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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One) 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                    to                     

Commission File Number 001-00123
BROWN-FORMAN CORPORATION
(Exact name of registrant as specified in its charter) 
Delaware61-0143150
(State or other jurisdiction of incorporation or organization)(IRS Employer Identification No.)
850 Dixie Highway
Louisville,Kentucky40210
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code (502585-1100
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock (voting), $0.15 par valueBFANew York Stock Exchange
Class B Common Stock (nonvoting), $0.15 par valueBFBNew York Stock Exchange
1.200% Notes due 2026BF26New York Stock Exchange
2.600% Notes due 2028BF28New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.      Yes       No  
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.      Yes       No  
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      Yes       No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).      Yes       No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes       No  
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 $23,100,000,000.
The number of shares outstanding for each of the registrant’s classes of Common Stock on May 31, 2022, was:
Class A Common Stock (voting), $0.15 par value169,175,352 
Class B Common Stock (nonvoting), $0.15 par value309,878,389 
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement of Registrant for use in connection with the Annual Meeting of Stockholders to be held July 28, 2022, are incorporated by reference into Part III of this report.



Table of Contents
Page
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.


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Forward-Looking Statement Information. 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,” “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:

Our substantial dependence upon the continued growth of the Jack Daniel's family of brands
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
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
Disruption of our distribution network or inventory fluctuations in our products by distributors, wholesalers, or retailers
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; shifts in consumer purchase practices; 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
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, or labor
Impact of health epidemics and pandemics, including the COVID-19 pandemic, and the risk of the resulting negative economic impacts and related governmental actions
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
Product recalls or other product liability claims, product tampering, contamination, or quality issues
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
Risks associated with acquisitions, dispositions, business partnerships, or investments – such as acquisition integration, termination difficulties or costs, or impairment in recorded value
Risks associated with being a U.S.-based company with a global business, 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 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; 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, 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
Decline in the social acceptability of beverage alcohol in significant markets
Significant additional labeling or warning requirements or limitations on availability of our beverage alcohol products
Counterfeiting and inadequate protection of our intellectual property rights
Significant legal disputes and proceedings, or government investigations
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
Our status as a family “controlled company” under New York Stock Exchange rules, and our dual-class share structure
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Use of Non-GAAP Financial Information. 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.”
PART I
Item 1. Business
Overview
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 5,200 people (excluding individuals that work on a part-time or temporary basis) on six continents, including approximately 2,600 people in the United States (approximately 15% of whom are represented by a union) and 1,200 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. Taking into account ownership of shares of our non-voting stock, the Brown family also controls more than 50% of the economic ownership in Brown-Forman.
For a discussion of recent developments, see “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Executive Summary.”
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Brands
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 world1. Jack Daniel’s Tennessee Whiskey was recently named the most valuable spirits brand in the world in the 2021 Interbrand “Best Global Brands” rankings. Our premium bourbons, Woodford Reserve and Old Forester, were once again selected for the Impact “Hot Brands”2 list, marking nine and four consecutive years on the list, respectively. Our tequilas, el Jimador and Herradura, were also named to the “Hot Brands”2 list.

Principal Brands
Jack Daniel's Tennessee Whiskey 
el Jimador Tequilas5
Jack Daniel's RTD3
el Jimador New Mix RTD
Jack Daniel's Tennessee Honey
Korbel California Champagnes6
Gentleman Jack Rare Tennessee Whiskey 
Korbel California Brandy6
Jack Daniel's Tennessee Fire
Herradura Tequilas7
Jack Daniel's Tennessee AppleFinlandia Vodkas
Jack Daniel's Single Barrel Collection4
Sonoma-Cutrer California Wines
Jack Daniel's Tennessee RyeOld Forester Kentucky Straight Bourbon Whisky
Jack Daniel's Winter JackOld Forester Whiskey Row Series
Jack Daniel's Sinatra Select Old Forester Kentucky Straight Rye Whisky
Jack Daniel’s BondedGlenDronach Single Malt Scotch Whisky
Jack Daniel's No. 27 Gold Tennessee Whiskey Benriach Single Malt Scotch Whisky
Jack Daniel's Bottled-in-BondGlenglassaugh Single Malt Scotch Whisky
Jack Daniel’s 10 Year OldChambord Liqueur
Jack Daniel’s Triple MashSlane Irish Whiskey
Woodford Reserve Kentucky BourbonFords Gin
Woodford Reserve Double OakedCoopers' Craft Kentucky Bourbon
Woodford Reserve Kentucky Rye WhiskeyPart Time Rangers RTDs
Woodford Reserve Kentucky Straight Malt Whiskey
Woodford Reserve Kentucky Straight Wheat Whiskey
1IWSR, 2022.
2Impact Databank, March 2022.
3Jack Daniel's RTD includes Jack Daniel's & Cola, Jack Daniel's Country Cocktails, Jack Daniel's Double Jack, and other malt- and spirit-based Jack Daniel’s RTDs.
4The 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, and Jack Daniel's Single Barrel 100 Proof.
5el Jimador Tequilas comprise all full-strength expressions of el Jimador.
6Korbel is not an owned brand. We sell Korbel products under contract in the United States and other select markets.
7Herradura Tequilas comprise all expressions of Herradura.
See “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations – Fiscal 2022 Brand Highlights” for brand performance details.
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 and our winery. We expect 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.
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Markets
We sell our products in over 170 countries around the world. The United States, our most important market, accounted for 49% of our net sales in fiscal 2022 and the other 51% were outside of the United States. The table below shows the percentage of total net sales for our largest markets in our three most recent fiscal years:

Percentage of Total Net Sales by Geographic Area
Year ended April 30
202020212022
United States50 %50 %49 %
Germany5 %6 %6 %
Australia5 %6 %6 %
United Kingdom5 %6 %6 %
Mexico5 %4 %5 %
Other30 %28 %28 %
TOTAL100 %100 %100 %
Note: Totals may differ due to rounding

For details about net sales in our largest markets, see “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations – Fiscal 2022 Market Highlights.” For details about our reportable segment and for additional geographic information about net sales and long-lived assets, see Note 17 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.”
Distribution Network and Customers
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, Korea, Mexico, Poland, Spain, Taiwan, Thailand, Turkey, 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, including Italy, Japan, and South Africa, 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 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 2022, our two largest customers accounted for approximately 14% and 12% of consolidated net sales, respectively. No other customer accounted for 10% or more of our consolidated net sales in fiscal 2022.
Seasonality
Holiday buying makes the fourth calendar quarter the peak season for our business. Approximately 30% of our reported net sales for fiscal 2020, fiscal 2021, and fiscal 2022 were in the fourth calendar quarter of each year.
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Competition
Trade information indicates that we are one of the largest global suppliers of premium spirits. According to IWSR, for calendar year 2021, the ten largest global spirits companies controlled approximately 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, Beam Suntory Inc., Becle S.A.B. de C.V., Davide Campari-Milano N.V., Diageo PLC, LVMH Moët Hennessy Louis Vuitton SE, Pernod Ricard SA, and Rémy Cointreau. 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.
Ingredients and Other Supplies

The principal raw materials used in manufacturing and packaging our distilled spirits, liqueurs, RTD products, and wines are shown in the table below.
Principal Raw Materials
Distilled SpiritsLiqueursRTD ProductsWinesPackaging
AgaveFlavoringsFlavoringsGrapesAluminum cans
BarleyNeutral spiritsMaltWoodCartons
CornSugarNeutral spiritsClosures
Malted barleyWaterSugarGlass bottles
RyeWhiskeyTequilaLabels
SugarWineWater
PET1 bottles
WaterWhiskey
Wood
1Polyethylene terephthalate (PET) is a polymer used in non-glass containers.
We are currently managing through a variety of global supply chain disruptions, largely related to glass supply, and have deployed a number of risk mitigation strategies to address the various constraints on our business. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for more information on the effect of supply chain disruptions on our results.
From time to time, our agricultural ingredients (agave, barley, corn, grapes, malted barley, rye, 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 and certain tequilas and 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.
For details on risks related to the unavailability of raw materials and the inherent uncertainty in forecasting supply and demand, see “Item 1A. Risk Factors.”
Intellectual Property
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 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,
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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 2022 Brand Highlights.”
Regulatory Environment
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 extra añejo (three years), añejo (one year), and reposado (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 subject to various environmental protection statutes and regulations, and our policy is to comply with them.
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Integrated Strategy and Performance
bfb-20220430_g1.jpg
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 core purpose, “Enriching Life,” and 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 faced a challenging and volatile environment, including supply chain disruptions and the ongoing pandemic, over the past two fiscal years. Our employees' unique mix of agility, resilience, energy, and collaboration enabled us to succeed despite these challenges, and we believe will continue to strengthen us over time. Our values drove decisions throughout this year, and our core purpose of “Enriching Life” and our highest ambition of “Nothing Better in the Market” continue to guide us as we move forward to a reimagined future with a renewed sense of opportunity for what lies ahead. We believe that several recent headwinds are becoming tailwinds. For example, after more than three years, tariffs on American whiskey in the European Union were removed on January 1, 2022, and tariffs in the United Kingdom were removed on June 1, 2022.
This Integrated Annual Report presents not only our financial performance but also our environmental, social, and governance (“ESG”) 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.
Portfolio and Responsibility
We seek to build brands and create shareholder value responsibly by delivering strong and sustainable growth, solid margins, and high returns on invested capital. We focus on building brands that can be meaningful for our company and our 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 shareholder 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 work both independently and with industry organizations to promote alcohol responsibility, 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.
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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 category1. We strive to strengthen the brand's leadership position, and will steadfastly work to keep JDTW relevant to consumers worldwide, while pursuing the 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 Honey (2011), Fire (2015), Rye (2017), Apple (2019), and our most recent launch, Jack Daniel's 10 Year Old Tennessee Whiskey (2021), 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 globally1, growing volumes at a strong double-digit compound annual growth rate since the brand was introduced 25 years ago. Woodford Reserve surpassed 1.4 million nine-liter cases of annual volume as of April 30, 2022. 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 resulting from the unprecedented cost of agave, we remain pleased with 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 GlenDronach, Benriach, and Glenglassaugh, and our Irish whiskey Slane, are well-positioned in their respective categories. We expect them all to become meaningful contributors over the longer term. Lastly, we believe our acquisition of Fords Gin in the summer of 2019 provides access to the premium gin category, particularly in the United States, and we look to grow this brand in key gin markets globally.
Fiscal 2022 was another year of growth for our ready-to-drink (RTD) portfolio. Jack Daniel's RTDs are approaching 14 million nine-liter cases globally. In Mexico, our el Jimador tequila-based RTD, New Mix, sold approximately 8 million nine-liter cases. In calendar 2020 we introduced Jack Daniel's Can Cocktails in the United States and also announced a new partnership with Pabst Brewing Company for the supply, sales, and distribution of Jack Daniel's Country Cocktails in this important market. In December 2020, we acquired Part Time Rangers, a line of low-calorie, spirit-based RTDs with natural fruit flavorings. Part Time Rangers is based in New Zealand, and we believe it will help us grow our RTD portfolio in that country, Australia, and potentially beyond.
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 and enjoyed 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. The campaign began by raising awareness and inspiring action from our colleagues and business partners around the importance of alcohol responsibility.
Geography
The United States remains our largest market, and continued growth there is important to our long-term success. We expect to foster this growth by emphasizing fast-growing spirits categories, continued product and packaging innovation, and brand building 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, we continue to increase our competitiveness through improved routes to consumers. In 2022, we established our owned-distribution organizations for Belgium & Luxembourg and Taiwan. More direct connection with customers and consumers enabled through owned distribution is an important part of our strategic growth.
The COVID-19 pandemic has impacted our global markets differently. While the recovery has been varied by geography, we expect increasing contributions to our long-term future growth from emerging markets, including Brazil, China, India, Mexico, Poland, and Southeast Asia.


