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BROWN FORMAN CORP - Quarter Report: 2022 October (Form 10-Q)



United States
Securities and Exchange Commission
Washington, D.C. 20549

FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 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 No. 001-00123

Brown-Forman Corporation
(Exact name of Registrant as specified in its Charter)
Delaware61-0143150
(State or other jurisdiction of(IRS Employer
incorporation or organization)Identification No.)
 
850 Dixie Highway 
Louisville,Kentucky40210
(Address of principal executive offices)(Zip Code)
(502) 585-1100
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
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
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 þ   No o
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 þ   No o
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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes     No  
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: November 30, 2022
Class A Common Stock (voting), $0.15 par value169,198,217 
Class B Common Stock (nonvoting), $0.15 par value309,951,931 



BROWN-FORMAN CORPORATION
Index to Quarterly Report Form 10-Q
Page
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Item 1A.
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PART I - FINANCIAL INFORMATION
 
Item 1. Financial Statements (Unaudited)


BROWN-FORMAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in millions, except per share amounts)

Three Months EndedSix Months Ended
October 31,October 31,
2021202220212022
Sales$1,283 $1,384 $2,466 $2,672 
Excise taxes289 290 566 571 
Net sales994 1,094 1,900 2,101 
Cost of sales404 481 757 866 
Gross profit590 613 1,143 1,235 
Advertising expenses104 121 194 231 
Selling, general, and administrative expenses165 180 333 355 
Other expense (income), net(1)(1)(7)
Operating income322 313 611 656 
Non-operating postretirement expense— — 
Interest income(1)(3)(2)(5)
Interest expense20 18 41 37 
Income before income taxes301 298 570 624 
Income taxes65 71 142 148 
Net income$236 $227 $428 $476 
Earnings per share:
Basic$0.49 $0.47 $0.89 $0.99 
Diluted$0.49 $0.47 $0.89 $0.99 
See notes to the condensed consolidated financial statements.
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BROWN-FORMAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(Dollars in millions)
 
Three Months EndedSix Months Ended
October 31,October 31,
2021202220212022
Net income$236 $227 $428 $476 
Other comprehensive income (loss), net of tax:
Currency translation adjustments(12)(6)(22)(11)
Cash flow hedge adjustments10 24 10 
Postretirement benefits adjustments
Net other comprehensive income (loss)10 
Comprehensive income$238 $229 $438 $479 
See notes to the condensed consolidated financial statements.
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BROWN-FORMAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in millions, except per share amounts)
April 30, 2022October 31,
2022
Assets
Cash and cash equivalents$868 $1,087 
Accounts receivable, less allowance for doubtful accounts of $13 at April 30 and $5 at October 31
813 894 
Inventories:
Barreled whiskey1,155 1,165 
Finished goods312 411 
Work in process225 249 
Raw materials and supplies126 170 
Total inventories1,818 1,995 
Other current assets277 282 
Total current assets3,776 4,258 
Property, plant and equipment, net875 890 
Goodwill761 748 
Other intangible assets586 571 
Deferred tax assets74 82 
Other assets301 303 
Total assets$6,373 $6,852 
Liabilities
Accounts payable and accrued expenses$703 $750 
Accrued income taxes81 57 
Short-term borrowings— 186 
Current portion of long-term debt250 250 
Total current liabilities1,034 1,243 
Long-term debt2,019 1,974 
Deferred tax liabilities219 234 
Accrued pension and other postretirement benefits183 183 
Other liabilities181 178 
Total liabilities3,636 3,812 
Commitments and contingencies
Stockholders’ Equity
Common stock:
Class A, voting, $0.15 par value (170,000,000 shares authorized; 170,000,000 shares issued)
25 25 
Class B, nonvoting, $0.15 par value (400,000,000 shares authorized; 314,532,000 shares issued)
47 47 
Additional paid-in capital— 
Retained earnings3,242 3,534 
Accumulated other comprehensive income (loss), net of tax(352)(349)
Treasury stock, at cost (5,511,000 and 5,387,000 shares at April 30 and October 31, respectively)
(225)(220)
Total stockholders’ equity2,737 3,040 
Total liabilities and stockholders’ equity$6,373 $6,852 
 See notes to the condensed consolidated financial statements.
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BROWN-FORMAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in millions)
Six Months Ended
October 31,
 20212022
Cash flows from operating activities:  
Net income$428 $476 
Adjustments to reconcile net income to net cash provided by operations: 
Asset impairment charges— 
Depreciation and amortization40 39 
Stock-based compensation expense
Deferred income tax provision(23)(8)
Other, net33 
Changes in assets and liabilities:
Accounts receivable(186)(94)
Inventories(51)(187)
Other current assets31 
Accounts payable and accrued expenses43 45 
Accrued income taxes22 (23)
Other operating assets and liabilities17 
Cash provided by operating activities335 316 
Cash flows from investing activities:  
Proceeds from sale of property, plant, and equipment— 
Additions to property, plant, and equipment(33)(61)
Computer software expenditures(2)(1)
Cash used for investing activities(35)(58)
Cash flows from financing activities:  
Net change in short-term borrowings(184)186 
Payments of withholding taxes related to stock-based awards(6)(5)
Dividends paid(172)(180)
Cash provided by (used for) financing activities(362)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(15)(37)
Net increase (decrease) in cash, cash equivalents, and restricted cash(77)222 
Cash, cash equivalents, and restricted cash at beginning of period1,150 874 
Cash, cash equivalents, and restricted cash at end of period1,073 1,096 
Less: Restricted cash (included in other current assets) at end of period— (9)
Cash and cash equivalents at end of period$1,073 $1,087 
See notes to the condensed consolidated financial statements.
6


BROWN-FORMAN CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

In these notes, “we,” “us,” “our,” “Brown-Forman,” and the “Company” refer to Brown-Forman Corporation and its consolidated subsidiaries, collectively.
1.    Condensed Consolidated Financial Statements 
We prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the U.S. Securities and Exchange Commission for interim financial information. In accordance with those rules and regulations, we condensed or omitted certain information and disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP). In our opinion, the accompanying financial statements include all adjustments, consisting only of normal recurring adjustments (unless otherwise indicated), necessary for a fair statement of our financial results for the periods presented in these financial statements. The results for interim periods are not necessarily indicative of future or annual results.

