Brown-Forman Delivers Strong Fiscal 2021 Results

LOUISVILLE, Ky.–(BUSINESS WIRE)–Brown-Forman Corporation (NYSE: BFA, BFB) reported financial results for its fourth quarter and fiscal year ended April 30, 2021. For the fourth quarter, the company’s reported net sales of $812 million increased 14%¹ (+19% on an underlying basis²) compared to the same prior-year period. In the quarter, reported operating income decreased 10% to $168 million (+7% on an underlying basis) and diluted earnings per share declined 6% to $0.25.

For fiscal year 2021, the company’s reported net sales of $3.5 billion grew 3% (+6% on an underlying basis) compared to the same prior-year period. Reported operating income increased 7% to $1.2 billion (+4% on an underlying basis) and diluted earnings per share grew 9% to $1.88.

Brown-Forman’s President and Chief Executive Officer Lawson Whiting stated, “Brown-Forman’s performance in fiscal 2021 demonstrates the resilience of our strategy and our people, and the strength of our portfolio and our brands. In an unprecedented and complex environment, we delivered underlying net sales growth consistent with our long-term expectations. I am proud of this performance, and the work we did throughout the year to advance our commitments to environmental sustainability, diversity and inclusion, and community outreach. We place great care and focus on being strong stewards of our culture, our brands, and our communities, and it is evident in this fiscal year’s results.”

Fiscal 2021 Highlights

Underlying net sales grew 6% (+3% reported)
- Growth across each of the three major International Monetary Fund (IMF) geographic clusters
- Jack Daniel’s family of brands underlying net sales grew 4% (+1% reported)
- Premium bourbons maintained double-digit underlying net sales growth
- The tequila portfolio grew underlying net sales 14% (+9% reported)
Sustained investment behind the brand portfolio with underlying advertising increasing 2% (+4% reported)
Continued to reshape the portfolio through the sale of Early Times, Canadian Mist, and Collingwood brands and the acquisition of Part Time Rangers ready-to-drinks
Strong free cash flow²generation of $755 million
Industry-leading return on invested capital² of nearly 20%

Fiscal 2021 Brand Results

Jack Daniel’s family of brands underlying net sales growth was driven primarily by Jack Daniel’s RTDs³, the international launch of Jack Daniel’s Tennessee Apple, and volume-driven growth from Jack Daniel’s Tennessee Honey and Gentleman Jack. These gains were partially offset by a reduction in Jack Daniel’s Tennessee Whiskey’s underlying net sales.

Fiscal 2021 Milestones:
- Jack Daniel’s RTDs depleted over 12 million 9L cases³
- Jack Daniel’s flavors depleted over 3 million 9L cases
- Gentleman Jack depleted over 800 thousand 9L cases

Premium bourbons grew underlying net sales with both Woodford Reserve and Old Forester maintaining strong double-digit growth. Once again Woodford Reserve was named a “Hot Brand³” by Impact Magazine.

The tequila portfolio’s underlying net sales growth was led by double-digit underlying net sales growth for el Jimador and Herradura in the United States coupled with strong volume-driven increases from New Mix in Mexico. These gains were partially offset by declines for Herradura and el Jimador in Mexico.

Fiscal 2021 Market Results

Strong underlying net sales growth from our largest market, the United States³, was driven primarily by our premium bourbons, Jack Daniel’s RTDs, and higher volumes and prices for our tequilas, Herradura and el Jimador.

Developed international³markets delivered double-digit underlying net sales growth driven by strong growth in Australia, Germany, France, and the United Kingdom, partially offset by declines in the on-premise focused markets and markets reliant on tourism, such as Spain and Czechia.

Emerging markets³grew underlying net sales in the mid-single digits propelled by volume gains in Brazil, Mexico, China, and Poland. These gains were partially offset by declines in tourism and trading down to lower-priced brands in some markets.