1 IWSR 2022
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People, Diversity & Inclusion, and Ethics & Compliance
As we work to increase our brands' relevance and appeal to diverse consumer groups around the world, we believe a diversity of experiences and mindsets within our own workforce is essential. In the summer of 2019, we unveiled Many Spirits, One Brown-Forman: Gender and Race Edition, our 2030 Diversity & Inclusion Strategy aimed at creating a foundation from which to build a more diverse workforce and inclusive culture. In the summer of 2020, we developed and published commitments to be better and do better – to live our value of respect, educate ourselves more fully on what it means to be anti-racist, identify and eliminate barriers to inclusion, create an environment where all employees can bring their best selves to work, and extend our commitment more deeply in our communities, especially our hometown of Louisville, Kentucky. We believe these actions will help us continue to build an inclusive culture at Brown-Forman.
Our vision is to create an environment where leveraging diversity and inclusion occurs naturally, giving us a sustainable marketplace advantage. We have set race and gender ambitions to have at least 50% women in professional- and leader-level roles globally, 40% women in senior leadership positions globally, and 25% people of color in our United States workforce by 2030. We have also set a goal to reach 16% of our supplier spend in locations such as the United States, the United Kingdom, and Australia, with businesses that are woman- or minority-owned by 2030. 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.
One of the main drivers of Brown-Forman’s inclusive culture is the continued growth and leadership of our 10 Employee Resource Groups (ERGs). We believe ERGs are instrumental in enriching our company's culture, and our employees experience this by supporting development and engagement of our diverse workforce, driving cultural awareness and competency across the organization, and enabling authentic engagement with our consumers. Our ERGs also create spaces for our employees and their allies to connect with, support, and advocate for one another.
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 44 countries, we offer a third-party service to employees and others who choose to “speak up” anonymously. We deliver training to Managers reinforcing our commitment to non-retaliation and maintaining a “Speak-Up” culture.
We convey our compliance expectations to employees via our Code of Conduct, and all employees certify annually that they will comply with the Code of Conduct and report a potential violation. The Code of Conduct is a toolkit for employees, as it details expectations for 18 different risks, includes links to Q&A, policies, training and the ability to contact a subject-matter expert. Our Code of Conduct and certification is refreshed annually and is available in 13 languages.
Investment and Sustainability
One thing we have learned over more than a century and a half is 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 fiscal 2021, our Board of Directors approved a $125 million capital investment to expand our bourbon-making capacity in Kentucky to meet anticipated future consumer demand. Additionally, in fiscal 2022 our Board of Directors approved a $50 million capital investment to expand our scotch-making capacity to meet anticipated future 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 new goals broaden our focus beyond business operations to include our supply chain, where the majority of our environmental footprint resides. With this new strategy, we have a roadmap for continued progress over the next quarter-century.