We suggest that you read these condensed financial statements together with the financial statements and footnotes included in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022 (2022 Form 10-K). We prepared the accompanying financial statements on a basis that is substantially consistent with the accounting principles applied in our 2022 Form 10-K.

2.    Earnings Per Share 
We calculate basic earnings per share by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share further includes the dilutive effect of stock-based compensation awards. We calculate that dilutive effect using the “treasury stock method” (as defined by GAAP).

The following table presents information concerning basic and diluted earnings per share:
Three Months EndedSix Months Ended
October 31,October 31,
(Dollars in millions, except per share amounts)2021202220212022
Net income available to common stockholders$236 $227 $428 $476 
Share data (in thousands):  
Basic average common shares outstanding478,857 479,138 478,822 479,106 
Dilutive effect of stock-based awards1,661 1,411 1,793 1,388 
Diluted average common shares outstanding480,518 480,549 480,615 480,494 
Basic earnings per share$0.49 $0.47 $0.89 $0.99 
Diluted earnings per share$0.49 $0.47 $0.89 $0.99 

We excluded common stock-based awards for approximately 743,000 shares and 1,006,000 shares from the calculation of diluted earnings per share for the three months ended October 31, 2021 and 2022, respectively. We excluded common stock-based awards for approximately 540,000 shares and 959,000 shares from the calculation of diluted earnings per share for the six months ended October 31, 2021 and 2022, respectively. We excluded those awards because they were not dilutive for those periods under the treasury stock method.

3.    Inventories
We value some of our consolidated inventories, including most of our U.S. inventories, at the lower of cost, using the last-in, first-out (LIFO) method or market value. If the LIFO method had not been used, inventories at current cost would have been $385 million higher than reported as of April 30, 2022, and $414 million higher than reported as of October 31, 2022. Changes in the LIFO valuation reserve for interim periods are based on an allocation of the projected change for the entire fiscal year, recognized proportionately over the remainder of the fiscal year.

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4.    Goodwill and Other Intangible Assets
The following table shows the changes in goodwill (which includes no accumulated impairment losses) and other intangible assets during the six months ended October 31, 2022:
(Dollars in millions)Goodwill
Other Intangible Assets
Balance at April 30, 2022
$761 $586 
Foreign currency translation adjustment(13)(15)
Balance at October 31, 2022
$748 $571 

Our other intangible assets consist of trademarks and brand names, all with indefinite useful lives.

5.    Commitments and Contingencies
We operate in a litigious environment, and we are sued in the normal course of business. Sometimes plaintiffs seek substantial damages. Significant judgment is required in predicting the outcome of these suits and claims, many of which take years to adjudicate. We accrue estimated costs for a contingency when we believe that a loss is probable and we can make a reasonable estimate of the loss, and then adjust the accrual as appropriate to reflect changes in facts and circumstances. We do not believe it is reasonably possible that these existing loss contingencies, individually or in the aggregate, would have a material adverse effect on our financial position, results of operations, or liquidity. No material accrued loss contingencies were recorded as of October 31, 2022.

6.    Debt
Our long-term debt (net of unamortized discount and issuance costs) consisted of:
(Principal and carrying amounts in millions)April 30, 2022October 31,
2022
2.250% senior notes, $250 principal amount, due January 15, 2023
$250 $250 
3.500% senior notes, $300 principal amount, due April 15, 2025
298 298 
1.200% senior notes, €300 principal amount, due July 7, 2026
315 298 
2.600% senior notes, £300 principal amount, due July 7, 2028
374 346 
4.000% senior notes, $300 principal amount, due April 15, 2038
295 295 
3.750% senior notes, $250 principal amount, due January 15, 2043
248 248 
4.500% senior notes, $500 principal amount, due July 15, 2045
489 489 
2,269 2,224 
Less current portion250 250 
$2,019 $1,974 
We had short-term borrowings of $186 million as of October 31, 2022 under our commercial paper program. There were no borrowings under that program as of April 30, 2022.
(Dollars in millions)April 30, 2022October 31,
2022
Commercial paper$—$186
Average interest rate—%3.65%
Average remaining days to maturity017


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7.    Stockholders’ Equity
The following table shows the changes in stockholders’ equity by quarter during the six months ended October 31, 2021:
(Dollars in millions)
Class A Common Stock
Class B Common Stock
Additional Paid-in Capital
Retained Earnings
AOCI
Treasury Stock
Total
Balance at April 30, 2021$25 $47 $— $3,243 $(422)$(237)$2,656 
Net income192 192 
Net other comprehensive income (loss)
Declaration of cash dividends (172)(172)
Stock-based compensation expense
Stock issued under compensation plans
Loss on issuance of treasury stock issued under compensation plans(2)(8)(10)
Balance at July 31, 202125 47 3,255 (414)(232)2,683 
Net income236 236 
Net other comprehensive income (loss)
Stock-based compensation expense
Stock issued under compensation plans
Loss on issuance of treasury stock issued under compensation plans(2)(2)
Balance at October 31, 2021$25 $47 $$3,491 $(412)$(231)$2,923 

The following table shows the changes in stockholders’ equity by quarter during the six months ended October 31, 2022:
(Dollars in millions)
Class A Common Stock
Class B Common Stock
Additional Paid-in Capital
Retained Earnings
AOCI
Treasury Stock
Total
Balance at April 30, 2022$25 $47 $— $3,242 $(352)$(225)$2,737 
Net income249 249 
Net other comprehensive income (loss)
Declaration of cash dividends(180)(180)
Stock-based compensation expense
Stock issued under compensation plans
Loss on issuance of treasury stock issued under compensation plans(4)(4)(8)
Balance at July 31, 202225 47 — 3,307 (351)(221)2,807 
Net income227 227 
Net other comprehensive income (loss)
Stock-based compensation expense
Stock issued under compensation plans
Loss on issuance of treasury stock issued under compensation plans(2)(2)
Balance at October 31, 2022$25 $47 $$3,534 $(349)$(220)$3,040 

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The following table shows the change in each component of accumulated other comprehensive income (AOCI), net of tax, during the six months ended October 31, 2022:
(Dollars in millions)
Currency Translation Adjustments
Cash Flow Hedge Adjustments
Postretirement Benefits Adjustments
Total AOCI
Balance at April 30, 2022
$(239)$37 $(150)$(352)
Net other comprehensive income (loss)(11)10 
Balance at October 31, 2022
$(250)$47 $(146)$(349)

The following table shows the cash dividends declared per share on our Class A and Class B common stock during the six months ended October 31, 2022:
Declaration DateRecord DatePayable DateAmount per Share
May 26, 2022June 8, 2022July 1, 2022$0.1885
July 28, 2022September 6, 2022October 3, 2022$0.1885
On November 17, 2022, our Board of Directors increased the quarterly cash dividend on our Class A and Class B common stock from $0.1885 per share to $0.2055 per share. The quarterly cash dividend is payable on January 3, 2023, to stockholders of record on December 2, 2022.

