class B common stock to the three year cumulative TSR of the companies in the Standard Poor s Consumer Staples Index the peer group Beginning with PBRSUs granted in fiscal 2024 performance is measured based in part 50 on our TSR compared to the TSR of the peer group and in part 50 on our adjusted operating income growth compared to the adjusted operating income growth of the peer group over the three year performance period At the end of the performance period the number of PBRSUs is adjusted for performance and then adjusted upward to account for dividends paid during the second and third years of the performance period The resulting PBRSUs are then converted to common shares
For the portion of the PBRSUs based on adjusted operating income performance we calculate the grant date fair value using the closing market price on the underlying stock at the date of grant discounted for dividends that are not paid on the PBRSUs during the first year of the performance period
For the portion of the PBRSUs based on TSR we calculate the grant date fair value using a Monte Carlo simulation model The following table shows the assumptions used in the Monte Carlo simulation model to value the awards granted during each of the last three fiscal years
Beginning in fiscal 2024 we grant time based restricted stock units RSUs to certain non executive employees Each RSU represents the right to receive one share of Class B common stock The RSUs vest in three equal amounts at the end of each of the subsequent three fiscal years Outstanding RSUs are credited with dividend equivalent RSUs when dividends are paid on our common stock The grant date fair value of an RSU is the closing market price of the underlying stock on the grant date The following table presents information about RSUs outstanding as of April 30 2024 and for the year then ended
DSUs are granted to our non employee directors Each DSU represents the right to receive one share of common stock based on the closing price of the shares on the date of grant Outstanding DSUs are credited with dividend equivalent DSUs when dividends are paid on our common stock Each annual grant vests after one year DSUs are paid out in shares after the completion of a director s tenure on the board plus a six month waiting period The director may elect to receive the distribution either in a single lump sum or in ten equal annual installments As of April 30 2024 there were approximately 181 000 outstanding DSUs of which approximately 159 000 were vested
The grant date fair value of a DSU is the closing market price of the underlying stock on the grant date The weighted average grant date fair values for these awards granted during each of the last three years were as follows
As of April 30 2024 there was 14 of total unrecognized compensation cost related to non vested stock based awards That cost is expected to be recognized over a weighted average period of 1 6 years Further information related to our stock based awards for the last three years is as follows
We incur income taxes on the earnings of our U S and foreign operations The following table based on the locations of the taxable entities from which sales were derived rather than the location of customers presents the U S and foreign components of our income before income taxes
The income shown above was determined according to GAAP Because those standards sometimes differ from the tax rules used to calculate taxable income there are differences between a the amount of taxable income and pretax financial income for a year and b the tax bases of assets or liabilities and their amounts as recorded in our financial statements As a result we recognize a current tax liability for the estimated income tax payable on the current tax return deferred tax liabilities tax on income that will be recognized on future tax returns and deferred tax assets tax from deductions that will be recognized on future tax returns for the estimated effects of the differences mentioned above
Total income tax expense for a year includes the tax associated with the current tax return current tax expense and the change in the net deferred tax asset or liability deferred tax expense Our total income tax expense for each of the last three years was as follows
Our consolidated effective tax rate usually differs from current statutory rates due to the recognition of amounts for events or transactions with no tax consequences The following table reconciles our effective tax rate to the federal statutory tax rate in the United States
As of April 30 2024 we had approximately 1 909 of undistributed earnings from our foreign subsidiaries 1 617 at April 30 2023 These earnings have been previously subject to tax primarily as a result of the 2017 Tax Cuts and Jobs Act Historically we have asserted that the undistributed earnings of our foreign subsidiaries are reinvested indefinitely outside the United States We continue to maintain indefinite reinvestment assertions for most undistributed earnings of our foreign subsidiaries and no deferred taxes have been provided on the earnings For undistributed earnings not considered permanently reinvested deferred tax liabilities have been provided for any applicable income taxes and withholding taxes payable in various countries which are not significant We have also asserted that other outside basis differences related to our foreign subsidiaries are reinvested indefinitely and that the determination of any unrecognized deferred tax liabilities is not practicable due to the complexities in the calculations The other outside basis differences relate primarily to differences between U S GAAP and tax basis that arose through purchase accounting These basis differences could reverse through sales of foreign subsidiaries or other transactions none of which are considered probable as of April 30 2024