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Our recent investments in renewable energy and resource stewardship underscore our long-term focus:
Wind: Our partnership with the East Fork Wind project, which became operational in April 2020, provides a renewable energy source that offsets more than 90% of our electricity usage in the United States.
Solar: Last year, Jack Daniel's announced a partnership to provide our Lynchburg distillery with 20 megawatts of solar energy. The agreement will provide nearly three-quarters of the distillery's electricity needs, and makes Jack Daniel's the first distillery to participate in Tennessee Valley Authority's Green Invest Program.
Watersheds: To manage water risk, we have completed watershed risk assessments to evaluate watersheds we operate in that are considered at-risk or business critical. Following the assessments, we have begun to develop multi-year mitigation plans to address risk.
Waste: In 2020, we were pleased to achieve our zero-waste-to-landfill (defined as sending less than 1% to landfill) goal across our production facilities. Our next priority is to integrate circular economy principles into our business that will allow us to go beyond zero-waste to a regenerative approach where resources are continually reused.
We believe we are better positioned than ever to deliver exceptional high-quality products to our consumers around the world. We have a highly capable and engaged workforce. We have developed brand-building capabilities by equipping our teams with the training and tools necessary for an increasingly data-driven digital global marketplace. Among other trends, the expansion of the digital economy accelerated significantly as consumers, businesses, and communities adapted to the challenges brought on by the COVID-19 pandemic. To continue our success in how we market and sell our brands, we announced in fiscal 2021 an investment in a new Integrated Marketing Communications organization that we believe will further enhance our ability to win in the digital economy.
Community
In addition to the investments we make in our employees, we believe it is vital that we give back to the communities that support both our employees and our company by thoughtfully deploying our time, talent, and resources. We have been a proud corporate citizen of our hometown of Louisville, Kentucky, since we were founded. Being a good neighbor is something we strive for wherever we operate, and our expanded focus and commitment to the neighborhood around our corporate campus meets this call to be the best neighbor we can be in an area that has experienced the effects of underinvestment and systemic racism.
We also continue to expand our civic engagement into 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 in the communities where we work and live, and to shape our charitable-giving strategy to meet the essential needs of the communities that sustain us. We provide charitable donations and our employees volunteer throughout our communities, including 128 serving on 230 nonprofit boards in the United States. The Brown-Forman Foundation (the Foundation) was created in fiscal 2018 with the goal of helping fund our ongoing philanthropic endeavors. The Foundation's earnings provide a consistent source of revenue for charitable giving
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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 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 in west Louisville, from early childhood through adult learning.
We believe that having a long-term-focused, committed, and engaged shareholder 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 shareholder return through shareholder-friendly capital allocation and socially and environmentally conscious investments to fuel long-term growth.
Human Capital Resources
Overview: Culture of Care
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 5,200 people (excluding individuals that work on a part-time or temporary basis) we employ in 43 countries around the world. This includes approximately 3,400 salaried employees and 1,800 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.
COVID-19 Response
Shortly after the global pandemic began, we shifted nearly all global salaried employees to a virtual working environment and safely maintained our essential production operations. Over the last year, salaried employees have begun returning to their offices as local conditions have allowed. We welcomed salaried employees back to our Louisville headquarters on May 2, 2022, where we have made investments in our facilities and services to ease this transition.
The majority of our employees will be working under a hybrid work style going forward, working a minimum of three days per week in the office and the remaining days at home (or the location of their choice). We believe this structure will allow our employees to collaborate and build relationships, while enjoying the flexibility that they have come to appreciate. Flexibility has been a cultural priority at Brown-Forman since well before the pandemic and we are pleased to have found a solution that meets the needs of our business and our employees.
Structural Investments
We launched a new capability and organization within Brown-Forman that we call “Integrated Marketing Communications” (IMC). IMC focuses on driving excellence within five highly integrated, interdependent disciplines: e-commerce, Media, Performance, Search, and Content. These disciplines are supported by increased investments to advance our consumer-centric philosophy, agile processes, technology, and our organization, which has been significantly enhanced to support this initiative. The IMC organization consists of many marketers around the world who are solely focused on advancing our digital marketing and e-commerce initiatives. This includes new roles that we have recently created, which has given us the opportunity to elevate internal talent as well as incorporate external talent from leading companies with critical expertise. Through IMC, we can better meet consumers where they are by customizing content to maximize relevance and more effectively drive their behavior. We can now do this in real time and at scale. By integrating e-commerce within IMC, we can create a truly cohesive end-to-end consumer journey starting from awareness and closing the loop with sales.
Diversity & Inclusion
We are continuing to pursue our 2030 Diversity & Inclusion strategy, as outlined in Many Spirits, One Brown-Forman: Gender and Race Edition. This year, we continued to increase the number of women in senior leadership globally and people of color in the United States through both internal promotions and external hiring.
To support our culture of inclusion, all executive leaders participated in our six month Inclusive Leadership Program. This group completed the program at the end of the calendar year and we have recently begun cascading it down to our business leaders.
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Workforce Stability
We must remain focused on winning the war for talent in a marketplace where opportunities abound and highly skilled knowledge workers can work from anywhere. While we have historically enjoyed low turnover amongst our salaried population, we have tracked our departures carefully over the last year, given the acceleration of the job market. We have analyzed our data quarterly, looking at cuts by gender, ethnicity, function, location, age, management level, etc. in addition to qualitative exit interview data. We have been pleased to find that our turnover remains consistent with our pre-pandemic levels. We will, of course, continue to monitor our data carefully.
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Executive Officers
Information about Our Executive Officers
The following persons served as executive officers as of June 17, 2022:
NameAgePrincipal Occupation and Business Experience
Lawson E. Whiting53President and Chief Executive Officer since 2019. Executive Vice President and Chief Operating Officer from October 2017 to December 2018. Executive Vice President and Chief Brands and Strategy Officer from 2015 to 2017. Senior Vice President and Chief Brands Officer from 2013 to 2015. Senior Vice President and Managing Director for Western Europe from 2011 to 2013. Vice President and Finance Director for Western Europe from 2010 to 2011. Vice President and Finance Director for North America from 2009 to 2010.
Matthew E. Hamel62Executive Vice President and General Counsel since 2021. Executive Vice President, General Counsel and Secretary from 2007 to 2021.
Leanne D. Cunningham52Senior Vice President and Chief Financial Officer since July 2021. Senior Vice President, Shareholder Relations Officer, Global Commercial Finance, and Financial Planning and Analysis from August 2020 to June 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. Vice President, Chief of Staff and Director of Business Development Global Production from November 2009 to October 2013.
Matias Bentel47Senior Vice President and Chief Brands Officer since January 2020. 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.
Kelli N. Brown52Senior Vice President and Chief Accounting Officer since August 2018. Vice President and Director Finance (North America Region) from 2015 to August 2018. Director NAR Division Finance (North America Region) from 2013 to 2015. Director Business Planning and Analytics (North America Region) from 2012 to 2013.
Ralph E. de Chabert75Senior Vice President, Chief Corporate Citizenship Officer since February 2022. Senior Vice President, Chief Diversity Inclusion and Global Community Relations Officer from March 2019 to February 2022. Vice President and Chief Diversity Officer from 2007 to 2019.
Marshall B. Farrer51Senior Vice President, President Europe since August 2020. 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 July 2018 to May 2015. Vice President, Managing Director, Jack Daniel’s Tennessee Honey from January 2014 to April 2015. Vice President, Managing Director, Australia/New Zealand region from 2010 to 2014.
Kirsten M. Hawley52Senior Vice President, Chief People, Places, and Communications Officer since May 2021. 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 2013 to 2015. Vice President and Director of Organization and Leader Development from 2011 to 2013.
John V. Hayes62Senior Vice President, President, U.S.A. and Canada since June 2018. Senior Vice President, Chief Marketing Officer of Brown-Forman Brands from February 2015 to June 2018. Senior Vice President, Managing Director Jack Daniel’s from 2011 to 2015.
Thomas W. Hinrichs60Senior Vice President, President Emerging International since August 2020. 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 2013 to 2015. Senior Vice President and Managing Director for Greater Europe and Africa from 2006 to 2013.
Timothy M. Nall51Senior Vice President, Chief Global Supply Chain and Technology Officer since March 2022. 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. Vice President Director Wines/ENV/Govt Comp 2011 to 2013.
Crystal L. Peterson51Vice President, Chief Inclusion and Global Community Relations Officer since June 2022. 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.
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Available Information
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 also available free of charge by writing to our Secretary at 850 Dixie Highway, Louisville, Kentucky 40210 or emailing Secretary@b-f.com.
Item 1A. Risk Factors
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.
Risks Related to Our Business and Operations
Our business performance is substantially dependent upon the continued health of the Jack Daniel's family of brands.
The Jack Daniel's family of brands is the primary driver of our revenue and growth. Jack Daniel's is an iconic global trademark with a loyal consumer fan base, and 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, should we not be 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 2022 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 14 international markets. Transitioning from a third-party distribution model to an owned distribution model involves significant investment, 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.
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 could create a more challenging competitive landscape for our products. Consolidation accelerated during the COVID-19 pandemic and the resulting quarantines, “stay at home” orders, travel restrictions, retail store closures, social distancing requirements, and other government actions, created 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
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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 as newly consolidated distributors take down prices. 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.
Changes to any of our route-to-consumer models or 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.
As noted above, e-commerce distribution grew dramatically early in the COVID-19 pandemic and is likely to continue growing in the future. 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, particularly following the COVID-19 pandemic, 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, 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 within the United States, Canada, or elsewhere; and changes in trends related to travel, leisure, dining, gifting, entertaining, and beverage consumption trends. Consumers may begin to shift their consumption and purchases from our premium and super-premium products, more commonly found in on-premise establishments, in favor of off-premise purchases or away from alcoholic beverages entirely. This includes consumption at home as a result of various factors, including the COVID-19 pandemic, shifts in social trends, and shifts to purchases of our products to e-commerce retailers. These shifts in consumption and purchasing channels, which could adversely impact our profitability, have accelerated during the COVID-19 pandemic and the resulting quarantines, “stay at home” orders, travel restrictions, retail, restaurant, bar, and hotel closures, social distancing requirements, and other government action. 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 years, 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. Also, 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 RTD 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
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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 RTD 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 compete increasingly for consumer drinking occasions. 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, reduction in profits from one year to the next, and also could damage consumers' perception of our brand family. 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.
Production facility disruption could adversely affect our business.
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 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 near term or the short 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 as a result of the COVID-19 pandemic or otherwise. Disaster recovery plans may not prevent business disruption, and reconstruction of any damaged facilities could require a significant amount of time and resources.
The inherent uncertainty in supply/demand forecasting could adversely affect our business, particularly with respect to our aged products.
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 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 is also dependent on the growth cycle of our agave plants which take approximately 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. 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. Any forecasting error 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 raw materials. 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.
Higher costs or unavailability of water, raw materials, product ingredients, or labor could adversely affect our financial results.
Our products use materials and ingredients that we purchase from suppliers. Our ability to make and sell our products depends upon 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. Beginning in 2020, as a result of global supply chain challenges, our primary glass provider was not able to produce sufficient quantities to meet our needs, which increased our cost of production and adversely affected our financial results. While we continue to see improvements in our glass supply, overall supply chain logistics and transportation continue to be constrained, impacting our route to market
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costs and lead times. We project that logistics and transport constraints will persist at least through calendar 2022 and possibly through calendar 2023. Similar new supply chain challenges may occur in the future, making it difficult and more expensive to produce and deliver our products. For example, if we were to experience a disruption in the supply of American white oak logs or steel to produce the new charred oak barrels in which we age our whiskeys, our production capabilities could be compromised. 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, grapes, 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 that could reduce the profitability of our operations, including driver or equipment shortages, higher fuel costs, weather conditions, traffic congestion, shipment container availability, rail shut down, increased government regulation, and other matters. Our financial results may be adversely affected if we are not able to pass along energy, freight, or other input cost increases through higher prices to our customers without reducing demand or sales. For example, in connection with the COVID-19 pandemic, we experienced supply chain disruptions in connection with the availability of timely modes of transportation to ship our products globally.
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. For example, the global economy has been negatively impacted by Russia’s invasion of Ukraine. Global grain and energy markets have become increasingly volatile as sanctions have been imposed on Russia by other countries, including the United States and the European Union, in response to the invasion. As a result, we have suspended our operations in Russia, and it is not clear if, or when, we will be able to resume doing business in Russia. While we do not currently expect our production operations to be directly impacted by the conflict, changes in global grain and commodity pricing and availability may impact the markets in which 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, the effects of climate change, fires, diseases, and other agricultural uncertainties that affect the mortality, 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. Climate change 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 important to our ability to operate our business. If extended droughts become more common or severe, or if our water supply were interrupted for other reasons, high-quality water could become scarce in some key production regions for our products, including Tennessee, Kentucky, California, Finland, Mexico, Scotland, and Ireland, which in turn could adversely affect our business and financial results.
Our business faces various risks related to health epidemics and pandemics, including the COVID-19 pandemic and similar outbreaks, that could materially and adversely affect our business, our operations, our cash flows, and our financial results.
Our business, operations, cash flows, and financial results have been impacted and will likely continue to be impacted by health epidemics, pandemics, and similar outbreaks, such as the COVID-19 pandemic. The COVID-19 pandemic has had and could continue to have 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, our manufacturing operations, or in our distribution and supply chain. Furthermore, during the COVID-19 pandemic, we were affected in markets where, in connection with other government actions taken to slow the spread of the COVID-19 pandemic, liquor sales were temporarily restricted or banned outright such as in the Commonwealth of Pennsylvania in the United States, and in South Africa, India, and other Asian countries. 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) is unable to work or work effectively, including because of illness, quarantines, “stay at home” orders, social distancing requirements, other government action, facility closures, or other restrictions.
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The full impact of the COVID-19 pandemic (and any related variations) depends on factors beyond our knowledge or control, including the duration, severity, and potential resurgence of the outbreak and actions taken to contain its spread and mitigate the public health effects, including vaccine efficacy, and its short- and long-term impacts on the economy, unemployment, consumer confidence, and the financial health of our suppliers, distributors, customers, and retailers. We cannot predict with certainty the full impact of the COVID-19 pandemic on our business or our future financial or operational results. For further discussion on the impact of the COVID-19 pandemic on our business and financial results, see “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Significant Developments - COVID-19.”
Unfavorable economic conditions could negatively affect our operations and results.
Unfavorable global or regional economic conditions may be triggered by numerous developments beyond our control, including geopolitical events, health crises such as the COVID-19 pandemic, 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, in 2021 and continuing into 2022, the United States and 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). For additional details on the effects of COVID-19 on our operations and financial results, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Significant Developments - COVID-19.” For details on the effects of changes in the value of our benefit plan obligations and assets on our financial results, see Note 9 to the Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data.”
Product recalls or other product liability claims could materially and adversely affect our sales.
The success of our brands depends upon 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 to 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.
Negative publicity could affect our business performance.
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 shareholders, 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 outlets, 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, shareholders, employees, consumers, customers, and policymakers have focused increasingly on the environmental, social, and governance (“ESG”) or “sustainability” positions and practices of companies. If our ESG 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
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retain high-quality talent, and the performance of our brands and business may be negatively affected. Stakeholders 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 failure to attract or retain key talent could adversely affect our business.
Our success depends upon 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, 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, changes in immigration laws and policies, the increasing normalization of remote working, and demand for talent globally, we may not be able to find the right people with the right skills, at the right time, and in the right location, to achieve our business objectives.
We might not succeed in our strategies for investments, acquisitions, dispositions and other strategic transactions.
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 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. Acquisitions, investments, or joint ventures could also lead us to incur additional debt and related interest expenses or issue additional shares, and result in a reduction in our earnings per share and a decrease in our return on invested capital. We could incur future restructuring charges or record impairment losses on the value of goodwill or other intangible assets resulting from previous acquisitions, 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 our accomplishment of 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.
Risks Related to Our Global Operations
Our global business is subject to commercial, political, and financial risks.
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; 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 pandemics (such as COVID-19).
Additionally, in 2018, the United States imposed tariffs on steel and aluminum. In response, a number of countries imposed retaliatory tariffs on U.S. imports, including on our American whiskey products. Such retaliatory tariffs have negatively affected our results of operations through lower net sales and higher cost of sales. However, in October 2021, the United States and the European Union reached an agreement whereby, beginning January 1, 2022, the U.S. lifted the steel and aluminum duties and applied a tariff-rate-quota allowing duty-free importation of steel and aluminum from the European Union based on historical volumes, and, in response, the European Union suspended its retaliatory tariffs that have been in place on certain U.S. products, including our American whiskey products. Likewise, in March 2022, the United States and the United Kingdom reached a similar agreement, effective on June 1, 2022. Any new or additional increases in tariffs, custom duties, or other restrictions or barriers on imports and exports, or the further deterioration of economic relations between the United States and other countries could result in an increase in the price 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. Additionally, it could 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.
A failure to comply with anti-corruption laws, trade sanctions and restrictions, or similar laws or regulations may have a material adverse effect on our business and financial results.
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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. Because the COVID-19 pandemic has negatively impacted numerous local economies, government intervention in local economies and businesses has increased, which has elevated the risk of and opportunity for corruption. 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 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 continued compliance 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.
Fluctuations in foreign currency exchange rates relative to the U.S. dollar could have a material adverse effect on our financial results.
The global scope of our business means that foreign currency 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 talent 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 hurt by a stronger U.S. dollar and will be benefited by a weaker one. We do not attempt to hedge all of our foreign currency exposure. We attempt to hedge a portion 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.”
Legal and Regulatory Risks
National and local governments may adopt regulations or undertake investigations that could limit our business activities or increase our costs.
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 cause us to incur material additional costs or liabilities and jeopardize the growth of our business in the affected market. Specifically, governments may 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. Certain countries historically have banned all television, newspaper, magazine, and digital commerce/advertising for beverage alcohol products. Increases in 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 climate change, use of water, and other environmental issues could increase our operating costs. Increasing regulation of fuel 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.
Tax increases and changes in tax rules could adversely affect our financial results.
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 those that affect the effective corporate income tax rate. For example, 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 include increased residual profit allocations to market jurisdictions and the implementation of a global minimum tax rate. It is possible that the adoption of
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these or other proposals could have a material impact on our net income and cash flows. Furthermore, changes in the earnings mix or applicable foreign tax laws could also negatively impact our effective tax rates.
Our business operations are also subject to numerous duties or taxes that are 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 2022, we have observed excise tax increases in Turkey, France, Finland, Romania, and the annual Australian increase tied to the consumer price index, while we also note that Brazil enacted an excise tax decrease. Additionally, during fiscal 2022, Australia is considering proposals to change the country’s overall beverage alcohol tax policies.
Our ability to market and sell our products depends heavily on societal attitudes toward drinking and governmental policies that both flow from and affect those attitudes.
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 enjoy alcoholic beverages 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.
Significant additional labeling or warning requirements or limitations on the availability of our products could inhibit sales of affected products.
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 2020 in Australia and New Zealand, after concerted campaigning from advocacy groups, the government legislated mandatory pregnancy warning labels to be applied to alcohol beverages with a transition period of three years. Additionally, in February 2021, the European Union published its Europe Beating Cancer Plan. As part of the plan, by the end of 2023, the European Union will 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.
Counterfeiting or inadequate protection of our intellectual property rights could adversely affect our business prospects.
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
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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. In connection with the COVID-19 pandemic and its resulting economic impacts, a reduction in government actions and interventions in local economies and businesses may create an elevated risk of, and opportunity for, counterfeiting.
Litigation and legal disputes could expose our business to financial and reputational risk.
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.
Governmental actions around the world to enforce trade practice, anti-money-laundering, anti-corruption, competition, tax, environmental, and other laws are also 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.
Risks Related to Cybersecurity and Data Privacy
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.
We rely on information technology (IT) systems, networks, and services, including internet sites, data hosting and processing facilities and tools, hardware (including laptops and mobile devices), software, and technical applications and platforms, some of which are managed, hosted, provided, or used by third parties or their vendors, to help us manage our business. The various uses of these IT systems, networks, and services include: hosting our internal network and communication systems; ordering and managing materials from suppliers; billing and collecting cash from our customers; supply/demand planning; inventory planning; production; shipping products to customers; paying our employees; hosting corporate strategic plans and employee data; hosting our branded websites and marketing products to consumers; collecting and storing data on suppliers, customers, consumers, stockholders, employees, former employees, and beneficiaries of employees or former employees; processing transactions; summarizing and reporting results of operations; hosting, processing, and sharing confidential and proprietary research, business plans, and financial reporting and information; complying with regulatory, legal, or tax requirements; providing data security; and handling other processes necessary to manage our business.
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 of the COVID-19 pandemic, a greater number of our employees are working remotely and accessing our technology infrastructure remotely, which further increases our attack surface. For example, in July 2020, we discovered a data breach incident involving malware and related behaviors that resulted in unauthorized access to our IT networks.
Unauthorized access to our IT network or that of our service providers 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 sensitive information; interruptions in our ability to manage operations; and reputational, competitive, or business harm, which may adversely affect our business operations or financial results. In addition, such IT disruptions could result in unauthorized disclosure of material confidential information, resulting in financial and reputational damage because of lost or
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misappropriated confidential information belonging to us or to our partners, customers, consumers, employees, or former employees and their beneficiaries, stockholders, suppliers, or others.
As a result of any cyber breach or IT disruption, we could also be required to spend significant financial and other resources to remedy the damage. Those expenditures could include repairing or replacing networks and IT systems, which could require a significant amount of time and financial investment; responding to claims from employees, former employees, stockholders, suppliers, customers, consumers, or others; handling related litigation or governmental inquiries; or paying significant fines to regulatory agencies. Furthermore, a cyber breach at any one of our suppliers, customers, or other direct or indirect business partners could have similar impacts. Any cyber breach or IT disruption could have a material adverse effect on our business.
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, but also relating to 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 in various jurisdictions around the world. These laws change frequently, and new legislation in this area may be enacted in other jurisdictions at any time. Such laws and regulations include the California Consumer Protection Act, the California Privacy Rights Act, which will take effect on January 1, 2023, and the European Union General Data Protection Regulation (GDPR). These types of laws and regulations subject us to, among other things, additional costs and expenses and may require costly changes to our business practices and security systems, policies, procedures, and practices. Improper disclosure of personal data in violation of personal data protection laws, including the GDPR, could harm our reputation, cause loss of 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, all of which could negatively affect our business and operating results.
Risks Related to Our Ownership and Corporate Governance Structure
The Brown family has the ability to control the outcome of matters submitted for stockholder approval.
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 avail ourselves of the exemptions from having a board composed of a majority of independent directors and 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. Such dual-class share structures have increasingly come under the scrutiny of major indices, institutional investors, and proxy advisory firms, with some calling for the reclassification of nonvoting 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
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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.
Item 1B. Unresolved Staff Comments
None.
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Item 2. Properties
Our company-owned production facilities include distilleries, a winery, bottling plants, an RTD canning plant, warehousing operations, sawmills, cooperages, visitors' centers, and retail shops. We also have agreements with other parties for contract production in Australia, Belgium, China, Finland, Ireland, Latvia, Mexico, the Netherlands, New Zealand, South Africa, the United Kingdom, and the United States.
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 cities 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.