8.    Net Sales 
The following table shows our net sales by geography:
Three Months EndedSix Months Ended
October 31,October 31,
(Dollars in millions)2021202220212022
United States
$462 $534 $912 $1,016 
Developed International1
297 288 566 582 
Emerging2
187 208 337 384 
Travel Retail3
28 40 49 78 
Non-branded and bulk4
20 24 36 41 
Total$994 $1,094 $1,900 $2,101 
1Represents net sales of branded products to “advanced economies” as defined by the International Monetary Fund (IMF), excluding the United States. Our largest developed international markets are Germany, Australia, the United Kingdom, France, and Canada.
2Represents net sales of branded products to “emerging and developing economies” as defined by the IMF. Our largest emerging markets are Mexico, Poland, Brazil, and Chile.
3Represents net sales of branded products to global duty-free customers, other travel retail customers, and the U.S. military regardless of customer location.
4Includes net sales of used barrels, contract bottling, and bulk whiskey and wine, regardless of customer location.
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The following table shows our net sales by product category:
Three Months EndedSix Months Ended
October 31,October 31,
(Dollars in millions)2021202220212022
Whiskey1
$676 $754 $1,292 $1,461 
Ready-to-Drink2
109 122 217 248 
Tequila3
70 88 143 158 
Wine4
69 65 122 111 
Vodka5
32 24 57 47 
Non-branded and bulk6
20 24 36 41 
Rest of portfolio18 17 33 35 
Total$994 $1,094 $1,900 $2,101 
1Includes all whiskey spirits and whiskey-based flavored liqueurs. The brands included in this category are the Jack Daniel's family of brands (excluding the “ready-to-drink” products outlined below), the Woodford Reserve family of brands, the Old Forester family of brands, GlenDronach, Benriach, Glenglassaugh, Slane Irish Whiskey, and Coopers’ Craft.
2Includes the Jack Daniel’s ready-to-drink (RTD) and ready-to-pour (RTP) products, New Mix, and other RTD/RTP products.
3Includes the Herradura family of brands, el Jimador, and other tequilas.
4Includes Korbel California Champagne and Sonoma-Cutrer wines.
5Includes Finlandia.
6Includes net sales of used barrels, contract bottling, and bulk whiskey and wine.

9.    Pension Costs
The following table shows the components of the net cost recognized for our U.S. pension plans. Similar information for other defined benefit plans is not presented due to immateriality.
Three Months EndedSix Months Ended
October 31,October 31,
(Dollars in millions)2021202220212022
Service cost$$$13 $10 
Interest cost11 16 
Expected return on plan assets(11)(11)(23)(22)
Amortization of:    
Prior service cost— — — 
Net actuarial loss12 
Settlement charge— — 
Net cost$$$15 $

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10.    Income Taxes
Our consolidated interim effective tax rate is based on our expected annual operating income, statutory tax rates, and income tax laws in the various jurisdictions where we operate. Significant or unusual items, including adjustments to accruals for tax uncertainties, are recognized in the fiscal quarter in which the related event or a change in judgment occurs. The expected effective tax rate on ordinary income for the fiscal year is 24.8%, which is greater than the U.S. federal statutory rate of 21.0%, due to state taxes, effects of foreign operations and the impact of prior intercompany sales of inventory taxed at rates higher than current statutory tax rates, partially offset by the impact of the foreign-derived intangible income deduction.
The effective tax rate of 23.7% for the six months ended October 31, 2022, is lower than the expected tax rate of 24.8% on ordinary income for the full fiscal year, primarily due to the reversal of valuation allowances and prior fiscal year true-ups, partially offset by increased contingent tax liabilities and deferred taxes recorded in connection with a change in our indefinite reinvestment assertion. The effective tax rate of 23.7% for the six months ended October 31, 2022, was lower than the effective tax rate of 24.9% for the same period last year, primarily due to decreased prior year true-ups and reversal of valuation allowances in the current period, partially offset by increased state taxes and increased contingent tax liabilities.
During the second quarter of fiscal 2023, we lifted our indefinite reinvestment assertion for certain additional foreign subsidiaries with respect to their current earnings and prior year undistributed earnings (but not for their other outside basis differences) and have recorded deferred taxes for any income tax impacts that would result from cash distributions, including any withholding taxes. For most of our other foreign subsidiaries, we continue to assert that their outside basis differences, including current year and prior year undistributed earnings, are indefinitely reinvested outside the United States and no income taxes have been provided on those earnings, other than the one-time repatriation tax related to the 2017 Tax Cuts and Jobs Act.

11.    Derivative Financial Instruments and Hedging Activities
We are subject to market risks, including the effect of fluctuations in foreign currency exchange rates, commodity prices, and interest rates. We use derivatives to help manage financial exposures that occur in the normal course of business. We formally document the purpose of each derivative contract, which includes linking the contract to the financial exposure it is designed to mitigate. We do not hold or issue derivatives for trading or speculative purposes.

We use currency derivative contracts to limit our exposure to the foreign currency exchange rate risk that we cannot mitigate internally by using netting strategies. We designate most of these contracts as cash flow hedges of forecasted transactions (expected to occur within three years). We record all changes in the fair value of cash flow hedges in AOCI until the underlying hedged transaction occurs, at which time we reclassify that amount to earnings.

Some of our currency derivatives are not designated as hedges because we use them to partially offset the immediate earnings impact of changes in foreign currency exchange rates on existing assets or liabilities. We immediately recognize the change in fair value of these contracts in earnings.

We had outstanding currency derivatives, related primarily to our euro, British pound, and Australian dollar exposures, with notional amounts for all hedged currencies totaling $801 million at April 30, 2022, and $711 million at October 31, 2022. The maximum term of outstanding derivative contracts was 36 months at April 30, 2022 and 30 months at October 31, 2022.

