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LOUISVILLE, Ky.–(BUSINESS WIRE)–Brown-Forman Corporation (NYSE: BFA, BFB) reported financial results for its fourth quarter and fiscal year ended April 30, 2020. For the fourth quarter, the company’s reported net sales1 declined 5% to $709 million (-10% on an underlying basis2) compared to the same prior-year period. Reported operating income decreased 18% to $187 million (-27% on an underlying basis) and diluted earnings per share declined 20% to $0.27.
For the full year, the company’s reported net sales increased 1% to $3.4 billion (flat on an underlying basis). Reported operating income decreased 5% to $1.1 billion (-6% on an underlying basis) and diluted earnings per share declined 1% to $1.72.
“First, I speak on behalf of the entire Brown-Forman family in saying that our hearts and thoughts are with all who have been so deeply affected by COVID-19. While this is a business challenge, it is, above all, a human tragedy. I would like to thank our 4,800 employees for their exceptional agility and creativity in quickly shifting and adapting to the recent events in such a short period of time,” said Lawson Whiting, President and Chief Executive Officer. He added, “Brown-Forman has endured and prevailed through many challenges over the last 150 years. We believe we are well positioned to successfully navigate the environment we face today and emerge stronger thanks to the continued support of our shareholders, including the Brown family, our healthy balance sheet, the resilience of our people, and the strength of our brands.”
Fiscal 2020 Highlights
Business Environment Update Amid COVID-19 Pandemic
The company completed its third quarter of the fiscal year on January 31, 2020, registering a year-to-date net sales increase of 3% on both a reported and underlying basis with underlying net sales trends holding through February. In early March, the company revised its full-year outlook to include an estimate for the impact of COVID-19 on its results from Asia, most notably China, and Travel Retail only. Subsequent to that time, the rapid spread of the virus resulted in all of the company’s major markets being negatively affected.
“COVID-19 began to affect our performance in the middle of March and continued throughout April as both on-premise, representing approximately 20% of our business globally, and Travel Retail channels essentially came to a halt. We experienced strong growth in the off-premise (based on syndicated takeaway data) and e-Premise channels across most of our developed markets as country lockdowns and government restrictions took hold reflecting both an increase in at-home consumption and some pantry loading,” said Jane Morreau, the company’s Executive Vice President and Chief Financial Officer.
Fiscal 2020 Results By Market
Underlying net sales growth in the United States accelerated in fiscal 2020, increasing 5% (+8% reported), fueled in part by the fall 2019 launch of Jack Daniel’s Tennessee Apple, despite slower growth in the fourth quarter as COVID-19 related impacts began to take effect. Double-digit underlying net sales growth for Woodford Reserve, Old Forester, Jack Daniel’s RTDs, Herradura, and el Jimador collectively, also contributed to the growth for the year.
Underlying net sales in the company’s emerging markets fell 1% (-4% reported) as mid-single digit underlying net sales growth through the third quarter of fiscal 2020 was more than offset by significant declines in the fourth quarter. In Mexico, the company’s largest emerging market, underlying and reported net sales declined 7% as the recessionary economy was further hindered by the effects of the health pandemic. Despite COVID-19 headwinds, Poland’s underlying net sales grew 2% (-1% reported) in fiscal 2020 driven by higher volumes for the Jack Daniel’s family of brands, and Russia delivered strong underlying net sales growth of 8% (+6% reported) led by volume gains for Jack Daniel’s Tennessee Whiskey supported by strong consumer demand.
The developed international markets’ underlying net sales declined 1% (-2% reported) with the pandemic negatively affecting fourth quarter performance across these markets. In the United Kingdom, the company’s largest international market, underlying net sales declined 8% (-10% reported) driven by unfavorable channel and size mix and short-term disruptions from changes to our promotional strategy. Australia and France’s underlying net sales each declined 1% (-5% and -1% reported, respectively). In Australia, lower volumes of Jack Daniel’s RTDs and Jack Daniel’s Tennessee Whiskey were only partially offset by volumetric growth from the super-premium American whiskey portfolio. Declines in France were driven by lower volumes for Jack Daniel’s Tennessee Whiskey, offsetting volume growth from Jack Daniel’s Tennessee Honey and the launch of Jack Daniel’s RTDs. Despite the challenging environment in the final weeks of the fiscal year, Germany’s underlying net sales grew 7% (+8% reported) fueled by volume growth for Jack Daniel’s RTDs.
Travel Retail’s3 underlying net sales declined 10% (-11% reported) largely reflecting the unprecedented implementation of travel bans and restrictions caused by the pandemic.