Principal Properties
LocationPrincipal ActivitiesNotes
United States:
Louisville, KentuckyCorporate officesIncludes several renovated historic structures
Distilling, bottling, warehousingHome of Old Forester
Visitors' center
Cooperage Brown-Forman Cooperage
Lynchburg, TennesseeDistilling, bottling, warehousingHome of Jack Daniel's
Visitors' center
Woodford County, KentuckyDistilling, bottling, warehousingHome of Woodford Reserve
Visitors' center
Windsor, CaliforniaVineyards, winery, bottling, warehousingHome of Sonoma-Cutrer
Visitors' center
Trinity, AlabamaCooperageJack Daniel Cooperage
Clifton, TennesseeStave and heading mill
Stevenson, AlabamaStave and heading mill
Jackson, OhioStave and heading millLand is leased from a third party
International:
Cour-Cheverny, FranceDistilling, bottling, warehousingHome of Chambord
Amatitán, MexicoDistilling, bottling, warehousing, RTD canningHome of Herradura and el Jimador
Visitors' center
Slane, IrelandDistillingHome of Slane Irish Whiskey
Visitors' center
Aberdeenshire, ScotlandDistilling, warehousingHome of Glendronach
Visitors' center
Morayshire, ScotlandDistilling, warehousingHome of Benriach
Visitors' center
Newbridge, ScotlandBottling
Portsoy, ScotlandDistilling, warehousingHome of Glenglassaugh
Visitors' center

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Item 3. Legal Proceedings
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.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities
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, 2022, there were 1,899 holders of record of Class A common stock and 3,885 holders of record of Class B common stock. Because of overlapping ownership between classes, as of May 31, 2022, we had only 5,029 distinct common stockholders of record.
Stock Performance Graph
The graph below compares the cumulative total shareholder return of our Class B common stock for the last five fiscal years with the Standard & Poor's (S&P) 500 Index, the Dow Jones U.S. Consumer Goods Index, and the Dow Jones U.S. Food & Beverage Index. The information presented assumes an initial investment of $100 on April 30, 2017, 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 2017.
bfb-20220430_g3.jpg
201720182019202020212022
Brown-Forman Corporation$100$153$147$174$215$195
S&P 500 Total Return Index$100$113$129$130$189$190
Dow Jones U.S. Consumer Goods Index$100$98$109$109$169$175
Dow Jones U.S Food & Beverage Index$100$97$111$110$138$156

Item 6. [Reserved]