Underlying net sales in Travel Retail³ were down reflecting the significant impact COVID-19 travel bans and restrictions had on the channel.

Fiscal 2021 Other P&L Items

Volumes grew 12% fueled by RTDs and Jack Daniel’s flavors, while company-wide price/mix had a 6% unfavorable impact reflecting the portfolio mix shift toward lower-priced brands (Jack Daniel’s RTDs and New Mix) and the unfavorable channel mix shift (primarily for Jack Daniel’s Tennessee Whiskey) from the on-premise channel related to COVID-19 restrictions.

Underlying gross profit increased 3% (-2% reported), while reported gross margin contracted 270 basis points to 60.5% driven by higher input costs, lower fixed cost absorption, and the shift to lower-priced brands noted above.

The company’s sustained investment in underlying advertising increased 2% (+4% reported) with a significant acceleration in the second half of the fiscal year behind Jack Daniel’s “Make It Count” campaign. Underlying selling, general and administrative expenses were flat (+4% reported) as the company maintained tight management of discretionary spend.

Underlying operating income increased 4% (+7% reported), while diluted earnings per share increased 9% to $1.88, including an estimated $0.20 per share benefit from the gain on the sale of Early Times, Canadian Mist, and Collingwood brands.

Financial Stewardship

On May 27, 2021, Brown-Forman declared a regular quarterly cash dividend of $0.1795 per share on the Class A and Class B common stock. The quarterly cash dividend is payable on July 1, 2021 to stockholders of record on June 8, 2021. Brown-Forman has paid regular quarterly cash dividends for 77 consecutive years and has increased the regular dividend for 37 consecutive years.

In addition, the company grew free cash flow by $144 million to $755 million for the fiscal year and announced a $20 million contribution to the Brown-Forman Foundation.

Fiscal 2022 Outlook

“We are optimistic as we look ahead, as we expect the operating environment to continue to improve” noted Jane Morreau, Executive Vice President and Chief Financial Officer. Morreau added, “We remain confident in the collective strength of our markets and should benefit from the re-opening of the on-premise channel and increase in tourism. Additionally, our portfolio remains well positioned to capitalize on the continuing spirits premiumization trend. For fiscal 2022, we anticipate mid-single digit growth in underlying net sales and operating income.”

Conference Call Details

Brown-Forman will host a conference call to discuss these results at 10:00 a.m. (EDT) today. All interested parties in the United States are invited to join the conference call by dialing 833-962-1472 and asking for the Brown-Forman call. International callers should dial +1-442-268-1255. The company suggests that participants dial in ten minutes in advance of the 10:00 a.m. (EST) start of the conference call. A live audio broadcast of the conference call, and the accompanying presentation slides, will also be available via Brown-Forman’s Internet website, http://www.brown-forman.com/, through a link to “Investors/Events & Presentations.” A digital audio recording of the conference call and the presentation slides will also be posted on the website and will be available for at least 30 days following the conference call.

For over 150 years, Brown-Forman Corporation has enriched the experience of life by responsibly building fine quality beverage alcohol brands, including Jack Daniel’s Tennessee Whiskey, Jack Daniel’s Tennessee RTDs, Jack Daniel’s Tennessee Honey, Gentleman Jack, Jack Daniel’s Tennessee Fire, Jack Daniel’s Tennessee Apple, Jack Daniel’s Single Barrel, Finlandia, Korbel, el Jimador, Woodford Reserve, Old Forester, Coopers’ Craft, Herradura, New Mix, Sonoma-Cutrer, Chambord, Benriach, GlenDronach, Glenglassaugh, Slane, and Fords Gin. Brown-Forman’s brands are supported by approximately 4,700 employees and sold in more than 170 countries worldwide. For more information about the company, please visit http://www.brown-forman.com/.