Fiscal 2020 Results By Brand
The company’s whiskey portfolio grew underlying net sales +2% (+3% reported). Jack Daniel’s family of brands’ underlying net sales were flat (+1% reported). Jack Daniel’s Tennessee Whiskey’s underlying net sales decline offset growth from Jack Daniel’s Tennessee Apple, Jack Daniel’s RTDs, and broad-based volume growth from Jack Daniel’s Tennessee Honey and Gentleman Jack.
Brown-Forman’s portfolio of premium bourbon brands, including Woodford Reserve and Old Forester, continued to grow underlying net sales double digits. Woodford Reserve, the leader in the super-premium American whiskey category, grew underlying net sales 19% (+23% reported) and surpassed the one million 9L case milestone in fiscal 2020. Woodford Reserve’s growth was led by the United States, where consumer takeaway trends remain strong, along with broad-based volume growth internationally. Old Forester, the company’s 150-year-old founding brand, provided even stronger underlying net sales growth powered by volumetric gains and favorable mix from the brand’s high-end expressions.
Brown-Forman’s tequila brands grew underlying net sales 2% (+5% reported) in fiscal 2020, as declines of New Mix were more than offset by underlying net sales growth of 7% (+11% reported) on Herradura, reflecting double-digit volume growth in the United States. el Jimador also contributed to the company’s tequila portfolio growth for the year as underlying net sales grew 5% (+8% reported) driven by higher volumes in the United States as consumer takeaway trends remain strong.
Fiscal 2020 Other P&L Items
Company-wide price/mix was up 1% reflecting faster growth from higher priced Woodford Reserve and increased pricing on tequilas. These benefits were offset by volume declines, most notably on Jack Daniel’s Tennessee Whiskey and Finlandia. Underlying gross profit declined 3% (-2% reported) and reported gross margin contracted 200 basis points to 63.2% driven by higher input costs from agave and wood along with tariff-related costs.
Underlying advertising investment declined 2% (-3% reported) as the company adjusted rapidly in the fourth quarter to an environment which reflected on-premise closures, travel bans affecting the Travel Retail channel, and the cancellation of events and sponsorships across numerous countries. Underlying SG&A grew 1% (flat on a reported basis) as the company maintained its cost discipline focus.
During the fourth quarter, Brown-Forman recorded a non-cash brand name impairment charge of $13 million, or $0.02 per share, in Other expense (income) related to Chambord, a super-premium liqueur. This brand has a significant on-premise presence and is expected to be considerably affected by the closures and restrictions in this channel in response to the COVID-19 pandemic.
Underlying operating income declined 6% (-5% reported).
Financial Stewardship
On May 21, 2020, the Brown-Forman Board of Directors declared a regular quarterly cash dividend of $0.1743 per share on the Class A and Class B common stock, resulting in an annualized cash dividend of $0.6972 per share. The quarterly cash dividend is payable on July 1, 2020, to stockholders of record on June 8, 2020. Brown-Forman has paid regular quarterly cash dividends for 75 consecutive years and has increased the dividend for 36 uninterrupted years.
Fiscal Year 2021 Outlook
The company faces substantial uncertainty related to the evolving COVID-19 pandemic and its effect on the global economy. As a result of this uncertainty, the company is not able to provide quantitative guidance for fiscal year 2021 at this time. With a strong balance sheet, solid cash flows, and ample liquidity, the company expects to fully fund ongoing investments in the business and pay regular dividends. Whiting added, “with our attractive portfolio of brands in growing categories and our resilient supply chain, we believe we will successfully navigate these uncharted waters, similar to other challenges we have encountered over the past 150 years, and emerge an even stronger company with healthier brands to drive our growth in the future.”
Conference Call Details
Brown-Forman will host a conference call to discuss these results at 10:00 a.m. (EDT) today. All interested parties in the United States are invited to join the conference call by dialing 888-624-9285 and asking for the Brown-Forman call. International callers should dial +1-706-679-3410. The company suggests that participants dial in ten minutes in advance of the 10:00 a.m. (EDT) start of the conference call. A live audio broadcast of the conference call, and the accompanying presentation slides, will also be available via Brown-Forman’s Internet website, http://www.brown-forman.com/, through a link to “Investors/Events & Presentations.” A digital audio recording of the conference call and the presentation slides will also be posted on the website and will be available for at least 30 days following the conference call.