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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Introduction
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” (the Consolidated Financial Statements).
Our MD&A is organized as follows:
Table of Contents
Page
Presentation basis
Significant developments
Executive summary
Results of operations
Liquidity and capital resources
Critical accounting policies and estimates
Presentation Basis
Non-GAAP Financial Measures
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.
“Organic change” in measures of statements of operations. We present changes in certain measures, or line items, of the statements of operations that are adjusted to an “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 expenses2; and (h) organic operating income. To calculate these measures, we adjust, as applicable, for (1) acquisitions and divestitures, (2) foreign exchange, (3) impairment charges, and (4) a commitment to our charitable foundation. We explain these adjustments below.
“Acquisitions and divestitures.” This adjustment removes (a) the gain or loss recognized on sale of divested brands, (b) any non-recurring effects related to our acquisitions and divestitures (e.g., transaction, 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 fiscal 2021, we sold our Early Times, Canadian Mist, and Collingwood brands and related assets, which resulted in a pre-tax gain of $127 million, and entered into a related transition services agreement (TSA) for these brands. Also, during fiscal 2021, we acquired Part Time Rangers Limited, which owns Part Time Rangers RTDs. See Note 12 to the Consolidated Financial Statements for more information.
This adjustment removes (a) transaction and integration costs related to the acquisitions and divestitures, (b) the gain on sale of Early Times, Canadian Mist, and Collingwood and related assets, (c) operating activity for the non-comparable period for Early Times, Canadian Mist, and Collingwood, which is activity in the first quarter of fiscal 2021, (d) the net sales and operating expenses recognized pursuant to the TSA related to (i) contract bottling services and (ii) distribution services in certain markets, and (e) operating activity for Part Time Rangers Holdings Limited for the non-comparable period, which is primarily activity in the first two quarters of fiscal 2022. We believe that these adjustments allow for us to better understand our organic results on a comparable basis.
“Foreign exchange.” We calculate the percentage change in certain line items of the statements of operations in accordance with GAAP and adjust to exclude the cost or benefit of currency fluctuations. Adjusting for foreign exchange allows us to understand our business on a constant-dollar basis, as fluctuations in exchange rates can distort the organic
2 Operating expenses include advertising expense, SG&A expense, and other expense (income), net.
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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.
“Impairment Charges.” This adjustment removes the impact of impairment charges from our results of operations.
During the first three quarters of fiscal 2022, we recognized non-cash impairment charges of $9 million for certain fixed assets. During the fourth quarter of fiscal 2022, we recognized a non-cash impairment charge of $52 million for our Finlandia brand name. See “Critical Accounting Policies and Estimates” below and Note 14 to the Consolidated Financial Statements for more information.We believe that these adjustments allow for us to better understand our organic results on a comparable basis.
“Foundation.” During the fourth quarter of fiscal 2021, we committed $20 million to the Brown-Forman Foundation (the Foundation) to support the communities where our employees live and work. This adjustment removes the $20 million commitment to the Foundation from our organic SG&A expenses and organic operating income to present our organic results on a comparable basis.
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 2022 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.
As of the third quarter ended January 31, 2022, we changed certain non-GAAP financial measures that we have historically used. We no longer report “underlying changes” in certain measures of the statements of operations; instead, we now report “organic change” for certain measures of the statements of operations. “Organic change” includes all of the non-GAAP adjustments that we have historically made in adjusting GAAP to “underlying change” results, except that “organic change” does not include an adjustment for “estimated net change in distributor inventories,” which reflected the estimated net effect of changes in distributor inventories on changes in certain line items of the statements of operations. This change to our non-GAAP financial measures was in response to comments from and discussions with the Staff of the Securities and Exchange Commission.

Although we no longer provide non-GAAP financial measures that adjust for “estimated net change in distributor inventories,” we still believe that our results are affected by changes in distributor inventories, particularly in our largest market, the United States, where the spirits industry is subject to regulations that essentially mandate a so-called “three-tier system,” with a value chain that includes suppliers, distributors and retailers. Accordingly, we continue to provide information concerning fluctuations in distributor inventories. We believe such information is useful in understanding our performance and trends as it provides relevant information regarding customers’ demand for our products.
“Return on average invested capital.” This measure refers to the sum of net income and after-tax interest expense, divided by average invested capital. Average invested capital equals assets less liabilities, excluding interest-bearing debt, and is calculated using the average of the most recent 13 month-end balances. After-tax interest expense equals interest expense multiplied by one minus our effective tax rate. We use this non-GAAP measure because we consider it to be a meaningful indicator of how effectively and efficiently we invest capital in our business.
Definitions
Aggregations.
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.
Geographic Aggregations.
In “Results of Operations - Fiscal 2022 Market Highlights,” we provide supplemental information for our largest markets ranked by percentage of total fiscal 2022 net sales. In addition to markets listed by country name, we include the following aggregations:
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“Developed International” markets are “advanced economies” as defined by the IMF, excluding the United States. In fiscal 2022, our largest developed international markets were Germany, Australia, the United Kingdom, and France. This aggregation represents our net sales of branded products to these markets.
“Emerging” markets are “emerging and developing economies” as defined by the IMF. In fiscal 2022, our largest emerging markets were Mexico, Poland, Brazil, Russia, and Chile. This aggregation represents our net sales of branded products to these markets.
“Travel Retail” represents our net sales of branded products to global duty-free customers, other travel retail customers, and the U.S. military, regardless of customer location.
“Non-branded and bulk” includes our net sales of used barrels, contract bottling, and bulk whiskey and wine, regardless of customer location.
Brand Aggregations.
In “Results of Operations - Fiscal 2022 Brand Highlights,” we provide supplemental information for our largest brands ranked by percentage of total fiscal 2022 net sales. In addition to brands listed by name, we include the following aggregations:
“Whiskey” includes all whiskey spirits and whiskey-based flavored liqueurs, ready-to-drink (RTD), and ready-to-pour products (RTP). The brands included in this category are the Jack Daniel’s family of brands, the Woodford Reserve family of brands (Woodford Reserve), the Old Forester family of brands (Old Forester), GlenDronach, Benriach, Glenglassaugh, Slane Irish Whiskey, and Coopers’ Craft.
“American whiskey” includes the Jack Daniel’s family of brands and premium bourbons (defined below).
“Jack Daniel's family of brands” includes Jack Daniel’s Tennessee Whiskey (JDTW), Jack Daniel’s RTD and RTP products (JD RTD/RTP), Jack Daniel’s Tennessee Honey (JDTH), Gentleman Jack, Jack Daniel’s Tennessee Fire (JDTF), Jack Daniel’s Tennessee Apple (JDTA), Jack Daniel’s Single Barrel Collection (JDSB), Jack Daniel’s Tennessee Rye Whiskey (JDTR), Jack Daniel’s Sinatra Select, Jack Daniel’s Bonded, Jack Daniel’s No. 27 Gold Tennessee Whiskey, Jack Daniel’s Bottled-in-Bond, Jack Daniel’s 10 Year Old, and Jack Daniel’s Triple Mash.
“Jack Daniel’s RTD and RTP” products include all RTD line extensions of Jack Daniel’s, such as Jack Daniel’s & Cola, Jack Daniel’s Country Cocktails, Jack Daniel’s Double Jack, and other malt- and spirit-based Jack Daniel’s RTDs along with Jack Daniel’s Winter Jack RTP.
“Premium bourbons” includes Woodford Reserve, Old Forester, and Coopers’ Craft.
“Super-premium American whiskey” includes Woodford Reserve, Gentleman Jack, and other super-premium Jack Daniel's expressions.
“Tequila” includes the Herradura family of brands (Herradura), el Jimador, New Mix, and other tequilas.
“Wine” includes Korbel Champagnes and Sonoma-Cutrer wines.
“Vodka” includes Finlandia.
“Non-branded and bulk” includes our net sales of used barrels, contract bottling, and bulk whiskey and wine.
Other Metrics.
“Shipments.” We generally record revenues when we ship or deliver our products to our customers. In this report, unless otherwise specified, we refer to shipments when discussing volume.
“Depletions.” 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.
“Consumer takeaway.” 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
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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.
“Estimated net change in distributor inventories.” 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.
We perform the following calculation to determine the “estimated net change in distributor inventories”:
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.
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Significant Developments
Below we discuss the significant developments in our business during fiscal 2021 and fiscal 2022. These developments relate to the COVID-19 pandemic (COVID-19), supply chain disruptions, Russia’s invasion of Ukraine, innovation, and capital deployment.
COVID-19
We experienced strong, broad-based reported net sales growth across all of our geographic clusters and Travel Retail channel due to the gradual re-opening of the on-premise channel, some degree of travel and tourism returning, and growing premiumization trends. While the financial impact of COVID-19 on our business is difficult to measure, we believe the timing and pace of global vaccination rates, governmental actions to lower or eliminate restrictions in certain economies around the world, and the post-pandemic economic recovery positively impacted our results when compared to the same prior-year period. We further discuss the effect of COVID-19 on our results where relevant below.
Supply Chain Disruptions
Our results were negatively impacted by supply chain disruptions, largely related to glass supply. These disruptions curtailed our ability to fully meet demand and therefore negatively affected our net sales. Additionally, we incurred higher input and transportation costs due to the supply chain disruptions. We further discuss the effect of supply chain disruptions on our results where relevant below.
Russia’s Invasion of Ukraine
Russia’s invasion of Ukraine, which began in February 2022, had a negative effect on our fiscal 2022 operating results. The most significant effect was the $52 million non-cash impairment charge for our Finlandia brand name (see Note 4 to the Consolidated Financial Statements for more information), which reflects a decline in our long-term outlook for Finlandia due to the suspension of operations in Russia, a key market for the brand. Additionally, operating income was negatively affected by other items attributable to the conflict such as (a) the suspension of our commercial operations in Russia and our diminished ability to conduct business in Ukraine, (b) bad debt expense, (c) inventory write-offs, and (d) severance expense. These negative effects were partially offset by the gain on terminated Russian ruble hedge contracts.
Although reported net sales were negatively affected by the suspension of our commercial operations in Russia and our diminished ability to conduct business in Ukraine as a result of the conflict, the overall impact was not material to our consolidated full-year reported net sales growth rate, because (a) Russia and Ukraine represent a small share of total reported net sales and (b) the impact occurred in the fourth quarter of the fiscal year. Prior to the onset of the conflict, Russia and Ukraine represented approximately 2% of our reported net sales. We expect the conflict to have a more significant negative effect on our fiscal 2023 reported net sales results, reflecting a full-year impact of the suspension of commercial operations in Russia, and the ongoing disruption of our business in Ukraine. We further discuss the effect of the conflict on our fiscal 2022 results where relevant below.
Innovation
Jack Daniel’s family of brands. Innovation within the Jack Daniel’s family of brands has contributed to our growth in the last two years as described below.
In fiscal 2021 and fiscal 2022, we continued the international launch of Jack Daniel’s Tennessee Apple, expanding to certain developed international and emerging markets.
In fiscal 2021, we introduced new spirit-based RTD products in the United States.
In fiscal 2022, we launched Jack Daniel’s 10 Year Old in the United States.
Tequila brands. Tequila continues to be an attractive category, particularly in the United States, with both Herradura and el Jimador contributing significantly to our overall net sales growth. In fiscal 2021, we introduced Herradura Legend in the United States.
Capital Deployment
We have focused our capital deployment initiatives on (a) ensuring adequate liquidity and flexibility during the COVID-19 pandemic, (b) fully investing in our existing business, (c) continued execution of our acquisitions and divestitures strategy, and (d) returning cash to our stockholders through regular and special dividends.
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Investments. During fiscal 2021 and fiscal 2022, our capital expenditures totaled $200 million and focused on enabling the growth of our premium whiskey brands:
During fiscal 2021, a $125 million capital investment was approved by our Board of Directors to expand our bourbon-making capacity in Kentucky to meet anticipated future consumer demand.
During fiscal 2022, a $50 million capital investment was approved by our Board of Directors to expand our scotch-making capacity to meet anticipated future consumer demand.
To support the continued growth of JDTW, we built an additional barrel warehouse at our Jack Daniel’s distillery during fiscal 2022.
Acquisitions and divestitures. During fiscal 2021, we sold our Early Times, Canadian Mist, and Collingwood brands and related assets. Also in fiscal 2021, we acquired Part Time Rangers Holdings Limited, which owns Part Time Rangers RTDs. See Note 12 to the Consolidated Financial Statements for more information.
Cash returned to stockholders. During fiscal 2021 and fiscal 2022, we returned $1.2 billion to our stockholders through regular and special dividends.
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Executive Summary
Fiscal 2022 Highlights
We delivered reported net sales of $3.9 billion, an increase of 14% compared to fiscal 2021. Reported net sales growth was driven by higher volumes and favorable price/mix, partially offset by the negative effect of foreign exchange and the effect of acquisitions and divestitures. An estimated net increase in distributor inventories positively impacted reported net sales. Organic net sales increased 17% compared to fiscal 2021.
From a brand perspective, reported net sales growth was driven by JDTW, our tequilas, and premium bourbons.
From a geographic perspective, the United States, emerging markets, developed international markets, and the Travel Retail channel all contributed significantly to reported net sales growth.
Supply chain disruptions had an adverse effect on results.
We delivered reported operating income of $1.2 billion, an increase of 3% compared to fiscal 2021. The increase in reported operating income was driven by reported net sales growth and the absence of the $20 million commitment to the Foundation in fiscal 2021, partially offset by (a) the effect of acquisitions and divestitures (primarily the fiscal 2021 gain on sale of Early Times, Canadian Mist, and Collingwood), (b) impairment charges, and (c) the negative effect of foreign exchange. Organic operating income increased 27% compared to fiscal 2021.
We delivered diluted earnings per share of $1.74, a decrease of 7% compared to fiscal 2021, due to higher income taxes, partially offset by an increase in reported operating income. Earnings per share in fiscal 2021 included an estimated $0.20 per share benefit from the gain on sale of Early Times, Canadian Mist, and Collingwood and related assets.
Our return on average invested capital decreased to 17.7% in fiscal 2022, compared to 19.6% in fiscal 2021, driven primarily by higher income taxes. Return on average invested capital in fiscal 2021 benefited from the gain on sale of Early Times, Canadian Mist, and Collingwood and related assets.