Important Information on Forward-Looking Statements:

This press release contains statements, estimates, and projections that are “forward-looking statements” as defined under U.S. federal securities laws. Words such as “aim,” “anticipate,” “aspire,” “believe,” “can,” “continue,” “could,” “envision,” “estimate,” “expect,” “expectation,” “intend,” “may,” “might,” “plan,” “potential,” “project,” “pursue,” “see,” “seek,” “should,” “will,” “would,” and similar words indicate forward-looking statements, which speak only as of the date we make them. Except as required by law, we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. By their nature, forward-looking statements involve risks, uncertainties, and other factors (many beyond our control) that could cause our actual results to differ materially from our historical experience or from our current expectations or projections. These risks and uncertainties include, but are not limited to:

Impact of health epidemics and pandemics, including the COVID-19 pandemic, and the resulting negative economic impact and related governmental actions
Risks associated with being a U.S.-based company with global operations, including commercial, political, and financial risks; local labor policies and conditions; protectionist trade policies, or economic or trade sanctions, including additional retaliatory tariffs on American spirits and the effectiveness of our actions to mitigate the negative impact on our margins, sales, and distributors; compliance with local trade practices and other regulations; terrorism; and health pandemics
Failure to comply with anti-corruption laws, trade sanctions and restrictions, or similar laws or regulations
Fluctuations in foreign currency exchange rates, particularly a stronger U.S. dollar
Changes in laws, regulatory measures, or governmental policies – especially those that affect the production, importation, marketing, labeling, pricing, distribution, sale, or consumption of our beverage alcohol products
Tax rate changes (including excise, sales, VAT, tariffs, duties, corporate, individual income, dividends, or capital gains) or changes in related reserves, changes in tax rules or accounting standards, and the unpredictability and suddenness with which they can occur
Unfavorable global or regional economic conditions, particularly related to the COVID-19 pandemic, and related economic slowdowns or recessions, low consumer confidence, high unemployment, weak credit or capital markets, budget deficits, burdensome government debt, austerity measures, higher interest rates, higher taxes, political instability, higher inflation, deflation, lower returns on pension assets, or lower discount rates for pension obligations
Dependence upon the continued growth of the Jack Daniel’s family of brands
Changes in consumer preferences, consumption, or purchase patterns – particularly away from larger producers in favor of small distilleries or local producers, or away from brown spirits, our premium products, or spirits generally, and our ability to anticipate or react to them; legalization of marijuana use on a more widespread basis; shifts in consumer purchase practices from traditional to e-commerce retailers; bar, restaurant, travel, or other on-premise declines; shifts in demographic or health and wellness trends; or unfavorable consumer reaction to new products, line extensions, package changes, product reformulations, or other product innovation
Decline in the social acceptability of beverage alcohol in significant markets
Production facility, aging warehouse, or supply chain disruption
Imprecision in supply/demand forecasting
Higher costs, lower quality, or unavailability of energy, water, raw materials, product ingredients, labor, or finished goods
Significant additional labeling or warning requirements or limitations on availability of our beverage alcohol products
Competitors’ and retailers’ consolidation or other competitive activities, such as pricing actions (including price reductions, promotions, discounting, couponing, or free goods), marketing, category expansion, product introductions, or entry or expansion in our geographic markets or distribution networks
Route-to-consumer changes that affect the timing of our sales, temporarily disrupt the marketing or sale of our products, or result in higher fixed costs
Inventory fluctuations in our products by distributors, wholesalers, or retailers
Risks associated with acquisitions, dispositions, business partnerships, or investments – such as acquisition integration, termination difficulties or costs, or impairment in recorded value
Counterfeiting and inadequate protection of our intellectual property rights
Product recalls or other product liability claims, product tampering, contamination, or quality issues
Significant legal disputes and proceedings, or government investigations
Cyber breach or failure or corruption of key information technology systems, or failure to comply with personal data protection laws
Negative publicity related to our company, products, brands, marketing, executive leadership, employees, board of directors, family stockholders, operations, business performance, or prospects
Failure to attract or retain key executive or employee talent
Our status as a family “controlled company” under New York Stock Exchange rules, and our dual-class share structure

For further information on these and other risks, please refer to our public filings, including the “Risk Factors” section of our annual report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission.