At April 30 2024 we had 14 of gross unrecognized tax benefits 11 of which would reduce our effective income tax rate if recognized A reconciliation of the beginning and ending unrecognized tax benefits follows
We file federal income tax returns in the United States and also file tax returns in various state local and foreign jurisdictions The major jurisdictions where we are subject to examination by tax authorities include the United States Australia Brazil Germany Korea Mexico Netherlands and the United Kingdom We have tax years open for examination from 2013 and forward Various tax examinations are currently in progress in the United States for both federal and states and in certain foreign jurisdictions In the United States we are participating in the Internal Revenue Service s Compliance Assurance Program for our fiscal 2024 tax year
On November 3 2022 we acquired the Gin Mare and Gin Mare Capri brands through our purchase of 100 of the equity interests of Gin Mare Brand S L U a Spanish company and Mareliquid Vantguard S L U a Spanish company the Gin Mare acquisition The acquisition was accounted for as a business combination The purchase price of the Gin Mare acquisition was 523 which consisted of 468 in cash paid at the acquisition date plus contingent consideration of 55 The purchase price for the Gin Mare acquisition decreased by 1 as a result of certain fair value adjustments to the contingent consideration made during the first half of fiscal 2024 which were primarily a result of changes in the discount rates used to calculate the fair value as of the acquisition date
The adjustments to the prior Gin Mare purchase price allocation reflect revised valuations for the trademarks and brand names which were driven by an increase in the discount rates used to calculate fair values as of the acquisition date partially offset by higher projections of future cash flows The Gin Mare purchase price allocation was finalized during the second quarter of fiscal 2024
The contingent consideration of 55 reflects the estimated fair value at the acquisition date of contingent future cash payments of up to 90 to the sellers under an earn out provision of the acquisition agreement We determined the estimated fair value of the contingent consideration using a Monte Carlo simulation which requires the use of assumptions such as projected future net sales discount rates and volatility rates
Any contingent consideration earned by the sellers will be payable in cash no earlier than July 2024 and no later than July 2027 depending on when the sellers choose to exercise the right to receive the payment The amount payable will depend on the achievement of net sales targets for Gin Mare for the latest fiscal year completed prior to the date of exercise by the sellers The possible payments range from zero to 90 approximately 89 as of the acquisition date
At the acquisition date we also entered into a supply agreement with the sellers for the production and supply of Gin Mare products to us at market terms for an initial period of 10 years subject to subsequent renewal periods
On January 5 2023 we acquired the Diplomático and Botucal rum brands through our purchase of i 100 of the equity interests of a International Rum and Spirits Distributors Unipessoal Lda a Portuguese company b Diplomático Branding Unipessoal Lda a Portuguese company c International Bottling Services S A a Panamanian corporation and d International Rum Spirits Marketing Solutions S L a Spanish company and ii certain assets of Destilerias Unidas Corp the Diplomático acquisition The acquisition was accounted for as a business combination The purchase price of the Diplomático acquisition consisted of cash of 723 net of a post closing working capital adjustment of 4
The adjustments to the prior Diplomático purchase price allocation reflect revised valuations for the trademarks and brand names which were driven by an increase in the discount rates used to calculate fair values as of the acquisition date partially offset by higher projections of future cash flows The adjustments also reflect certain other immaterial net working capital adjustments The Diplomático purchase price allocation was finalized during the third quarter of fiscal 2024
At the acquisition date we also entered into a supply agreement with the sellers for their production and supply of rum to us at market terms for an initial period of 10 years subject to subsequent renewal periods
The amounts allocated to trademarks and brand names for each acquisition were estimated using the relief from royalty method which requires the use of significant assumptions such as net sales discount rates and royalty rates