For 150 years, Brown-Forman Corporation has enriched the experience of life by responsibly building fine quality beverage alcohol brands, including the Jack Daniel’s Family of Brands, Finlandia, Korbel, el Jimador, Woodford Reserve, Old Forester, Coopers’ Craft, Canadian Mist, Herradura, New Mix, Sonoma-Cutrer, Early Times, Chambord, BenRiach, GlenDronach, Slane, and Fords Gin. Brown-Forman’s brands are supported by approximately 4,800 employees and sold in more than 170 countries worldwide. For more information about the company, please visit http://www.brown-forman.com/.
Important Information on Forward-Looking Statements:
This press release contains statements, estimates, and projections that are “forward-looking statements” as defined under U.S. federal securities laws. Words such as “aim,” “anticipate,” “aspire,” “believe,” “can,” “continue,” “could,” “envision,” “estimate,” “expect,” “expectation,” “intend,” “may,” “might,” “plan,” “potential,” “project,” “pursue,” “see,” “seek,” “should,” “will,” “would,” and similar words indicate forward-looking statements, which speak only as of the date we make them. Except as required by law, we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. By their nature, forward-looking statements involve risks, uncertainties, and other factors (many beyond our control) that could cause our actual results to differ materially from our historical experience or from our current expectations or projections. These risks and uncertainties include, but are not limited to:
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.
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Brown-Forman Corporation Unaudited Consolidated Statements of Operations For the Three Months Ended April 30, 2019 and 2020 (Dollars in millions, except per share amounts) |
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|
||||||||||
|
2019 |
|
2020 |
|
Change |
|||||
|
|
|
|
|
|
|||||
Net sales |
$ |
744 |
|
|
$ |
709 |
|
|
(5%) |
|
Cost of sales |
262 |
|
|
256 |
|
|
(2%) |
|||
Gross profit |
482 |
|
|
453 |
|
|
(6%) |
|||
Advertising expenses |
93 |
|
|
75 |
|
|
(19%) |
|||
Selling, general, and administrative expenses |
163 |
|
|
167 |
|
|
3% |
|||
Other expense (income), net |
(2 |
) |
|
24 |
|
|
|
|||
Operating income |
228 |
|
|
187 |
|
|
(18%) |
|||
Non-operating postretirement expense |
3 |
|
|
2 |
|
|
|
|||
Interest expense, net |
19 |
|
|
19 |
|
|
|
|||
Income before income taxes |
206 |
|
|
166 |
|
|
(20%) |
|||
Income taxes |
47 |
|
|
38 |
|
|
|
|||
Net income |
$ |
159 |
|
|
$ |
128 |
|
|
(20%) |
|
|
|
|
|
|
|
|||||
Earnings per share: |
|
|
|
|
|
|||||
Basic |
$ |
0.33 |
|
|
$ |
0.27 |
|
|
(20%) |
|
Diluted |
$ |
0.33 |
|
|
$ |
0.27 |
|
|
(20%) |
|
|
|
|
|
|
|
|||||
Gross margin |
64.8 |
% |
|
63.9 |
% |
|
|
|||
Operating margin |
30.7 |
% |
|
26.4 |
% |
|
|
|||
|
|
|
|
|
|
|||||
Effective tax rate |
22.5 |
% |
|
22.9 |
% |
|
|
|||
|
|
|
|
|
|
|||||
Cash dividends paid per common share |
$ |
0.1660 |
|
|
$ |
0.1743 |
|
|
|
|
|
|
|
|
|
|
|||||
Shares (in thousands) used in the |
|
|
|
|
|
|||||
calculation of earnings per share |
|
|
|
|
|
|||||
Basic |
477,034 |
|
|
478,148 |
|
|
|
|||
Diluted |
480,047 |
|
|
480,342 |
|
|
|
|||
|
|
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Brown-Forman Corporation Unaudited Consolidated Statements of Operations For the Twelve Months Ended April 30, 2019 and 2020 (Dollars in millions, except per share amounts) |
||||||||||
|
||||||||||
|
2019 |
|
2020 |
|
Change |
|||||