We also use foreign currency-denominated debt instruments to help manage our foreign currency exchange rate risk. We designate a portion of those debt instruments as net investment hedges, which are intended to mitigate foreign currency exposure related to non-U.S. dollar net investments in certain foreign subsidiaries. Any change in value of the designated portion of the hedging instruments is recorded in AOCI, offsetting the foreign currency translation adjustment of the related net investments that is also recorded in AOCI. The amount of foreign currency-denominated debt instruments designated as net investment hedges was $636 million at April 30, 2022, and $594 million at October 31, 2022.

At inception, we expect each financial instrument designated as a hedge to be highly effective in offsetting the financial exposure it is designed to mitigate. We also assess their effectiveness continually. If determined to be no longer highly effective, we discontinue designating and accounting for the instrument as a hedge.

We use forward purchase contracts with suppliers to protect against corn price volatility. We expect to take physical delivery of the corn underlying each contract and use it for production over a reasonable period of time. Accordingly, we account for these contracts as normal purchases rather than as derivative instruments.

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The following table presents the pre-tax impact that changes in the fair value of our derivative instruments and non-derivative hedging instruments had on AOCI and earnings:
Three Months Ended
October 31,
(Dollars in millions)Classification20212022
Currency derivatives designated as cash flow hedges:   
Net gain (loss) recognized in AOCIn/a$15 $22 
Net gain (loss) reclassified from AOCI into earningsSales15 
Currency derivatives not designated as hedging instruments:   
Net gain (loss) recognized in earningsSales$$
Net gain (loss) recognized in earningsOther income (expense), net(1)
Foreign currency-denominated debt designated as net investment hedge:
Net gain (loss) recognized in AOCIn/a$14 $23 
Total amounts presented in the accompanying condensed consolidated statements of operations for line items affected by the net gains (losses) shown above:
Sales$1,283 $1,384 
Other income (expense), net
Six Months Ended
October 31,
(Dollars in millions)Classification20212022
Currency derivatives designated as cash flow hedges:   
Net gain (loss) recognized in AOCIn/a$30 $36 
Net gain (loss) reclassified from AOCI into earningsSales(1)23 
Currency derivatives not designated as hedging instruments:   
Net gain (loss) recognized in earningsSales$$
Net gain (loss) recognized in earningsOther income (expense), net— 
Foreign currency-denominated debt designated as net investment hedge:
Net gain (loss) recognized in AOCIn/a$22 $43 
Total amounts presented in the accompanying condensed consolidated statements of operations for line items affected by the net gains (losses) shown above:
Sales$2,466 $2,672 
Other income (expense), net(5)

We expect to reclassify $40 million of deferred net gains on cash flow hedges recorded in AOCI as of October 31, 2022, to earnings during the next 12 months. This reclassification would offset the anticipated earnings impact of the underlying hedged exposures. The actual amounts that we ultimately reclassify to earnings will depend on the exchange rates in effect when the underlying hedged transactions occur.

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The following table presents the fair values of our derivative instruments:
April 30, 2022October 31, 2022
(Dollars in millions)
Classification
Derivative Assets
Derivative Liabilities
Derivative Assets
Derivative Liabilities
Designated as cash flow hedges:
Currency derivativesOther current assets$32 $(3)$48 $(2)
Currency derivativesOther assets20 (1)22 — 
Not designated as hedges:
Currency derivativesOther current assets— — — 
Currency derivativesAccrued expenses— (1)— — 

The fair values reflected in the above table are presented on a gross basis. However, as discussed further below, the fair values of those instruments subject to net settlement agreements are presented on a net basis in our balance sheets.

In our statements of cash flows, we classify cash flows related to cash flow hedges in the same category as the cash flows from the hedged items.

Credit risk. We are exposed to credit-related losses if the counterparties to our derivative contracts default. This credit risk is limited to the fair value of the contracts. To manage this risk, we contract only with major financial institutions that have investment-grade credit ratings and with whom we have standard International Swaps and Derivatives Association (ISDA) agreements that allow for net settlement of the derivative contracts. Also, we have established counterparty credit guidelines that we monitor regularly, and we monetize contracts when we believe it is warranted. Because of these safeguards, we believe we have no derivative positions that warrant credit valuation adjustments.

Our derivative instruments require us to maintain a specific level of creditworthiness, which we have maintained. If our creditworthiness were to fall below that level, then the counterparties to our derivative instruments could request immediate payment or collateralization for derivative instruments in net liability positions. None of our derivatives with creditworthiness requirements were in a net liability position at April 30, 2022 and October 31, 2022.

Offsetting. As noted above, our derivative contracts are governed by ISDA agreements that allow for net settlement of derivative contracts with the same counterparty. It is our policy to present the fair values of current derivatives (that is, those with a remaining term of 12 months or less) with the same counterparty on a net basis in our balance sheets. Similarly, we present the fair values of noncurrent derivatives with the same counterparty on a net basis. We do not net current derivatives with noncurrent derivatives in our balance sheets.

The following table summarizes the gross and net amounts of our derivative contracts:
(Dollars in millions)
Gross Amounts of Recognized Assets (Liabilities)
Gross Amounts Offset in Balance Sheet
Net Amounts Presented in Balance Sheet
Gross Amounts Not Offset in Balance Sheet
Net Amounts
April 30, 2022
Derivative assets$52 $(4)$48 $(1)$47 
Derivative liabilities(5)(1)— 
October 31, 2022
Derivative assets71 (2)69 — 69 
Derivative liabilities(2)— — — 

No cash collateral was received or pledged related to our derivative contracts as of April 30, 2022, or October 31, 2022.

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12.    Fair Value Measurements
The following table summarizes the assets and liabilities measured or disclosed at fair value on a recurring basis:
April 30, 2022October 31, 2022
 CarryingFairCarryingFair
(Dollars in millions)AmountValueAmountValue
Assets  
Cash and cash equivalents$868 $868 $1,087 $1,087 
Currency derivatives, net48 48 69 69 
Liabilities  
Currency derivatives, net— — 
Short-term borrowings— — 186 186 
Long-term debt (including current portion)2,269 2,239 2,224 2,003 

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. We categorize the fair values of assets and liabilities into three levels based on the assumptions (inputs) used to determine those values. Level 1 provides the most reliable measure of fair value, while Level 3 generally requires significant management judgment. The three levels are:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than those included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in inactive markets; or other inputs that are observable or can be derived from or corroborated by observable market data.
Level 3 – Unobservable inputs supported by little or no market activity.