Goodwill is calculated as the excess of the purchase price over the fair value of the net identifiable assets acquired The goodwill recorded for each acquisition is primarily attributable to the value of leveraging our distribution network and brand building expertise to grow sales of the acquired brands For the Gin Mare acquisition we expect none of the goodwill of 306 to be deductible for tax purposes For the Diplomático acquisition we expect 108 of the goodwill of 386 to be deductible for tax purposes
In connection with the acquisitions we recognized transaction expenses of 55 during fiscal 2023 The following table shows the classification of the transaction expenses in the accompanying consolidated statement of operations
On November 1 2023 we sold the Finlandia vodka business to Coca Cola HBC AG for 196 in cash The net carrying amount of the related business assets and liabilities included in the sale was 100 consisting largely of goodwill and other intangible assets As a result of the sale we recognized a pre tax gain of 92 during fiscal 2024 calculated as follows
On April 30 2024 we sold the Sonoma Cutrer wine business to The Duckhorn Portfolio Inc Duckhorn in exchange for an ownership percentage of 21 4 in Duckhorn and cash of 50 The net carrying amount of the related business assets and liabilities included in the sale was 142 and consisted of the following
We are subject to market risks including the effect of fluctuations in foreign currency exchange rates commodity prices and interest rates We use derivatives to help manage financial exposures that occur in the normal course of business We formally document the purpose of each derivative contract which includes linking the contract to the financial exposure it is designed to mitigate We do not hold or issue derivatives for trading or speculative purposes
We use currency derivative contracts to limit our exposure to the foreign currency exchange risk that we cannot mitigate internally by using netting strategies We designate most of these contracts as cash flow hedges of forecasted transactions expected to occur within three years We record all changes in the fair value of cash flow hedges in accumulated other comprehensive income AOCI until the underlying hedged transaction occurs when we reclassify that amount into earnings
Some of our currency derivatives are not designated as hedges because we use them to partially offset the immediate earnings impact of changes in foreign currency exchange rates on existing assets or liabilities We immediately recognize the change in fair value of these contracts in earnings
We had outstanding currency derivatives related primarily to our euro British pound and Australian dollar exposures with notional amounts for all hedged currencies totaling 747 and 566 at April 30 2023 and 2024 respectively The maximum term of outstanding derivative contracts was 24 months at both April 30 2023 and 2024
We also use foreign currency denominated debt to help manage our foreign currency exchange risk We designate a portion of those debt instruments as net investment hedges which are intended to mitigate foreign currency exposure related to non U S dollar net investments in certain foreign subsidiaries Any change in value of the designated portion of the hedging instruments is recorded in AOCI offsetting the foreign currency translation adjustment of the related net investments that is also recorded in AOCI The amount of foreign currency denominated debt designated as net investment hedges was 495 and 497 as of April 30 2023 and 2024 respectively
At inception we expect each financial instrument designated as a hedge to be highly effective in offsetting the financial exposure it is designed to mitigate and we assess hedge effectiveness continually If we determine that any financial instruments designated as hedges are no longer highly effective we discontinue hedge accounting for those instruments
We use forward purchase contracts with suppliers to protect against corn price volatility We expect to take physical delivery of the corn underlying each contract and use it for production over a reasonable period of time Accordingly we account for these contracts as normal purchases rather than as derivative instruments
The following table presents the pre tax impact that changes in the fair value of our derivative instruments and non derivative hedging instruments had on AOCI and earnings during each of the last three years
We expect to reclassify 7 of deferred net gains on cash flow hedges recorded in AOCI as of April 30 2024 to earnings during fiscal 2025 This reclassification would offset the anticipated earnings impact of the underlying hedged exposures The actual amounts that we ultimately reclassify to earnings will depend on the exchange rates in effect when the underlying hedged transactions occur
The fair values reflected in the above table are presented on a gross basis However as discussed further below the fair values of those instruments subject to net settlement agreements are presented on a net basis in our balance sheets