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Summary of Operating Performance Fiscal 2021 and Fiscal 2022
2021 vs. 2022
Fiscal year ended April 3020212022Reported Change
Organic Change1
Net sales$3,461 $3,933 14 %17 %
Cost of sales$1,367 $1,542 13 %18 %
Gross profit$2,094 $2,391 14 %17 %
Advertising$399 $438 10 %11 %
SG&A$671 $690 %%
Gain on sale of business$(127)$— nmn/a
Other expense (income), net$(15)$59 nmnm
Operating income$1,166 $1,204 %27 %
Total operating expenses2
$1,055 $1,187 13 %%
As a percentage of net sales3
Gross profit60.5 %60.8 %0.3 pp
Operating income33.7 %30.6 %(3.1 pp)
Interest expense, net$79 $77 (4 %)
Effective tax rate16.5 %24.8 %8.3 pp
Diluted earnings per share$1.88 $1.74 (7 %)
Return on average invested capital1
19.6 %17.7 %(1.9 pp)
1See “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.
2Operating expenses include advertising expense, SG&A expense, and other expense (income), net.
3Year-over-year changes in percentages are reported in percentage points (pp).





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Results of Operations
Fiscal 2022 Market Highlights
The following table shows net sales results for our largest markets, summarized by geographic area, for fiscal 2022 compared to fiscal 2021. We discuss results of the markets most affecting our performance below the table.

Top Markets
Net Sales % Change vs. 2021
Geographic area1
% of Fiscal 2022 Net Sales
ReportedAcquisitions and DivestituresForeign Exchange
Organic2
United States49 %10 %2 % %12 %
Developed International29 %12 % %4 %16 %
Germany%11 %— %%14 %
Australia%%— %%%
United Kingdom%%— %%15 %
France%(1 %)— %%%
Rest of Developed International%32 %%%37 %
Emerging18 %24 % %5 %29 %
Mexico%19 %— %(4 %)15 %
Poland%%— %%13 %
Brazil%22 %— %(1 %)21 %
Russia%%— %%13 %
Chile%64 %— %— %64 %
Rest of Emerging%34 %— %15 %49 %
Travel Retail3 %65 %2 %1 %67 %
Non-branded and bulk2 %6 %18 %1 %25 %
Total100 %14 %2 %2 %17 %
Note: Results may differ due to rounding
1See “Definitions” above for definitions of market aggregations presented here.
2See “Non-GAAP Financial Measures” above for details on our use of “organic change” in net sales, including how we calculate this measure and why we believe this information is useful to readers.
Reported net sales for some of the markets discussed below were positively impacted by comparisons against COVID-19-related declines during fiscal 2021. See “Significant Developments - COVID-19” above for more information on the impact of COVID-19 on our results.
The United States, our most important market, grew reported net sales 10%, led by (a) JDTW, fueled by higher volumes and a favorable channel mix shift to the on-premise channel; (b) our premium bourbons, due to higher volumes and prices of Woodford Reserve and Old Forester; (c) our tequilas, driven by higher volumes of Herradura and el Jimador; and (d) volumetric growth of Sonoma-Cutrer. An estimated net increase in distributor inventories positively impacted reported net sales. This growth was partially offset by the effect of acquisitions and divestitures along with lower volumes of JDTH. Supply chain disruptions had an adverse effect on results.
Developed International
Germany’s reported net sales increased 11%, fueled by volumetric gains of JDTW and JD RTDs, partially offset by the negative effect of foreign exchange.
Australia’s reported net sales increased 5%, driven primarily by higher pricing of JD RTDs, partially offset by the negative effect of foreign exchange.
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The United Kingdom’s reported net sales increased 7%, led by volumetric growth of JDTW, partially offset by the negative effect of foreign exchange. Supply chain disruptions had an adverse effect on results.
Reported net sales in the Rest of Developed International increased 32%, fueled by JDTW growth in Spain, Japan, and Korea, partially offset by the negative effect of foreign exchange. An estimated net increase in distributor inventories positively impacted reported net sales. Supply chain disruptions had an adverse effect on results.
Emerging
Mexico’s reported net sales increased 19%, driven by broad-based growth across our portfolio of brands, led by Herradura and JDTW, along with the positive effect of foreign exchange. Supply chain disruptions had an adverse effect on results.
Poland’s reported net sales increased 9%, led by JDTW and Finlandia, partially offset by the negative effect of foreign exchange. Supply chain disruptions had an adverse effect on results.
Brazil’s reported net sales increased 22%, fueled by the launch of JDTA, favorable price/mix of JDTW, and higher volumes of JDTH. Supply chain disruptions had an adverse effect on results.
Russia’s reported net sales increased 7%, led by the launch of JDTA and higher pricing of Finlandia, partially offset by the negative effect of foreign exchange. Our fiscal 2022 reported net sales were adversely impacted by the suspension of our commercial operations in Russia due to Russia’s invasion of Ukraine. Our fiscal 2023 outlook reflects the expected impact of a full-year suspension of our commercial operations in Russia.
Chile’s reported net sales increased 64%, driven by broad-based growth across much of our portfolio, led by higher volumes of JDTW and the launch of JDTA. Supply chain disruptions had an adverse effect on results.
Reported net sales in the Rest of Emerging increased 34%, driven primarily by JDTW gains, led by Turkey, Romania, and the United Arab Emirates. This growth was partially offset by the negative effect of foreign exchange (reflecting the strengthening of the dollar primarily against the Turkish lira). An estimated net increase in distributor inventories positively impacted reported net sales.
Travel Retail reported net sales increased 65%, fueled by higher volumes across much of our portfolio, led by JDTW, as we cycled against significant declines during the same prior-year period, partially offset by unfavorable price/mix.
Non-branded and bulk reported net sales increased 6%, driven by higher volumes for used barrels.

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Fiscal 2022 Brand Highlights
The following table highlights the global results of our largest brands for fiscal 2022 compared to fiscal 2021. We discuss results of the brands most affecting our performance below the table.