|
|
|
|
|
|
|||||
Net sales |
$ |
3,324 |
|
|
$ |
3,363 |
|
|
1% |
|
Cost of sales |
1,158 |
|
|
1,236 |
|
|
7% |
|||
Gross profit |
2,166 |
|
|
2,127 |
|
|
(2%) |
|||
Advertising expenses |
396 |
|
|
383 |
|
|
(3%) |
|||
Selling, general, and administrative expenses |
641 |
|
|
642 |
|
|
0% |
|||
Other expense (income), net |
(15 |
) |
|
11 |
|
|
|
|||
Operating income |
1,144 |
|
|
1,091 |
|
|
(5%) |
|||
Non-operating postretirement expense |
22 |
|
|
5 |
|
|
|
|||
Interest expense, net |
80 |
|
|
77 |
|
|
|
|||
Income before income taxes |
1,042 |
|
|
1,009 |
|
|
(3%) |
|||
Income taxes |
207 |
|
|
182 |
|
|
|
|||
Net income |
$ |
835 |
|
|
$ |
827 |
|
|
(1%) |
|
|
|
|
|
|
|
|||||
Earnings per share: |
|
|
|
|
|
|||||
Basic |
$ |
1.74 |
|
|
$ |
1.73 |
|
|
(1%) |
|
Diluted |
$ |
1.73 |
|
|
$ |
1.72 |
|
|
(1%) |
|
|
|
|
|
|
|
|||||
Gross margin |
65.2 |
% |
|
63.2 |
% |
|
|
|||
Operating margin |
34.4 |
% |
|
32.4 |
% |
|
|
|||
|
|
|
|
|
|
|||||
Effective tax rate |
19.8 |
% |
|
18.0 |
% |
|
|
|||
|
|
|
|
|
|
|||||
Cash dividends per common share: |
|
|
|
|
|
|||||
Paid |
$ |
0.6480 |
|
|
$ |
0.6806 |
|
|
|
|
|
|
|
|
|
|
|||||
Shares (in thousands) used in the |
|
|
|
|
|
|||||
calculation of earnings per share |
|
|
|
|
|
|||||
Basic |
478,956 |
|
|
477,765 |
|
|
|
|||
Diluted |
482,067 |
|
|
480,409 |
|
|
|
|||
|
|
|
|
|
|
Brown-Forman Corporation Unaudited Condensed Consolidated Balance Sheets (Dollars in millions) |
||||||||
|
April 30, |
|
April 30, |
|||||
Assets: |
|
|
|
|||||
Cash and cash equivalents |
$ |
307 |
|
|
$ |
675 |
|
|
Accounts receivable, net |
609 |
|
|
570 |
|
|||
Inventories |
1,520 |
|
|
1,685 |
|
|||
Other current assets |
283 |
|
|
335 |
|
|||
Total current assets |
2,719 |
|
|
3,265 |
|
|||
|
|
|
|
|||||
Property, plant, and equipment, net |
816 |
|
|
848 |
|
|||
Goodwill |
753 |
|
|
756 |
|
|||
Other intangible assets |
645 |
|
|
635 |
|
|||
Other assets |
206 |
|
|
272 |
|
|||
Total assets |
$ |
5,139 |
|
|
$ |
5,776 |
|
|
|
|
|
|
|||||
Liabilities: |
|
|
|
|||||
Accounts payable and accrued expenses |
$ |
544 |
|
|
$ |
518 |
|
|
Accrued income taxes |
9 |
|
|
30 |
|
|||
Short-term borrowings |
150 |
|
|
333 |
|
|||
Total current liabilities |
703 |
|
|
881 |
|
|||
|
|
|
|
|||||
Long-term debt |
2,290 |
|
|
2,269 |
|
|||
Deferred income taxes |
145 |
|
|
177 |
|
|||
Accrued postretirement benefits |
197 |
|
|
297 |
|
|||
Other liabilities |
157 |
|
|
177 |
|
|||
Total liabilities |
3,492 |
|
|
3,801 |
|
|||
|
|
|
|
|||||
Stockholders’ equity |
1,647 |
|
|
1,975 |
|
|||
|
|
|
|
|||||
Total liabilities and stockholders’ equity |
$ |
5,139 |
|
|
$ |
5,776 |
|
|
|
|
|
|
Brown-Forman Corporation Unaudited Condensed Consolidated Statements of Cash Flows For the Twelve Months Ended April 30, 2019 and 2020 (Dollars in millions) |
||||||||
|
2019 |
|
2020 |
|||||
|
|
|
|
|||||
Cash provided by operating activities |
$ |
800 |
|
|
$ |
724 |
|
|
|
|
|
|
|||||
Cash flows from investing activities: |
|
|
|
|||||
Additions to property, plant, and equipment |
(119 |
) |
|
(113 |
) |
|||
Acquisition of business, net of cash acquired |
— |
|
|
(22 |
) |
|||
Other |
— |
|
|
(6 |
) |
|||
Cash used for investing activities |
(119 |
) |
|
(141 |
) |
|||
|
|
|
|
|||||
Cash flows from financing activities: |
|
|
|
|||||
Net change in short-term borrowings |
(71 |
) |
|
178 |
|
|||
Acquisition of treasury stock |
(207 |
) |
|
(1 |
) |
|||
Dividends paid |
(310 |
) |
|
(325 |
) |
|||
Other |
(11 |
) |
|
(43 |
) |
|||