We are exposed to credit related losses if the counterparties to our derivative contracts default This credit risk is limited to the fair value of the contracts To manage this risk we contract only with major financial institutions that have earned investment grade credit ratings and with whom we have standard International Swaps and Derivatives Association ISDA agreements that allow for net settlement of the derivative contracts Also we have established counterparty credit guidelines that we monitor regularly Based on our most recent assessment we consider our counterparty credit risk to be low
Our derivative instruments require us to maintain a specific level of creditworthiness which we have maintained If our creditworthiness were to fall below that level then the counterparties to our derivative instruments could request immediate payment or collateralization for derivative instruments in net liability positions The aggregate fair value of all derivatives with creditworthiness requirements that were in a net liability position was 1 and 1 at April 30 2023 and 2024 respectively
As noted above our derivative contracts are governed by ISDA agreements that allow for net settlement of derivative contracts with the same counterparty It is our policy to present the fair values of current derivatives that is those with a remaining term of 12 months or less with the same counterparty on a net basis in our balance sheets Similarly we present the fair values of noncurrent derivatives with the same counterparty on a net basis We do not net current derivatives with noncurrent derivatives in our balance sheets
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date We categorize the fair values of assets and liabilities into three levels based on the assumptions inputs used to determine
Observable inputs other than those included in Level 1 such as quoted prices for similar assets and liabilities in active markets quoted prices for identical or similar assets and liabilities in inactive markets or other inputs that are observable or can be derived from or corroborated by observable market data
We determine the fair values of our currency derivatives forward contracts using standard valuation models The significant inputs used in these models which are readily available in public markets or can be derived from observable market transactions include the applicable spot exchange rates forward exchange rates and interest rates These fair value measurements are categorized as Level 2 within the valuation hierarchy
We determine the fair value of long term debt primarily based on the prices at which identical or similar debt has recently traded in the market and also considering the overall market conditions on the date of valuation These fair value measurements are categorized as Level 2 within the valuation hierarchy
We determine the fair value of our contingent consideration liability using a Monte Carlo simulation model which requires the use of Level 3 inputs such as projected future net sales discount rates and volatility rates Changes in any of these Level 3 inputs could result in material changes to the fair value of the contingent consideration and could materially impact the amount of non cash expense or income recorded each reporting period
We measure some assets and liabilities at fair value on a nonrecurring basis That is we do not measure them at fair value on an ongoing basis but we do adjust them to fair value in some circumstances for example when we determine that an asset is impaired We recognized non cash impairment charges of 52 and 96 related to the Finlandia brand name during fiscal 2022 and 2023 respectively The impairment charges were based on the estimated fair value of the brand name which we determined using the relief from royalty method As discussed in Note 13 we also used the relief from royalty method to determine fair values in connection with our accounting for business combinations The fair value measurements determined using this method are categorized as Level 3 within the valuation hierarchy No other material nonrecurring fair value measurements were required during the periods presented in these financial statements
We record lease liabilities and right of use ROU assets on our balance sheet for leases with terms exceeding 12 months We do not record lease liabilities or ROU assets for short term leases The amounts recorded for lease liabilities and ROU assets are based on the estimated present value as of the lease commencement date of the future payments to be made over the lease term We calculate the present value using our incremental borrowing rate that corresponds to the term of the lease We include the effect of an option to renew or terminate a lease in the lease term when it is reasonably certain that we will exercise the option
Some of our leases contain non lease components e g maintenance or other services in addition to lease components We have elected the practical expedient not to separate the non lease components from the lease components
The net book value of property plant and equipment located outside the United States was 204 and 255 as of April 30 2023 and 2024 respectively Other long lived assets located outside the United States are not significant
