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Brown-Forman Sales Growth Continues; On Track For Full Year Outlook

Stocks in this article: BFB

Use of Non-GAAP Financial Information This press release includes measures not derived in accordance with generally accepted accounting principles (“GAAP”), including constant currency net sales, underlying net sales and underlying operating income. These 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 similar measures presented by other companies. Reconciliations of these measures to the most closely comparable GAAP measures, and reasons for the company’s use of these measures, are presented on Schedule A attached hereto.

             

Brown-Forman Corporation

Unaudited Consolidated Statements of Operations

For the Three Months Ended July 31, 2012 and 2013

(Dollars in millions, except per share amounts)

 

2012

2013

Change

 
Net sales $ 878 $ 896 2 %
Excise taxes 212 210 (1 %)
Cost of sales   202     209   4 %
Gross profit 464 477 3 %
Advertising expenses 92 103 12 %
Selling, general, and administrative expenses 148 156 5 %
Other expense, net   2     1  
Operating income 222 217 (2 %)
Interest expense, net   5     6  
Income before income taxes 217 211 (3 %)
Income taxes   70     68  
Net income $ 147   $ 143   (3 %)
 
Earnings per share:
Basic $ 0.69 $ 0.67 (3 %)
Diluted $ 0.69 $ 0.66 (3 %)
 
Gross margin 52.9 % 53.3 %
Operating margin 25.2 % 24.2 %
 
Effective tax rate 32.1 % 32.4 %
 
Cash dividends paid per common share $ 0.23 $ 0.26
 

Shares (in thousands) used in the calculation of earnings per share

Basic 213,168 213,709
Diluted 214,798 215,320
 
       

Brown-Forman Corporation

Unaudited Condensed Consolidated Balance Sheets

 (Dollars in millions)

 
April 30, July 31,

2013

2013

Assets:
Cash and cash equivalents $ 204 $ 217
Accounts receivable, net 548 542
Inventories 827 874
Other current assets   242   228
Total current assets 1,821 1,861
 
Property, plant, and equipment, net 450 459
Goodwill 617 618
Other intangible assets 668 669
Other assets   70   79
Total assets $ 3,626 $ 3,686
 
Liabilities:
Accounts payable and accrued expenses $ 451 $ 393
Dividends payable -- 55
Short-term borrowings 3 5
Current portion of long-term debt 2 1
Other current liabilities   17   61
Total current liabilities 473 515
 
Long-term debt 997 997
Deferred income taxes 180 185
Accrued postretirement benefits 280 266
Other liabilities   68   57
Total liabilities 1,998 2,020
 
Stockholders’ equity   1,628   1,666
 
Total liabilities and stockholders’ equity $ 3,626 $ 3,686
 
       

Brown-Forman Corporation

Unaudited Condensed Consolidated Statements of Cash Flows

For the Three Months Ended July 31, 2012 and 2013

(Dollars in millions)

 

2012

2013

 
Cash provided by operating activities $ 87 $ 93
 
Cash flows from investing activities:
Additions to property, plant, and equipment   (17 )   (25 )
Cash used for investing activities (17 ) (25 )
 
Cash flows from financing activities:
Net issuance of debt 1 1
Dividends paid (50 ) (54 )
Other   4     2  
Cash used for financing activities (45 ) (51 )
 

Effect of exchange rate changes on cash and cash equivalents

  (2 )   (4 )
 
Net increase in cash and cash equivalents 23 13
 
Cash and cash equivalents, beginning of period   338     204  
 
Cash and cash equivalents, end of period $ 361   $ 217  
 
           

Schedule A

Brown-Forman Corporation
Supplemental Information (Unaudited)
 
 
Three Months Ended Fiscal Year Ended
July 31, 2013 Apr 30, 2013
 
 
 
Reported change in net sales 2% 5%
Estimated net change in distributor inventories 2% (1%)
Impact of foreign currencies 1% 1%
Impact of Hopland-based wine business sale - 2%
 
Underlying change in net sales 5% 8%
 
 
Reported change in gross profit 3% 9%
Estimated net change in distributor inventories 3% (1%)
Impact of foreign currencies - 1%
Impact of Hopland-based wine business sale - 1%
 
Underlying change in gross profit 6% 10%
 
Reported change in advertising 12% 3%
Impact of foreign currencies - 2%
Impact of Hopland-based wine business sale - 1%
 
Underlying change in advertising 12% 6%
 
Reported change in SG&A 5% 7%
Impact of Hopland-based wine business sale - -
Dispute settlement - -
Impact of foreign currencies - 1%
 
Underlying change in SG&A 5% 8%
 
Reported change in operating income (2%) 14%
Estimated net change in distributor inventories 7% (3%)
Impact of Hopland-based wine business sale - 1%
Dispute settlement - -
Impact of foreign currencies (1%) 1%
 
Underlying change in operating income 4% 13%
 
Note: Totals may differ due to rounding
 

Notes:

Impact of foreign currencies – Refers to net gains and losses incurred by the company relating to sales and purchases in currencies other than the U.S. Dollar. Brown-Forman uses the measure to understand the growth of the business on a constant dollar basis as fluctuations in exchange rates can distort the underlying growth of the business (both positively and negatively). To neutralize the effect of foreign exchange fluctuations, the Company has translated current year results at prior year rates. While Brown-Forman recognizes that foreign exchange volatility is a reality for a global company, it routinely reviews its performance on a constant dollar basis. The company believes this allows both management and investors to understand better Brown-Forman’s growth trends.

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