We determine the fair values of our currency derivatives (forward contracts) using standard valuation models. The significant inputs used in these models, which are readily available in public markets or can be derived from observable market transactions, include the applicable spot exchange rates, forward exchange rates, and interest rates. These fair value measurements are categorized as Level 2 within the valuation hierarchy.

We determine the fair value of long-term debt primarily based on the prices at which identical or similar debt has recently traded in the market and also considering the overall market conditions on the date of valuation. These fair value measurements are categorized as Level 2 within the valuation hierarchy.

The fair values of cash and cash equivalents approximate the carrying amounts due to the short maturities of these instruments.

We measure some assets and liabilities at fair value on a nonrecurring basis. That is, we do not measure them at fair value on an ongoing basis, but we do adjust them to fair value in some circumstances (for example, when we determine that an asset is impaired). No material nonrecurring fair value measurements were required during the periods presented in these financial statements.

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13.    Other Comprehensive Income
The following table shows the components of net other comprehensive income (loss):
Three Months EndedThree Months Ended
October 31, 2021October 31, 2022
(Dollars in millions)Pre-TaxTaxNetPre-TaxTaxNet
Currency translation adjustments:
Net gain (loss) on currency translation$(9)$(3)$(12)$— $(6)$(6)
Reclassification to earnings— — — — — — 
Other comprehensive income (loss), net(9)(3)(12)— (6)(6)
Cash flow hedge adjustments:
Net gain (loss) on hedging instruments15 (4)11 22 (4)18 
Reclassification to earnings1
(2)(1)(15)(12)
Other comprehensive income (loss), net13 (3)10 (1)
Postretirement benefits adjustments:
Net actuarial gain (loss) and prior service cost(1)— (1)— — — 
Reclassification to earnings2
(2)— 
Other comprehensive income (loss), net(2)— 
Total other comprehensive income (loss), net$10 $(8)$$$(7)$
Six Months EndedSix Months Ended
October 31, 2021October 31, 2022
(Dollars in millions)Pre-TaxTaxNetPre-TaxTaxNet
Currency translation adjustments:
Net gain (loss) on currency translation$(17)$(5)$(22)$(1)$(10)$(11)
Reclassification to earnings— — — — — — 
Other comprehensive income (loss), net(17)(5)(22)(1)(10)(11)
Cash flow hedge adjustments:
Net gain (loss) on hedging instruments30 (7)23 36 (8)28 
Reclassification to earnings1
— (23)(18)
Other comprehensive income (loss), net31 (7)24 13 (3)10 
Postretirement benefits adjustments:
Net actuarial gain (loss) and prior service cost(1)— (1)— — — 
Reclassification to earnings2
13 (4)(1)
Other comprehensive income (loss), net12 (4)(1)
Total other comprehensive income (loss), net$26 $(16)$10 $17 $(14)$
1Pre-tax amount for each period is classified as sales in the accompanying condensed consolidated statements of operations.
2Pre-tax amount for each period is classified as non-operating postretirement expense in the accompanying condensed consolidated statements of operations.


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14.    Acquisitions
On November 3, 2022, we acquired 100% of the equity interests of Gin Mare Brand, S.L.U. and Mareliquid Vantguard, S.L.U. Through this transaction, we obtained 100% of the intellectual property rights to Gin Mare, which was the largest ultra-premium gin brand in the world in 2021 according to International Wine & Spirit Research (IWSR). The price of the acquisition consists of €475 million in cash paid at the acquisition date plus contingent future cash payments of up to €90 million under an “earn-out” provision of the acquisition agreement.

We are currently in the process of finalizing the accounting for this transaction and expect to complete our preliminary allocation of the purchase price during the third quarter of fiscal 2023.

Also, on October 6, 2022, we agreed to purchase the Diplomático Rum brand and related assets from Destillers United Group S.L. and Destilerias Unidas Corp. The Diplomático Rum family of brands was the largest super- and ultra-premium rum in the world in 2021 according to IWSR. The price of the acquisition will consist of $725 million (subject to certain adjustments) in cash to be paid to the sellers at the closing date. In addition, we have agreed to pay up to $50 million of certain post-closing costs and expenses in connection with the acquisition. We expect the transaction, which is subject to customary closing conditions, to close during the third quarter of fiscal 2023.

Because these acquisitions had not closed by October 31, 2022, they are not reflected in the accompanying financial statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis in conjunction with both our unaudited Condensed Consolidated Financial Statements and related notes included in Part I, Item 1 of this Quarterly Report and our Annual Report on Form 10-K for the fiscal year ended April 30, 2022 (2022 Form 10-K). Note that the results of operations for the six months ended October 31, 2022, are not necessarily indicative of future or annual results. In this Item, “we,” “us,” “our,” “Brown-Forman,” and the “Company” refer to Brown-Forman Corporation and its consolidated subsidiaries, collectively.