Our management with the participation of our Chief Executive Officer CEO and Chief Financial Officer CFO our principal executive and principal financial officers has evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a 15 e under the Securities Exchange Act of 1934 as amended the Exchange Act as of the end of fiscal 2023 Based on that evaluation our CEO and CFO concluded that our disclosure controls and procedures a are effective to ensure that information required to be disclosed by the Company in our reports filed or submitted under the Exchange Act is recorded processed summarized and reported within the time periods specified in the SEC s rules and forms and b include controls and procedures designed to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company s management including the CEO and the CFO as appropriate to allow timely decisions regarding required disclosure
Except as described below there has been no change in our internal control over financial reporting during the quarter ended April 30 2024 that has materially affected or is reasonably likely to materially affect our internal control over financial reporting
Management s report on our internal control over financial reporting as of April 30 2024 and our independent registered public accounting firm s report on our internal control over financial reporting are set forth in Item 8 Financial Statements and Supplementary Data
During the three months ended April 30 2024 no director or officer of the Company adopted or terminated a Rule 10b5 1 trading arrangement or non Rule 10b5 1 trading arrangement as each term is defined in Item 408 a of Regulation S K
Information on our Executive Officers is included under the caption Information about Our Executive Officers in Part I of this report For the other information required by this item see the following sections of our definitive proxy statement for the Annual Meeting of Stockholders to be held July 25 2024 2024 Proxy Statement which information is incorporated into this report by reference a Proposal 1 Election of Directors for biographical information on directors and family relationships b Code of Conduct and Code of Ethics for Senior Financial Officers for information on our code of ethics c Selection of Directors for information on the procedures by which security holders may recommend nominees to the Company s Board of Directors d Board Committees for information on our Audit Committee and e Hedging Derivatives and Short Sale Transactions Prohibited for information on our Insider Trading Policy
For the information required by this item refer to the following sections of our 2024 Proxy Statement which information is incorporated into this report by reference a Compensation Discussion and Analysis b Compensation Tables c Director Compensation d Compensation Committee Interlocks and Insider Participation e Compensation Committee Report and f Pay Ratio Disclosure
The following table summarizes information as of April 30 2024 about our equity compensation plans under which we have made grants of stock options stock appreciation rights restricted stock market value units performance units or other equity awards
Includes 249 260 Class B common shares to be issued upon exercise of stock settled stock appreciation rights SSARs 83 836 Class B restricted stock units RSUs 192 999 Class B performance based restricted stock units PBRSUs 217 867 Class A PBRSUs 150 658 Class A common deferred stock units DSUs and 30 341 Class B common DSUs issued under the Brown Forman 2004 2013 Omnibus and 2022 Omnibus Compensation Plans SSARs are exercisable for an amount of our common stock with a value equal to the increase in the fair market value of the common stock from the date the SSARs were granted The fair market value of our common stock at fiscal year end has been used for the purposes of reporting the number of shares to be issued upon exercise of the 3 753 996 SSARs outstanding at fiscal year end
RSUs PBRSUs and DSUs have no exercise price because their value depends on continued employment or service over time and are to be settled for shares of Class B common stock Accordingly these have been disregarded for purposes of computing the weighted average exercise price
For the information required by this item refer to the following sections of our 2024 Proxy Statement which information is incorporated into this report by reference a Certain Relationships and Related Transactions and b Our Independent Directors
For the information required by this item refer to the following sections of our 2024 Proxy Statement which information is incorporated into this report by reference a Fees Paid to Independent Registered Public Accounting Firm and b Audit Committee Pre Approval Policies and Procedures
We have omitted all other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission either because they are not required under the related instructions because the information required is included in the consolidated financial statements and notes thereto or because they do not apply