Brown-Forman Corporation
Unaudited Consolidated Statements of Operations
For the Three Months Ended April 30, 2020 and 2021
(Dollars in millions, except per share amounts)

	2020			2021				Change

Net sales	$	709		$	812			14%
Cost of sales	256			314				22%
Gross profit	453			498				10%
Advertising expenses	75			121				59%
Selling, general, and administrative expenses	167			211				26%
Other expense (income), net	24			(2		)
Operating income	187			168				(10%)
Non-operating postretirement expense	2			2
Interest expense, net	19			19
Income before income taxes	166			147				(11%)
Income taxes	38			27
Net income	$	128		$	120			(6%)

Earnings per share:
Basic	$	0.27		$	0.25			(6%)
Diluted	$	0.27		$	0.25			(6%)

Gross margin	63.9		%	61.4			%
Operating margin	26.4		%	20.7			%

Effective tax rate	22.9		%	18.4			%

Cash dividends paid per common share	$	0.1743		$	0.1795

Shares (in thousands) used in the calculation of earnings per share
Basic	478,148			478,696
Diluted	480,342			480,713

Brown-Forman Corporation
Unaudited Consolidated Statements of Operations
For the Twelve Months Ended April 30, 2020 and 2021
(Dollars in millions, except per share amounts)

	2020			2021				Change

Net sales	$	3,363		$	3,461			3%
Cost of sales	1,236			1,367				11%
Gross profit	2,127			2,094				(2%)
Advertising expenses	383			399				4%
Selling, general, and administrative expenses	642			671				4%
Gain on sale of business	—			(127		)
Other expense (income), net	11			(15		)
Operating income	1,091			1,166				7%
Non-operating postretirement expense	5			6
Interest expense, net	77			79
Income before income taxes	1,009			1,081				7%
Income taxes	182			178
Net income	$	827		$	903			9%

Earnings per share:
Basic	$	1.73		$	1.89			9%
Diluted	$	1.72		$	1.88			9%

Gross margin	63.2		%	60.5			%
Operating margin	32.4		%	33.7			%

Effective tax rate	18.0		%	16.5			%

Cash dividends paid per common share	$	0.6806		$	0.7076

Shares (in thousands) used in the calculation of earnings per share
Basic	477,765			478,527
Diluted	480,409			480,677

Brown-Forman Corporation
Unaudited Condensed Consolidated Balance Sheets
(Dollars in millions)

	April 30, 2020		April 30, 2021
Assets:
Cash and cash equivalents	$	675	$	1,150
Accounts receivable, net	570		753
Inventories	1,685		1,751
Other current assets	335		263
Total current assets	3,265		3,917

Property, plant, and equipment, net	848		832
Goodwill	756		779
Other intangible assets	635		676
Other assets	262		318
Total assets	$	5,766	$	6,522

Liabilities:
Accounts payable and accrued expenses	$	517	$	679
Accrued income taxes	30		34
Short-term borrowings	333		205
Total current liabilities	880		918

Long-term debt	2,269		2,354
Deferred income taxes	177		169
Accrued postretirement benefits	297		219
Other liabilities	168		206
Total liabilities	3,791		3,866

Stockholders’ equity	1,975		2,656

Total liabilities and stockholders’ equity	$	5,766	$	6,522

Brown-Forman Corporation
Unaudited Condensed Consolidated Statements of Cash Flows
For the Twelve Months Ended April 30, 2020 and 2021
(Dollars in millions)

	2020			2021

Cash provided by operating activities	$	724		$	817

Cash flows from investing activities:
Proceeds from sale of business	—			177
Acquisition of business, net of cash acquired	(22		)	(14		)
Additions to property, plant, and equipment	(113		)	(62		)
Other	(6		)	(3		)
Cash provided by (used for) investing activities	(141		)	98