Cash used for financing activities |
(599 |
) |
|
(191 |
) |
|||
|
|
|
|
|||||
Effect of exchange rate changes on cash and cash equivalents |
(14 |
) |
|
(24 |
) |
|||
|
|
|
|
|||||
Net increase in cash and cash equivalents |
68 |
|
|
368 |
|
|||
|
|
|
|
|||||
Cash and cash equivalents, beginning of period |
239 |
|
|
307 |
|
|||
|
|
|
|
|||||
Cash and cash equivalents, end of period |
$ |
307 |
|
|
$ |
675 |
|
|
|
|
|
|
|
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Schedule A |
|
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|
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Brown-Forman Corporation |
|
|
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Supplemental Information (Unaudited) |
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Fiscal Year Ended |
|
Fiscal Year Ended |
|
Nine Months Ended |
|
|
April 30, 2020 |
|
April 30, 2020 |
|
April 30, 2019 |
|
January 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported change in net sales |
|
(5)% |
|
1% |
|
2% |
|
3% |
Acquisitions and divestitures |
|
—% |
|
—% |
|
—% |
|
—% |
New accounting standard |
|
—% |
|
—% |
|
1% |
|
—% |
Foreign exchange |
|
1% |
|
1% |
|
2% |
|
—% |
Estimated net change in distributor inventories |
|
(7)% |
|
(2)% |
|
—% |
|
—% |
|
|
|
|
|
|
|
|
|
Underlying change in net sales |
|
(10)% |
|
—% |
|
5% |
|
3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported change in gross profit |
|
(6)% |
|
(2)% |
|
(2)% |
|
|
Acquisitions and divestitures |
|
—% |
|
—% |
|
—% |
|
|
New accounting standard |
|
—% |
|
—% |
|
1% |
|
|
Foreign exchange |
|
—% |
|
—% |
|
2% |
|
|
Estimated net change in distributor inventories |
|
(8)% |
|
(2)% |
|
—% |
|
|
|
|
|
|
|
|
|
|
|
Underlying change in gross profit |
|
(13)% |
|
(3)% |
|
2% |
|
|
|
|
|
|
|
|
|
|
|
Reported change in advertising expenses |
|
(19)% |
|
(3)% |
|
(2)% |
|
|
Acquisitions and divestitures |
|
(1)% |
|
—% |
|
—% |
|
|
New accounting standard |
|
—% |
|
—% |
|
4% |
|
|
Foreign exchange |
|
2% |
|
1% |
|
2% |
|
|
|
|
|
|
|
|
|
|
|
Underlying change in advertising expenses |
|
(17)% |
|
(2)% |
|
3% |
|
|
|
|
|
|
|
|
|
|
|
Reported change in SG&A |
|
3% |
|
—% |
|
(16)% |
|
|
Acquisitions and divestitures |
|
—% |
|
(1)% |
|
—% |
|
|
New accounting standard |
|
—% |
|
—% |
|
1% |
|
|
Foundation |
|
—% |
|
—% |
|
8% |
|
|
Foreign exchange |
|
3% |
|
2% |
|
2% |
|
|
|
|
|
|
|
|
|
|
|
Underlying change in SG&A |
|
6% |
|
1% |
|
(5)% |
|
|
|
|
|
|
|
|
|
|
|
Reported change in operating income |
|
(18)% |
|
(5)% |
|
9% |
|
|
Acquisitions and divestitures |
|
1% |
|
—% |
|
—% |
|
|
Chambord Impairment |
|
6% |
|
1% |
|
—% |
|
|
Foundation |
|
—% |
|
—% |
|
(7)% |
|
|
Foreign exchange |
|
1% |
|
—% |
|
3% |
|
|
Estimated net change in distributor inventories |
|
(16)% |
|
(3)% |
|
—% |
|
|
|
|
|
|
|
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Underlying change in operating income |
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(27)% |
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(6)% |
|
5% |
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Note: Totals may differ due to rounding |
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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. |
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Contacts
Rob Frederick
Vice President
Brown-Forman Brand & Communications
502-774-7707
Leanne Cunningham
Senior Vice President
Shareholder Relations Officer
502-774-7287
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