The following materials from Brown Forman Corporation s Annual Report on Form 10 K for the fiscal year ended April 30 2024 in Inline XBRL eXtensible Business Reporting Language format a Consolidated Statements of Operations b Consolidated Statements of Comprehensive Income c Consolidated Balance Sheets d Consolidated Statements of Cash Flows e Consolidated Statements of Stockholders Equity and f Notes to Consolidated Financial Statements
Restated Certificate of Incorporation of registrant incorporated into this report by reference to Exhibit 3 i of Brown Forman Corporation s Form 10 Q for the quarter ended July 31 2012 filed on September 5 2012 File No 002 26821
Certificate of Amendment of Restated Certificate of Incorporation of registrant incorporated into this report by reference to Exhibit 3 1 of Brown Forman Corporation s Form 8 K filed on August 9 2016 File No 001 00123
By laws of registrant as amended and restated effective January 23 2024 incorporated into this report by reference to Exhibit 3 1 of Brown Forman Corporation s Form 8 K filed on January 26 2024 File No 001 00123
Description of Brown Forman Corporation s Class A Common Stock par value 0 15 per share and Class B Common Stock par value 0 15 per share incorporated into this report by reference to Exhibit 4 1 of Brown Forman Corporation s Form 10 K for the fiscal year ended April 30 2020 filed on June 19 2020 File No 001 00123
Description of Brown Forman Corporation s 2 600 Notes due 2028 incorporated into this report by reference to Exhibit 4 3 of Brown Forman Corporation s Form 10 K for the fiscal year ended April 30 2020 filed on June 19 2020 File No 001 00123
Indenture dated as of April 2 2007 between Brown Forman Corporation and U S Bank National Association as Trustee incorporated into this report by reference to Exhibit 4 1 of Brown Forman Corporation s Form 8 K filed on April 3 2007 File No 002 26821
First Supplemental Indenture dated as of December 13 2010 between Brown Forman Corporation and U S Bank National Association as Trustee incorporated into this report by reference to Exhibit 4 2 of Brown Forman Corporation s Form S 3ASR Registration Statement filed on December 13 2010 File No 333 171126
Second Supplemental Indenture dated as of June 24 2015 between Brown Forman Corporation and U S Bank National Association as Trustee incorporated into this report by reference to Exhibit 4 3 of Brown Forman Corporation s Form S 3ASR Registration Statement filed on June 24 2015 File No 333 205183
Officer s Certificate dated December 12 2012 pursuant to Sections 1 01 2 02 3 01 and 3 03 of the Indenture dated as of April 2 2007 as supplemented by the First Supplemental Indenture dated as of December 13 2010 between Brown Forman Corporation and U S Bank National Association as Trustee setting forth the terms of the 3 75 Notes due 2043 incorporated into this report by reference to Exhibit 4 3 of Brown Forman Corporation s Form 8 K filed on December 12 2012 File No 002 26821
Officer s Certificate dated June 29 2015 pursuant to Sections 1 02 2 02 3 01 and 3 03 of the Indenture dated as of April 2 2007 as supplemented by the First Supplemental Indenture dated as of December 13 2010 and the Second Supplemental Indenture dated as of June 24 2015 between Brown Forman Corporation and U S Bank National Association as Trustee setting forth the terms of the 4 500 Notes due 2045 incorporated into this report by reference to Exhibit 4 4 of Brown Forman Corporation s Form 8 K filed on June 29 2015 File No 002 26821
Officers Certificate dated July 7 2016 pursuant to Sections 1 01 2 02 3 01 and 3 03 of the Indenture dated as of April 2 2007 as supplemented by the First Supplemental Indenture dated as of December 13 2010 and the Second Supplemental Indenture dated as of June 24 2015 between Brown Forman Corporation and U S Bank National Association as Trustee setting forth the terms of the 1 200 Notes due 2026 and the 2 600 Notes due 2028 incorporated into this report by reference to Exhibit 4 4 of Brown Forman Corporation s Form 8 K filed on July 8 2016 File No 002 26821
Officers Certificate dated March 26 2018 pursuant to Sections 1 02 2 02 3 01 and 3 03 of the Indenture dated April 2 2007 as supplemented by the First Supplemental Indenture dated as of December 13 2010 and the Second Supplemental Indenture dated as of June 24 2015 between Brown Forman Corporation and U S Bank National Association as Trustee setting forth the terms of the 3 500 Note due 2025 and the 4 000 Note due 2038 incorporated into this report by reference to Exhibit 4 4 of Brown Forman Corporation s Form 8 K filed on March 26 2018 File No 001 00123
Officers Certificate dated March 23 2023 pursuant to Sections 1 01 2 02 3 01 and 3 03 of the Indenture dated April 2 2007 as supplemented by the First Supplemental Indenture dated as of December 13 2010 and the Second Supplemental Indenture dated as of June 24 2015 between Brown Forman Corporation and U S Bank Trust Company National Association as successor in interest to U S Bank National Association as Trustee setting forth the terms of the 4 750 Notes due 2033 incorporated into this report by reference to Exhibit 4 4 of Brown Forman Corporation s Form 8 K filed on March 23 2023 File No 001 00123
A description of the Brown Forman Savings Plan incorporated into this report by reference to page 10 of Brown Forman Corporation s definitive proxy statement filed on June 27 1996 in connection with its 1996 Annual Meeting of Stockholders File No 001 00123