Cash flows from financing activities:
Net change in short-term borrowings	178			(126		)
Acquisition of treasury stock	(1		)	—
Dividends paid	(325		)	(338		)
Other	(43		)	(21		)
Cash used for financing activities	(191		)	(485		)

Effect of exchange rate changes on cash and cash equivalents	(24		)	45

Net increase (decrease) in cash and cash equivalents	368			475

Cash and cash equivalents, beginning of period	307			675

Cash and cash equivalents, end of period	$	675		$	1,150

Schedule A
Brown-Forman Corporation
Supplemental Statement of Operations Information (Unaudited)

	Three Months Ended	Twelve Months Ended	Fiscal Year Ended
	April 30, 2021	April 30, 2021	April 30, 2020



Reported change in net sales	*14%*	3%	1%
Acquisitions and divestitures	2%	—%	—%
Foreign exchange	(3)%	(1)%	1%
Estimated net change in distributor inventories	6%	4%	(2)%

Underlying change in net sales²	*19%*	6%	—%


Reported change in gross profit	*10%*	*(2)%*	*(2)%*
Acquisitions and divestitures	2%	1%	—%
Foreign exchange	(3)%	(1)%	—%
Estimated net change in distributor inventories	8%	4%	(2)%

Underlying change in gross profit²	*17%*	3%	*(3)%*

Reported change in advertising expenses	*59%*	4%	*(3)%*
Foreign exchange	(6)%	(2)%	1%

Underlying change in advertising expenses²	*53%*	2%	*(2)%*

Reported change in SG&A	*26%*	4%	—%
Acquisitions and divestitures	(1)%	—%	(1)%
Foundation	(12)%	(3)%	—%
Foreign exchange	(3)%	(1)%	2%

Underlying change in SG&A²	*11%*	—%	1%

Reported change in operating income	*(10)%*	7%	*(5)%*
Acquisitions and divestitures	4%	(10)%	—%
Foundation	10%	2%	—%
Chambord Impairment	(6)%	(1)%	1%
Foreign exchange	(8)%	(2)%	—%
Estimated net change in distributor inventories	16%	9%	(3)%

Underlying change in operating income²	7%	4%	*(6)%*

Note: Totals may differ due to rounding

See “Note 2 – Non-GAAP Financial Measures” for details on our use of Non-GAAP financial measures, how these measures are calculated and the reasons why we believe this information is useful to readers.

Schedule B
Brown-Forman Corporation
Supplemental Brand Information (Unaudited)
Twelve Months Ended April 30, 2021