Major Brands
Net Sales % Change vs. 2021
Product category / brand family / brand1
ReportedAcquisitions & DivestituresForeign Exchange
Organic2
Whiskey13 %2 %2 %18 %
Jack Daniel’s family of brands15 %— %%17 %
JDTW20 %— %%23 %
JD RTD/RTP%— %%%
JDTH— %— %%%
Gentleman Jack(3 %)— %%— %
JDTF16 %— %(2 %)13 %
JDTA44 %— %%46 %
Other Jack Daniel’s whiskey brands17 %— %%19 %
Woodford Reserve16 %— %— %16 %
Rest of Whiskey(10 %)37 %%28 %
Tequila22 % %(2 %)20 %
Herradura29 %— %(1 %)28 %
el Jimador27 %— %(1 %)27 %
Rest of Tequila%— %(3 %)%
Wine6 % % %6 %
Vodka (Finlandia)21 % %2 %23 %
Rest of Portfolio10 %(2 %)14 %22 %
Non-branded and bulk6 %18 %1 %25 %
Note: Results may differ due to rounding
1See “Definitions” above for definitions of brand aggregations and volume measures presented here.
2See “Non-GAAP Financial Measures” above for details on our use of “organic change” in net sales, including how we calculate this measure and why we believe this information is useful to readers.
Reported net sales for some of the brands discussed below were positively impacted by comparisons against COVID-19-related declines during fiscal 2021. See “Significant Developments - COVID-19” above for more information on the impact of COVID-19 on our results.
Whiskey
The Jack Daniel's family of brands grew reported net sales 15%, driven by the broad-based growth of JDTW.
JDTW generates a significant percentage of our total net sales and is our top priority. Reported net sales increased 20%, driven by (a) broad-based volume growth in the United States, developed international markets, and emerging markets; and (b) a favorable channel mix shift to the on-premise. An estimated net increase in distributor inventories positively impacted reported net sales. This growth was partially offset by the negative effect of foreign exchange. Supply chain disruptions had an adverse effect on results.
Jack Daniel's RTD/RTP grew reported net sales 6%, driven primarily by Australia and Germany.
Reported net sales for JDTH were flat, as broad-based gains in our international markets were offset by declines in the United States and the negative effect of foreign exchange. Supply chain disruptions had an adverse effect on results.
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JDTF grew reported net sales 16%, led by growth in emerging markets along with the positive effect of foreign exchange. An estimated net increase in distributor inventories positively impacted reported net sales. Supply chain disruptions had an adverse effect on results.
JDTA grew reported net sales 44%, fueled by the continued international launch in our emerging markets, most notably in Chile and Brazil, along with volumetric gains in the United States. An estimated net increase in distributor inventories positively impacted reported net sales.
Other Jack Daniel’s whiskey brands grew reported net sales 17%, largely driven by higher volumes in the United States reflecting the April 2022 inventory build in advance of the launch of Jack Daniel’s Bonded and Jack Daniel’s Triple Mash.
Woodford Reserve’s reported net sales increased 16%, fueled by higher volumes and prices in the United States along with volumetric gains in Travel Retail. Supply chain disruptions had an adverse effect on results.
Rest of Whiskey reported net sales declined 10% due to the effect of acquisitions and divestitures, partially offset by growth of Old Forester, BenRiach, and GlenDronach. An estimated net increase in distributor inventories positively impacted reported net sales.
Tequila
Herradura’s reported net sales increased 29%, fueled by growth in the United States and Mexico.
el Jimador’s reported net sales increased 27%, driven by broad-based volume growth led by the United States, Colombia, and Mexico.
Wine reported net sales increased 6%, driven primarily by higher volumes of Sonoma-Cutrer due to the reopening of the on-premise channel in the United States. An estimated net increase in distributor inventories positively impacted reported net sales.
Vodka (Finlandia) reported net sales increased 21% led by broad-based growth in emerging markets. Russia and Ukraine are key markets for Finlandia. Our fiscal 2023 outlook reflects the expected impact of a full-year suspension of our commercial operations in Russia and the ongoing impact on our ability to conduct business in Ukraine.
Rest of Portfolio reported net sales increased 10%, largely driven by the growth of Chambord in the United Kingdom and United States, partially offset by the negative effect of foreign exchange.
Non-branded and bulk. See discussion for this aggregation in “Results of Operations - Fiscal 2022 Market Highlights” above.

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Year-Over-Year Comparisons
Commentary below compares fiscal 2022 to fiscal 2021 results. A comparison of fiscal 2021 to fiscal 2020 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, 2021 (2021 Form 10-K).
Reported net sales for some markets and brands were positively impacted by comparisons against COVID-19-related declines during fiscal 2021. See “Significant Developments - COVID-19” above for more information.

Net Sales
2022
Percentage change versus the prior fiscal year ended April 30VolumePrice/mixTotal
Change in reported net sales%%14 %
Acquisitions and divestitures%(1 %)%
Foreign exchange— %%%
Change in organic net sales%%17 %
Note: Results may differ due to rounding
Reported net sales of $3.9 billion increased 14%, or $472 million, in fiscal 2022 compared to fiscal 2021. Reported net sales growth was driven by higher volumes and favorable price/mix, partially offset by the negative effect of foreign exchange and the effect of acquisitions and divestitures. An estimated net increase in distributor inventories positively impacted reported net sales. Volume growth was driven by the Jack Daniel’s family of brands, led by JDTW, JD RTDs, and JDTA. Favorable price/mix was driven by faster growth from our higher-priced brands, led by JDTW, and a favorable channel mix shift due to the continued re-opening of the on-premise channel. Supply chain disruptions had an adverse effect on results. See “Results of Operations - Fiscal 2022 Market Highlights” and “Results of Operations - Fiscal 2022 Brand Highlights” above for details on the factors contributing to the change in reported net sales for fiscal 2022.
Cost of Sales
2022
Percentage change versus the prior fiscal year ended April 30VolumeCost/mixTotal
Change in reported cost of sales%%13 %
Acquisitions and divestitures%%%
Foreign exchange— %%%
Change in organic cost of sales%%18 %
Note: Results may differ due to rounding
Reported cost of sales of $1.5 billion increased $175 million, or 13%, in fiscal 2022 compared to fiscal 2021. The increase was driven by higher volumes and unfavorable cost/mix, partially offset by the effect of acquisitions and divestitures and the positive effect of foreign exchange. An estimated net increase in distributor inventories negatively impacted reported cost of sales. Volume growth was driven by the Jack Daniel’s family of brands, led by JDTW, JD RTDs, and JDTA. Unfavorable cost/mix reflects (a) a shift in portfolio mix toward our higher-cost brands, (b) higher costs related to supply chain disruptions, (c) higher input costs related to grain and agave, and (d) inventory write-offs attributable to the impacts of Russia’s invasion of Ukraine.

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Gross Profit
Percentage change versus the prior fiscal year ended April 302022
Change in reported gross profit14 %
Acquisitions and divestitures%
Foreign exchange%
Change in organic gross profit17 %
Note: Results may differ due to rounding

Gross Margin
Fiscal year ended April 302022
Prior year gross margin60.5 %
Price/mix1.3 %
Cost/mix(1.3 %)
Acquisitions and divestitures0.5 %
Foreign exchange(0.2 %)
Change in gross margin0.3 %
Current year gross margin60.8 %
Note: Results may differ due to rounding