Brown Forman Corporation Nonqualified Savings Plan incorporated into this report by reference to Exhibit 4 1 of Brown Forman Corporation s Form S 8 Registration Statement filed on September 24 2010 File No 333 169564
Brown Forman Corporation 2004 Omnibus Compensation Plan as amended incorporated into this report by reference to Exhibit A of Brown Forman Corporation s definitive proxy statement filed on June 26 2009 in connection with its 2009 Annual Meeting of Stockholders File No 002 26821
2010 Form of Non Employee Director Stock Settled Stock Appreciation Right Award Agreement incorporated into this report by reference to Exhibit 10 2 of Brown Forman Corporation s Form 8 K filed on July 23 2010 File No 002 26821
Brown Forman Corporation Amended and Restated Supplemental Executive Retirement Plan and First Amendment thereto incorporated into this report by reference to Exhibit 10 a of Brown Forman Corporation s Form 10 K for the year ended April 30 2010 filed on June 25 2010 File No 002 26821
Second Amendment to the Brown Forman Corporation Amended and Restated Supplemental Executive Retirement Plan incorporated into this report by reference to Exhibit 10 a of Brown Forman Corporation s Form 10 Q for the quarter ended January 31 2011 filed on March 9 2011 File No 002 26821
Brown Forman Corporation Amended and Restated Non Employee Director Deferred Stock Unit Program incorporated into this report by reference to Exhibit 10 2 of Brown Forman Corporation s Form 8 K filed on July 26 2013 File No 002 26821
Form of Employee Stock Settled Stock Appreciation Right Award Agreement incorporated into this report by reference to Exhibit 10 3 of Brown Forman Corporation s Form 8 K filed on July 26 2013 File No 002 26821
Form of Employee Stock Settled Stock Appreciation Right Award Agreement incorporated into this report by reference to Exhibit 10 1 of Brown Forman Corporation s Form 8 K filed on August 1 2016 File No 001 00123
Fiscal 2021 Form of Performance Based Restricted Stock Unit Award Agreement Class A incorporated into this report by reference to Exhibit 10 1 of Brown Forman Corporation s Form 10 Q for the quarter ended July 31 2020 filed on September 2 2020 File No 001 00123
Fiscal 2021 Form of Performance Based Restricted Stock Unit Award Agreement Class B incorporated into this report by reference to Exhibit 10 2 of Brown Forman Corporation s Form 10 Q for the quarter ended July 31 2020 filed on September 2 2020 File No 001 00123
First Amendment to Brown Forman Corporation Amended and Restated Non Employee Director Deferred Stock Unit Program incorporated into this report by reference to Exhibit 10 23 of Brown Forman Corporation s Form 10 K for the fiscal year ended April 30 2022 filed on June 17 2022 File No 001 00123
Brown Forman 2022 Omnibus Compensation Plan incorporated into this report by reference to Appendix B of Brown Forman Corporation s definitive proxy statement filed on June 24 2022 in connection with its 2022 Annual Meeting of Stockholders File No 001 00123
Fiscal 2024 Form of Performance Based Restricted Stock Unit Award Agreement Class A incorporated into this report by reference to Exhibit 10 1 of Brown Forman Corporation s Form 10 Q for the quarter ended July 31 2023 filed on August 30 2023
Fiscal 2024 Form of Performance Based Restricted Stock Unit Award Agreement Class B incorporated into this report by reference to Exhibit 10 2 of Brown Forman Corporation s Form 10 Q for the quarter ended July 31 2023 filed on August 30 2023
Fiscal 2024 Form of Employee Stock Settled Stock Appreciation Right Award Agreement incorporated into this report by reference to Exhibit 10 3 of Brown Forman Corporation s Form 10 Q for the quarter ended July 31 2023 filed on August 30 2023
Securities and Asset Purchase Agreement among Brown Forman Corporation and Destillers United Group S L and Destilerias Unidas Corp dated as of October 6 2022 incorporated into this report by reference to Exhibit 10 1 of Brown Forman Corporation s Form 10 Q for the quarter ended October 31 2022 filed on December 7 2022 File No 001 00123
Amendment No 1 to Securities and Asset Purchase Agreement dated as of January 4 2023 by and among Brown Forman Corporation Destillers United Group S L and Destilerias Unidas Corp incorporated into this report by reference to Exhibit 10 3 of Brown Forman Corporation s Form 8 K filed on January 5 2023 File No 001 00123
Second Amended and Restated Five Year Credit Agreement dated as of May 26 2023 among Brown Forman Corporation any borrowing subsidiaries as may become a party thereto certain lenders party thereto and U S Bank National Association as Administrative Agent incorporated into this report by reference to Exhibit 10 1 of Brown Forman Corporation s Form 8 K filed on May 30 2023 File No 001 00123
Pursuant to the requirements of Section 13 or 15 d of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized
Pursuant to the requirements of the Securities Exchange Act of 1934 this report has been signed below by the following persons on behalf of the registrant and in the capacities on June 14 2024 as indicated

Company Name	BROWN FORMAN CORP Vist SEC web-site
Category	BEVERAGES
Trading Symbol	BFA