			% Change vs. Prior Year Period
Brand³	Depletions (Millions)		Depletions³		Net Sales
Brand³	9-Liter	Drinks Equivalent³	9-Liter	Drinks Equivalent³	Reported	Acquisitions and Divestitures	Foreign Exchange	Estimated Net Change in Distributor Inventories	Underlying²
Whiskey	31.6	20.4	12%	4%	3%	1%	(1)%	4%	7%
Jack Daniel’s family of brands	29.4	18.2	12%	2%	1%	—%	(1)%	4%	4%
Jack Daniel’s Tennessee Whiskey	12.5	12.5	(4)%	(4)%	(8)%	—%	(1)%	4%	(4)%
Jack Daniel’s RTD and RTP	12.5	1.2	32%	32%	39%	—%	(2)%	(3)%	34%
Jack Daniel’s Tennessee Honey	2.1	2.1	10%	10%	14%	—%	(1)%	(2)%	11%
Gentleman Jack	0.8	0.8	15%	15%	11%	—%	(1)%	2%	13%
Jack Daniel’s Tennessee Fire	0.6	0.6	4%	4%	(3)%	—%	—%	7%	3%
Jack Daniel’s Tennessee Apple	0.6	0.6	120%	120%	24%	—%	(2)%	76%	98%
Other Jack Daniel’s Whiskey Brands	0.3	0.3	0%	0%	1%	—%	(2)%	6%	6%
Woodford Reserve	1.3	1.3	18%	18%	16%	—%	—%	5%	20%
Rest of Whiskey	0.9	0.9	13%	13%	8%	18%	(1)%	6%	30%
Tequila	10.3	2.9	20%	1%	9%	—%	4%	1%	14%
el Jimador	1.3	1.3	(5)%	(5)%	2%	—%	1%	4%	7%
Herradura	0.6	0.6	(2)%	(2)%	15%	—%	2%	(1)%	15%
Rest of Tequila	8.5	1.1	27%	11%	11%	—%	9%	1%	21%
Wine	2.1	2.1	10%	10%	10%	—%	—%	3%	14%
Vodka	2.4	2.4	(14)%	(14)%	(18)%	—%	—%	2%	(16)%
Rest of Portfolio	0.5	0.5	1%	1%	37%	(4)%	(26)%	(1)%	6%
Non-Branded and Bulk	NM	NM	NM	NM	(23)%	(6)%	(1)%	—%	(31)%
Total Portfolio	46.9	28.3	12%	2%	3%	—%	(1)%	4%	6%
Other Brand Aggregations
American whiskey	31.2	20.0	12%	4%	3%	—%	(1)%	4%	6%
Premium bourbons	1.7	1.7	19%	19%	19%	—%	—%	5%	23%

Note: Totals may differ due to rounding

Schedule C
Brown-Forman Corporation
Supplemental Geographic Information (Unaudited)
Twelve Months Ended April 30, 2021


Geographic Area³	Net Sales
Geographic Area³	Reported	Acquisitions and Divestitures	Foreign Exchange	Estimated Net Change in Distributor Inventories	Underlying²
United States	3%	1%	—%	6%	10%
Developed International	13%	—%	(6)%	3%	10%
Australia	35%	—%	(8)%	—%	27%
Germany	21%	—%	(4)%	—%	17%
United Kingdom	14%	—%	(10)%	2%	6%
France	17%	—%	(5)%	—%	12%
Canada	2%	1%	2%	3%	8%
Rest of Developed International	(10)%	—%	(4)%	8%	(6)%
Emerging	1%	—%	4%	1%	6%
Mexico	(4)%	—%	9%	—%	5%
Poland	9%	—%	(1)%	—%	7%
Brazil	37%	—%	28%	(1)%	64%
Russia	(11)%	1%	2%	8%	—%
Rest of Emerging	(2)%	—%	1%	(1)%	(2)%
Travel Retail	(50)%	—%	—%	1%	(48)%
Non-Branded and Bulk	(23)%	(6)%	(1)%	—%	(31)%
Total	3%	—%	(1)%	4%	6%

Note: Totals may differ due to rounding

Schedule D
Brown-Forman Corporation
Supplemental Free Cash Flow Information (Unaudited)
(Dollars in millions)

	Twelve Months Ended
	April 30, 2020			April 30, 2021

Cash provided by operating activities	$	724		$	817
Additions to property, plant, and equipment	(113		)	(62		)
Free Cash Flow²	$	611		$	755

Note 1 – Percentage growth rates are compared to the same prior-year periods, unless otherwise noted.

Note 2 – Non-GAAP Financial Measures

Use of Non-GAAP Financial Information. We use certain financial measures in this press release that are not measures of financial performance under U.S. generally accepted accounting principles (GAAP). These non-GAAP measures, defined below, should be viewed as supplements to (not substitutes for) our results of operations and other measures reported under GAAP.

Contacts

Rob Frederick

Vice President

Brown-Forman Brand & Communications

502-774-7707

Sue Perram

Director

Investor Relations

502-774-6862

Read full story here