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: (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 expenses1; and (h) organic operating income. To calculate these measures, we adjust, as applicable, for (1) acquisitions and divestitures, (2) foreign exchange, and (3) impairment charges. 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), 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, and entered into a related transition services agreement (TSA) for these brands. This adjustment removes the net sales and operating expenses recognized pursuant to the TSA for the non-comparable period, which is activity during the first quarter of fiscal 2022. We believe this adjustment allows 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 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 half of fiscal 2022, we recognized non-cash impairment charges of $9 million for certain fixed assets. We believe that this adjustment allows for us to better understand 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 2023 Year-to-Date Highlights” and “Results of Operations - Year-Over-Year Period 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
1 Operating expenses include advertising expense, SG&A expense, and other expense (income), net.
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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.
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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 2023 Year-to-Date Highlights,” we provide supplemental information for our largest markets ranked by percentage of total fiscal 2022 reported net sales. Due to our decision to suspend commercial operations in Russia, it is no longer considered one of our largest markets. In addition to markets that are listed by country name, we include the following aggregations:
“Developed International” markets are “advanced economies” as defined by the IMF, excluding the United States. Our largest developed international markets are Germany, Australia, the United Kingdom, France, and Canada. This aggregation represents our net sales of branded products in these markets.
“Emerging” markets are “emerging and developing economies” as defined by the IMF. Our largest emerging markets are Mexico, Poland, Brazil, and Chile. This aggregation represents our net sales of branded products in 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 2023 Year-to-Date Highlights,” we provide supplemental information for our largest brands ranked by percentage of total fiscal 2022 reported net sales. In addition to brands that are listed by name, we include the following aggregations outlined below.
Beginning in fiscal 2023, we began presenting “Ready-to-Drink” products as a separate aggregation due to its more significant contribution to our growth in recent years and industry-wide category growth trends. “Whiskey” no longer contains Jack Daniel’s ready-to-drink (RTD) and ready-to-pour (RTP), and “Tequila” no longer includes New Mix. These brands are now included in the “Ready-to-Drink” brand aggregation.
“Whiskey” includes all whiskey spirits and whiskey-based flavored liqueurs. The brands included in this category are the Jack Daniel’s family of brands (excluding the “Ready-to-Drink” products defined below), the Woodford Reserve family of brands (Woodford Reserve), the Old Forester family of brands (Old Forester), GlenDronach, Benriach, Glenglassaugh, Slane Irish Whiskey, and Coopers’ Craft.
“American whiskey” includes the Jack Daniel’s family of brands (excluding the “Ready-to-Drink” products defined below) and premium bourbons (defined below).
“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.
“Ready-to-Drink” includes all ready-to-drink (RTD) and ready-to-pour (RTP) products. The brands included in this category are Jack Daniel’s RTD and RTP products (JD RTD/RTP), New Mix, and other RTD/RTP products.
“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.
“Tequila” includes the Herradura family of brands (Herradura), el Jimador, and other tequilas.
“Wine” includes Korbel California Champagne and Sonoma-Cutrer wines.
“Vodka” includes Finlandia.
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“Non-branded and bulk” includes our net sales of used barrels, contract bottling, and bulk whiskey and wine.
“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 Years Old, and Jack Daniel’s Triple Mash.
Other Metrics.
“Shipments.” We generally record revenues when we ship or deliver our products to our customers. In this document, 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) our shipments directly to retail or wholesale customers for owned distribution markets or (b) shipments from our distributor customers to retailers and wholesalers in other markets. 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-premise channels, as measured by volume or retail sales value. This information is provided by third parties, such as Nielsen and the National Alcohol Beverage Control Association (NABCA). Our estimates of market share or changes in market share are derived from consumer takeaway data using the retail sales value metric. We believe consumer takeaway is a leading indicator of how consumer demand is trending.
“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.

Important Information on Forward-Looking Statements:
This report contains statements, estimates, and projections that are “forward-looking statements” as defined under U.S. federal securities laws. Words such as “aim,” “anticipate,” “aspire,” “believe,” “can,” “continue,” “could,” “envision,” “estimate,” “expect,” “expectation,” “intend,” “may,” “might,” “outlook,” “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:

Our substantial dependence upon the continued growth of the Jack Daniel’s family of brands
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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 new 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
For further information on these and other risks, please see the risks and uncertainties described in Part I, Item 1A. Risk Factors of our 2022 Form 10-K and those described from time to time in our future reports filed with the Securities and Exchange Commission (SEC).
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Overview
For the six months ended October 31, 2022, we experienced strong, broad-based reported net sales growth driven by gains across all geographic clusters and the Travel Retail channel reflecting the strength of our portfolio of brands, strong consumer demand, and the continued rebuilding of distributor inventories. The rebuilding of distributor inventories reflects the easing of supply chain constraints during the first half of fiscal 2023 compared to last year. Foreign exchange fluctuations negatively affected our results reflecting the strengthening of the dollar primarily against the euro, Turkish lira, and pound sterling.
Supply chain disruptions continued to affect our business during the first half of fiscal 2023. Our glass supply position improved while overall supply chain logistics and transportation challenges constrained product movement and increased transportation costs. We further discuss the effect of supply chain disruptions on our results where relevant below.
The removal of the European Union and United Kingdom tariffs on American whiskey positively affected our results during the first half of fiscal 2023. Tariffs include the combined effect of tariff-related costs, whether arising as a reduction of reported net sales or as an increase in reported cost of sales. We estimate that lower costs associated with tariffs (a) increased reported net sales growth by approximately half a percentage point, (b) reduced our reported cost of sales growth by approximately four percentage points, and (c) increased gross margin by approximately one and a half percentage points. We further discuss the estimated effect of the removal of the European Union and United Kingdom tariffs on American whiskey on our results where relevant below.
Due to Russia’s invasion of Ukraine in February 2022, reported net sales were negatively affected by the suspension of our commercial operations in Russia and our diminished ability to conduct business in Ukraine. We further discuss the effect of Russia’s invasion of Ukraine where relevant below.
Fiscal 2023 Year-to-Date Highlights
We delivered reported net sales of $2.1 billion, for the six months ended October 31, 2022, an increase of 11% compared to the same period last year. The increase was driven by higher volumes and favorable price/mix, partially offset by the negative effect of foreign exchange. An estimated net increase in distributor inventories positively impacted reported net sales.
From a brand perspective, reported net sales growth was driven by JDTW, premium bourbons, and Ready-to-Drinks.
From a geographic perspective, the United States, emerging markets, the Travel Retail channel, and developed international markets all contributed significantly to reported net sales growth.
We delivered reported operating income of $656 million for the six months ended October 31, 2022, an increase of 8% compared to the same period last year. We delivered diluted earnings per share of $0.99, an increase of 11% from the $0.89 reported for the same period last year, driven by the increase in reported operating income and the benefit of a lower effective tax rate.
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Summary of Operating Performance
Three Months Ended October 31,Six Months Ended October 31,
(Dollars in millions)20212022Reported Change
 Organic Change1
20212022Reported Change
Organic Change1
Net sales$994 $1,094 10 %16 %$1,900 $2,101 11 %17 %
Cost of sales404 481 19 %21 %757 866 14 %17 %
Gross profit590 613 %13 %1,143 1,235 %17 %
Advertising104 121 16 %22 %194 231 19 %25 %
SG&A165 180 %15 %333 355 %11 %
Other expense (income), net(1)(1)nmnm(7)nmnm
Operating income322 313 (2 %)%611 656 %19 %
Total operating expenses2
$268 $300 12 %18 %$532 $579 %13 %
As a percentage of net sales3
Gross profit59.3 %56.0 %(3.3)pp60.1 %58.8 %(1.3)pp
Operating income32.3 %28.7 %(3.6)pp32.1 %31.2 %(0.9)pp
Interest expense, net$19 $15 (18 %)$39 $32 (18 %)
Effective tax rate21.6 %23.7 %2.1 pp24.9 %23.7 %(1.2)pp
Diluted earnings per share$0.49 $0.47 (4 %)$0.89 $0.99 11 %
Note: Totals may differ due to rounding
1See “Non-GAAP Financial Measures” above for details on our use of “organic change,” including how we calculate these measures and why we believe 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 Year-to-Date Highlights
Market Highlights
The following table provides supplemental information for our largest markets. We discuss results of the markets most affecting our performance below the table. Unless otherwise indicated, all related commentary is for the six months ended October 31, 2022 compared to the same period last year.
Top Markets1
Six months ended October 31, 2022
Net Sales % Change vs. 2022
Geographic area2
ReportedAcquisitions and DivestituresForeign Exchange
Organic3
United States11 % % %11 %
Developed International3 % %11 %14 %
Germany%— %13 %14 %
Australia%— %%%
United Kingdom(8 %)— %10 %%
France(18 %)— %10 %(8 %)
Canada33 %— %%39 %
Rest of Developed International20 %— %17 %37 %
Emerging14 % %13 %27 %
Mexico23 %— %(2 %)21 %
Poland%— %20 %27 %
Brazil44 %— %%45 %
Chile(17 %)— %— %(17 %)
Rest of Emerging%— %23 %30 %
Travel Retail60 % %7 %67 %
Non-branded and bulk16 %11 %3 %30 %
Total11 % %6 %17 %
Note: Results may differ due to rounding
1“Top Markets” are ranked based on percentage of total fiscal 2022 reported net sales (see 2022 Form 10-K “Results of Operations - Fiscal 2022 Market Highlights” and Note 8 to the Condensed Consolidated Financial Statements). Due to our decision to suspend commercial operations in Russia, it is no longer considered a “Top Market.” Russia’s year-to-date results are included in our “Emerging” and “Total” results.
2See “Definitions” above for definitions of market aggregations presented here.
3See “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.
The United States grew reported net sales 11% driven by higher volumes and favorable mix, reflecting an estimated net increase in distributor inventories, and higher prices across our portfolio. Volume growth was driven by Woodford Reserve and JDTW, partially offset by declines for Korbel California Champagne.
Developed International
Germany’s reported net sales increased 1% led by volumetric gains of JDTW and JD RTDs, largely offset by the negative effect of foreign exchange.
Australia’s reported net sales increased 3% driven by higher volumes and prices of JD RTDs, partially offset by the negative effect of foreign exchange.
United Kingdom’s reported net sales declined 8% driven by the negative effect of foreign exchange, partially offset by higher prices for JDTW.
France’s reported net sales declined 18% due to the negative effect of foreign exchange along with lower volumes of JDTW and JDTH, reflecting whiskey category declines and a reduction of promotions.
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Canada’s reported net sales increased 33% led by higher JDTW volumes. An estimated net increase in distributor inventories positively impacted reported net sales.
Reported net sales in the Rest of Developed International increased 20% fueled by JDTW gains, led by Spain and Korea, partially offset by the negative effect of foreign exchange. An estimated net increase in distributor inventories positively impacted reported net sales.
Emerging
Mexico’s reported net sales increased 23% driven by higher volumes and prices of New Mix, which gained market share in the RTD category.
Poland’s reported net sales increased 7% led by higher volumes of JDTW, partially offset by the negative effect of foreign exchange.
Brazil’s reported net sales increased 44% fueled by higher volumes of JDTW, partially due to an estimated net increase in distributor inventories.
Chile’s reported net sales declined 17% largely reflecting a net decrease in distributor inventories for the Jack Daniel’s family of brands.
Reported net sales in the Rest of Emerging increased 8% led by JDTW growth in Turkey, Sub-Saharan Africa, the United Arab Emirates, and India, largely offset by declines in Russia and 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’s reported net sales increased 60% driven primarily by higher volumes across much of our portfolio as travel continued to rebound from the COVID-19-related travel restrictions. An estimated net increase in distributor inventories positively impacted reported net sales.
Non-branded and bulk reported net sales increased 16% driven by higher prices for used barrels.
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Brand Highlights
The following table provides supplemental information for our largest brands. We discuss results of the brands most affecting our performance below the table. Unless otherwise indicated, all related commentary is for the six months ended October 31, 2022 compared to the same period last year.
Major Brands
Six months ended October 31, 2022
Net Sales % Change vs 2022
Product category / brand family / brand1
ReportedAcquisitions and DivestituresForeign Exchange
Organic2
Whiskey13 %— %%20 %
JDTW%— %%18 %
JDTH%— %%12 %
Gentleman Jack14 %— %%21 %
JDTF23 %— %%28 %
JDTA(16 %)— %%(10 %)
Woodford Reserve39 %— %%40 %
Old Forester39 %— %— %39 %
Rest of Whiskey19 %%%27 %
Ready-to-Drink14 %— %%20 %
JD RTD/RTP%— %%15 %
New Mix48 %— %(2 %)46 %
Tequila10 %— %%11 %
Herradura%— %— %%
el Jimador16 %— %%18 %
Wine(9 %)— %— %(9 %)
Vodka (Finlandia)(17 %)— %12 %(4 %)
Rest of Portfolio%— %%%
Non-branded and bulk16 %11 %%30 %
Note: Results may differ due to rounding
1See “Definitions” above for definitions of brand 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.
Whiskey
Reported net sales for JDTW increased 9% driven by growth across all geographic clusters and the Travel Retail channel reflecting (a) higher volumes, due in part to an estimated net increase in distributor inventories; and (b) higher prices. This growth was partially offset by the negative effect of foreign exchange.
Reported net sales for JDTH increased 6% driven by volumetric growth in the United States reflecting an estimated net increase in distributor inventories, partially offset by the negative effect of foreign exchange.
Reported net sales for Gentleman Jack increased 14% led by higher volumes in the United States and the Travel Retail channel, reflecting an estimated net increase in distributor inventories, partially offset by the negative effect of foreign exchange.
JDTF grew reported net sales 23% driven by higher volumes in the United States, partially due to an estimated net increase in distributor inventories. This growth was partially offset by the negative effect of foreign exchange.
JDTA reported net sales declined 16% due to (a) lower volumes in the United States, partially driven by an estimated net decrease in distributor inventories; (b) the negative effect of foreign exchange; and (c) lower volumes in the United Kingdom.
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Woodford Reserve reported net sales increased 39% driven by higher volumes, partially due to an estimated net increase in distributor inventories, and higher prices in the United States.
Old Forester reported net sales increased 39% driven by higher volumes in the United States, largely due to an estimated net increase in distributor inventories.
Reported net sales for Rest of Whiskey increased 19% led by the launch of Jack Daniel’s Bonded and Jack Daniel’s Triple Mash in the United States.
Ready-to-Drink
The JD RTD/RTP brands reported net sales grew 9% led by growth in Australia and Germany, partially offset by the negative effect of foreign exchange.
New Mix grew reported net sales 48% fueled by higher volumes and prices in Mexico with market share gains.
Tequila
Herradura reported net sales increased 9% driven by volumetric growth in the United States. An estimated net increase in distributor inventories positively impacted reported net sales.
el Jimador reported net sales increased 16% led by higher volumes in the United States.
Wine reported net sales declined 9% due to lower volumes of Korbel California Champagne, partially offset by higher volumes of Sonoma-Cutrer and higher prices of Korbel California Champagne in the United States. An estimated net decrease in distributor inventories negatively impacted reported net sales.
Vodka (Finlandia) reported net sales declined 17% reflecting the impact of the suspension of our commercial operations in Russia and the negative effect of foreign exchange. These declines were partially offset by broad-based growth across other international markets.
Non-branded and bulk reported net sales increased 16% driven by higher prices for used barrels.
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Year-Over-Year Period Comparisons
Net Sales
3 Months6 Months
Percentage change versus the prior year period ended October 31VolumePrice/mixTotalVolumePrice/mixTotal
Change in reported net sales14 %(4 %)10 %13 %(3 %)11 %
Acquisitions and divestitures— %— %— %— %— %— %
Foreign exchange— %%%— %%%
Change in organic net sales14 %%16 %13 %%17 %
Note: Results may differ due to rounding
For the three months ended October 31, 2022, reported net sales were $1.1 billion, an increase of $100 million, or 10%, compared to the same period last year largely driven by higher volumes of New Mix, JDTW, and JD RTDs. Price/mix reflects the negative effect of foreign exchange, partially offset by higher prices across much of our portfolio led by JDTW. Reported net sales were positively impacted by an estimated net increase in distributor inventories.
For the six months ended October 31, 2022, reported net sales were $2.1 billion, an increase of $201 million, or 11%, compared to the same period last year largely driven by higher volumes of New Mix, JDTW, and JD RTDs. Price/mix reflects the negative effect of foreign exchange, partially offset by higher prices across much of our portfolio led by JDTW. Reported net sales were positively impacted by an estimated net increase in distributor inventories. See “Results of Operations - Fiscal 2023 Year-to-Date Highlights” above for further details on net sales for the six months ended October 31, 2022.
Cost of Sales
3 Months6 Months
Percentage change versus the prior year period ended October 31VolumeCost/mixTotalVolumeCost/mixTotal
Change in reported cost of sales14 %%19 %13 %%14 %
Acquisitions and divestitures— %— %— %— %%%
Foreign exchange— %%%— %%%
Change in organic cost of sales14 %%21 %13 %%17 %
Note: Results may differ due to rounding
For the three months ended October 31, 2022, reported cost of sales were $481 million, an increase of $77 million, or 19%, compared to the same period last year largely driven by higher volumes of New Mix, JDTW, and JD RTDs. Cost/mix reflects higher costs related to inflation on our input costs and supply chain disruptions. These factors were partially offset by (a) the removal of the European Union and United Kingdom tariffs on American whiskey, (b) a shift in portfolio mix toward our lower-cost brands, and (c) the positive effect of foreign exchange. An estimated net increase in distributor inventories negatively impacted reported cost of sales.
For the six months ended October 31, 2022, reported cost of sales were $866 million, an increase of $109 million, or 14%, compared to the same period last year largely driven by higher volumes of New Mix, JDTW, and JD RTDs. Cost/mix reflects higher costs related to inflation on our input costs and supply chain disruptions. These factors were largely offset by (a) a shift in portfolio mix toward our lower-cost brands, (b) the removal of the European Union and United Kingdom tariffs on American whiskey and (c) the positive effect of foreign exchange. An estimated net increase in distributor inventories negatively impacted reported cost of sales.