Reported gross profit of $2.4 billion increased $297 million, or 14%, in fiscal 2022 compared to fiscal 2021. Gross margin increased to 60.8% in fiscal 2022, up 0.3 percentage points from 60.5% in fiscal 2021. The increase in gross margin was driven primarily by favorable price/mix and the effect of acquisitions and divestitures, largely offset by unfavorable cost/mix.
Operating Expenses
Percentage change versus the prior fiscal year ended April 30
2022ReportedFoundation ImpairmentForeign ExchangeOrganic
Advertising10 %— %— %%11 %
SG&A%%— %%%
Total operating expenses1
13 %2 %(6 %)(1 %)8 %
Note: Results may differ due to rounding
1Operating expenses include advertising expense, SG&A expense, and other expense (income), net.
Reported operating expenses totaled $1.2 billion and increased $132 million, or 13%, in fiscal 2022 compared to fiscal 2021.
Reported advertising expenses increased 10% in fiscal 2022, driven primarily by higher spend in our developed international and emerging markets to support JDTW and the continued launch of JDTA.
Reported SG&A expenses increased 3% in fiscal 2022, driven primarily by (a) comparison to lower discretionary spend during fiscal 2021 due to COVID-19, (b) higher compensation and benefit-related expenses, and (c) expenses attributable to the impacts of Russia’s invasion of Ukraine. This increase in spend was partially offset by the absence of the $20 million commitment to the Foundation in fiscal 2021 and the positive effect of foreign exchange.
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Operating Income
Percentage change versus the prior fiscal year ended April 302022
Change in reported operating income%
Acquisitions and divestitures14 %
Foundation(2 %)
Impairment charges%
Foreign exchange%
Change in organic operating income27 %
Note: Results may differ due to rounding
Reported operating income was $1.2 billion in fiscal 2022, an increase of $38 million, or 3%, compared to fiscal 2021. Operating margin declined 3.1 percentage points to 30.6% in fiscal 2022 from 33.7% in fiscal 2021 driven by (a) the effect of acquisitions and divestitures (primarily the fiscal 2021 gain on sale of Early Times, Canadian Mist, and Collingwood and related assets), (b) unfavorable cost/mix, (c) impairment charges (primarily the non-cash impairment charge for our Finlandia brand name), and (d) the negative effect of foreign exchange. These factors were partially offset by (a) favorable price/mix, (b) operating expense (excluding impairment charges) leverage, and (c) the absence of the $20 million commitment to the Foundation in fiscal 2021.
Interest expense (net) decreased $2 million, or 4%, in fiscal 2022 compared to fiscal 2021, due to higher interest income driven by higher interest rates on our interest-bearing investments.
Our effective tax rate for fiscal 2022 was 24.8% compared to 16.5% in fiscal 2021. The increase in our effective tax rate was driven primarily by (a) the absence of a deferred tax benefit recognized in the prior-year related to an intercompany transfer of assets, (b) the impact of prior intercompany sales of inventory taxed at rates higher than current statutory tax rates, (c) increased expense from true-ups of prior-year tax liabilities, tax rate changes and other permanent differences; and (d) decreased benefit from stock-based compensation. See Note 11 to the Consolidated Financial Statements for details.
Diluted earnings per share were $1.74 in fiscal 2022, a decrease of 7% compared to fiscal 2021 due to higher income taxes, partially offset by an increase in reported operating income. Earnings per share in fiscal 2021 included an estimated $0.20 per share benefit from the gain on sale of Early Times, Canadian Mist, and Collingwood and related assets.
Fiscal 2023 Outlook
Below we discuss our outlook for fiscal 2023 which reflects the trends, developments, and uncertainties, including those described above, we expect to affect our business. 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 because 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.
The company anticipates continued growth in fiscal 2023 despite global macroeconomic and geopolitical uncertainties. Accordingly, we expect the following in fiscal 2023:
Reflecting the strength of our portfolio of brands and strong consumer demand, we expect organic net sales growth in the mid-single digit range.
Considering the net effect of inflation and the removal of the European Union and United Kingdom tariffs on American whiskey, we project reported gross margin to increase slightly.
Based on the above expectations, we anticipate mid-single digit organic operating income growth.
We expect our fiscal 2023 effective tax rate to be in the range of approximately 22% to 23%.
Capital expenditures are planned to be in the range of $190 to $210 million.
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Liquidity and Capital Resources
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 Standard & Poor's) 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 cash flow from operations is supplemented by our cash and cash equivalent balances, as well as access to other liquidity sources. Cash and cash equivalents were $1,150 million at April 30, 2021, and $868 million at April 30, 2022. As of April 30, 2022, approximately 71% 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, which may require us to provide for and pay additional taxes.
We have an $800 million commercial paper program that we use, together with our cash flow from operations, to fund our short-term operational needs. See Note 6 to the Consolidated Financial Statements for outstanding commercial paper balances, interest rates, and days to maturity at April 30, 2021 and April 30, 2022. The average balances, interest rates, and original maturities during the periods ended April 30, 2021 and 2022, are presented below.
(Amounts in millions)Three Months AverageFiscal Year Average
April 30,April 30,
2021202220212022
Average commercial paper$259 $— $321 $59 
Average interest rate0.23 %— %0.49 %0.16 %
Average days to maturity at issuance720116 32 
Our commercial paper program is supported by available commitments under our $800 million bank credit facility. The credit facility, which was extended for an additional year in November 2021, is scheduled to expire in November 2024. At April 30, 2022, there were no borrowings outstanding under the credit facility. 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 the financial conditions of each bank.
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), repayment of our note maturing in 2023, 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 6, 9 and 11 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 expected future financial commitments.
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Cash Flow Summary
The following table summarizes our cash flows for each of the last two years:
(Dollars in millions)20212022
Cash flows from operating activities$817 $936 
Investing activities:
Proceeds from sale of business$177 $— 
Acquisition of business(14)— 
Additions to property, plant, and equipment(62)(138)
Other(3)11 
Net cash flows from investing activities$98 $(127)
Financing activities:
Net change in short-term borrowings$(126)$(196)
Regular dividend payments(338)(352)
Special dividend payment— (479)
Other(21)(11)
Net cash flows from financing activities$(485)$(1,038)
Cash provided by operations of $936 million increased $119 million from fiscal 2021, reflecting improved operating results and the impact of changes in working capital, which included the collection in December 2021 of approximately $62 million of accounts receivable from Bacardi that had been withheld since fiscal 2021. (See Note 5 to the Consolidated Financial Statements for details about the Bacardi matter.)
Cash flows from investing activities decreased $127 million during fiscal 2022, compared to an increase of $98 million during the prior year. The $225 million change largely reflects (a) the proceeds of $177 million received in the prior-year period from our divestiture of the Early Times, Canadian Mist, and Collingwood brands and related assets and (b) a $76 million increase in capital expenditures.
Cash used for financing activities was $1,038 million during fiscal 2022, compared to $485 million for fiscal 2021. The $553 million increase largely reflects a special cash dividend payment of $479 million in December 2021 and a $70 million increase in net repayments of short-term borrowings.
A discussion of our cash flows for fiscal 2021 compared to fiscal 2020 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 year ended April 30, 2021.
Dividends
As announced in November 2021, our Board of Directors approved a 5% increase in the quarterly cash dividend on our Class A and Class B common stock to $0.1885 per share from $0.1795 per share, effective with the regular quarterly dividend paid on December 28, 2021. As a result, the indicated annual cash dividend increased from $0.7180 per share to $0.7540 per share. The Board also declared a special cash dividend of $1.00 per share on our Class A and Class B common stock, which was paid on December 29, 2021.
As announced on May 26, 2022, our Board of Directors declared a regular quarterly cash dividend on our Class A and Class B common stock of $0.1885 per share. Stockholders of record on June 8, 2022, will receive the dividend on July 1, 2022.
Critical Accounting Policies and Estimates
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.
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Goodwill and Other Intangible Assets
We have obtained most of our brands by acquiring other companies. When we acquire another company, 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 making 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.
Based on our assumptions, we believe none of our goodwill or other intangibles are impaired as of April 30, 2022. Further, we estimate the fair values of goodwill and other intangible assets substantially exceed their carrying amounts, except for our Finlandia brand name. As of April 30, 2022, the carrying amount of the Finlandia brand name is $181 million.
During the fourth quarter of fiscal 2022, we recognized a non-cash impairment charge of $52 million for the Finlandia brand name. The impairment reflects a decline in our long-term outlook for Finlandia due to our suspension of operations in Russia, a key market for the brand. We determined Finlandia’s fair value based on the “relief from royalty” method, using current assumptions. Reasonably possible changes in those assumptions could result in additional non-cash impairment charges in the future. For example, we estimate that, all else equal, (a) a 15% decline in projected future net sales would result in an impairment charge of approximately $19 million or (b) a 1 percentage point increase in the discount rate would result in an impairment charge of approximately $29 million.
Pension and Other Postretirement Benefits
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 2022 to those to be used in determining that cost for fiscal 2023.
 Pension BenefitsMedical and Life
Insurance Benefits
 2022202320222023
Discount rate for service cost3.36 %4.44 %3.49 %4.50 %
Discount rate for interest cost2.24 %3.97 %2.27 %3.96 %
Expected return on plan assets6.25 %6.25 %n/an/a
Using these assumptions, we estimate our pension and other postretirement benefit cost for fiscal 2023 will be approximately $21 million, compared to $28 million (excluding settlement charges) for fiscal 2022. Decreasing/increasing the
47


assumed discount rates by 50 basis points would increase/decrease the total fiscal 2023 cost by approximately $6 million. Decreasing/increasing the assumed return on plan assets by 50 basis points would increase/decrease the total fiscal 2023 cost by approximately $4 million.
Income Taxes
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.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Market risks
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 exchange rate risk. 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 $1,218 million and $801 million at April 30, 2021 and 2022, respectively.
We estimate that a hypothetical 10% weakening of the dollar compared to exchange rates of hedged currencies as of April 30, 2022, would decrease the fair value of our then-existing foreign currency derivative contracts by approximately $61 million. This hypothetical change in fair value does not consider the expected inverse change in the underlying foreign currency exposures.
Commodity price risk. 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 certain exposures through forward purchase contracts.
Interest rate risk. 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, 2022, our cash and cash equivalents ($868 million) were exposed to interest rate changes. Based on the then-existing balances of our interest-bearing investments, a hypothetical one percentage point increase in interest rates would result in a negligible decrease in net interest expense.
See Notes 13 and 14 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.

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Item 8. Financial Statements and Supplementary Data


Table of Contents
Page
Reports of Management
Reports of Independent Registered Public Accounting Firms (PCAOB ID 238 and 42)
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Stockholders’ Equity
Notes to Consolidated Financial Statements


49


Reports of Management
Management’s Responsibility for Financial Statements
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, free 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’s Report on Internal Control over Financial Reporting
Management is also responsible for establishing and maintaining effective 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.
As of the end of our fiscal year, management conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework and criteria in Internal Control – Integrated Framework (2013) 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, 2022. 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, 2022, as stated in their report.
 
Dated:June 17, 2022  
 By:/s/ Lawson E. Whiting
  Lawson E. Whiting
  
President and Chief Executive Officer
 By:/s/ Leanne D. Cunningham
  Leanne D. Cunningham
  Senior Vice President and Chief Financial Officer


50


Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Brown-Forman Corporation

Opinion on the Financial Statements
We have audited the consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows of Brown-Forman Corporation and its subsidiaries (the “Company”) for the year ended April 30, 2020, including the related notes and schedule of valuation and qualifying accounts for the year ended April 30, 2020 appearing under 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 results of operations and cash flows of the Company for the year ended April 30, 2020 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (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 of these consolidated financial statements 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 consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP
Louisville, Kentucky
June 19, 2020

We served as the Company’s auditor from 1933 to 2020.
51


Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Brown-Forman Corporation

Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Brown-Forman Corporation and Subsidiaries (the Company) as of April 30, 2022 and 2021, the related consolidated statement of operations, comprehensive income, stockholders’ equity and cash flows for each of the two years in the period ended April 30, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended April 30, 2022, 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, 2022, 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 17, 2022 expressed an unqualified opinion thereon.

Basis for Opinion
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 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 the financial statements are free of material misstatement, whether due to error or fraud. Our audit 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.

Critical Audit Matter

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.

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Valuation of Other Intangible Assets with Indefinite Lives
Description of the Matter
At April 30, 2022, the balance of the Company’s other intangible assets with indefinite lives was $586 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. As described in Note 4, during the fourth quarter of 2022, the Company recognized an impairment charge of $52 million for its Finlandia brand name. The Company determined Finlandia’s fair value based on the relief from royalty method.

Auditing management’s estimate of the fair value of 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 future net sales. The estimate also includes assumptions such as discount rates and royalty rates.

How We Addressed the Matter in Our AuditWe 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 other intangible assets with indefinite lives, including controls over management’s review of the selection of assumptions, described above, used in the valuation model.

To test the estimated fair value of the Company’s brand names, we performed audit procedures that included, among others, assessing methodologies used in the valuation model 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.


/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2020.

Louisville, Kentucky
June 17, 2022

53


Report of Independent Registered Public Accounting Firm


To the Stockholders and the Board of Directors of Brown-Forman Corporation

Opinion on Internal Control Over Financial Reporting
We have audited Brown-Forman Corporation and Subsidiaries’ internal control over financial reporting as of April 30, 2022, 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, 2022, 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, 2022 and 2021, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the two years in the period ended April 30, 2022, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) and our report dated June 17, 2022 expressed an unqualified opinion thereon.

Basis for Opinion
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.

Definition and Limitations of Internal Control Over Financial Reporting
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.

/s/ Ernst & Young LLP

Louisville, Kentucky
June 17, 2022

54


Brown-Forman Corporation and Subsidiaries
Consolidated Statements of Operations
(Dollars in millions, except per share amounts)
 
Year Ended April 30,202020212022
Sales$4,306 $4,526 $5,081 
Excise taxes943 1,065 1,148 
Net sales3,363 3,461 3,933 
Cost of sales1,236 1,367 1,542 
Gross profit2,127 2,094 2,391 
Advertising expenses383 399 438 
Selling, general, and administrative expenses642 671 690 
Gain on sale of business (127) 
Other expense (income), net11 (15)59 
Operating income1,091 1,166 1,204 
Non-operating postretirement expense5 6 13 
Interest income(5)(2)(5)
Interest expense82 81 82 
Income before income taxes1,009 1,081 1,114 
Income taxes182 178 276 
Net income$