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Gross Profit
Percentage change versus the prior year period ended October 31
3 Months
6 Months
Change in reported gross profit%%
Acquisitions and divestitures— %— %
Foreign exchange%%
Change in organic gross profit13 %17 %
Note: Results may differ due to rounding
Gross Margin
For the period ended October 31
3 Months
6 Months
Prior year gross margin59.3 %60.1 %
Price/mix2.4 %2.4 %
Cost (excluding tariffs)(5.6)%(3.8)%
Acquisitions and divestitures0.1 %0.1 %
Tariffs1
1.4 %1.4 %
Foreign exchange(1.6 %)(1.4 %)
Change in gross margin(3.3 %)(1.3 %)
Current year gross margin56.0 %58.8 %
Note: Results may differ due to rounding
1“Tariffs” include the combined effect of tariff-related costs, whether arising as a reduction of reported net sales or as an increase in reported cost of sales.
For the three months ended October 31, 2022, reported gross profit of $613 million increased $23 million, or 4%, compared to the same period last year. Gross margin decreased 3.3 percentage points to 56.0% from 59.3% in the same period last year. The decrease in gross margin was driven by (a) higher costs due to the impact of inflation on our input costs, (b) higher cost related to supply chain disruptions, and (c) the negative effect of foreign exchange, partially offset by favorable price/mix and the removal of the European Union and United Kingdom tariffs on American whiskey.
For the six months ended October 31, 2022, reported gross profit of $1.2 billion increased $93 million, or 8%, compared to the same period last year. Gross margin decreased 1.3 percentage points to 58.8% from 60.1% in the same period last year. The decrease in gross margin was driven by (a) higher costs due to the impact of inflation on our input costs, (b) higher cost related to supply chain disruptions, and (c) the negative effect of foreign exchange, partially offset by favorable price/mix and the removal of the European Union and United Kingdom tariffs on American whiskey.
Operating Expenses
Percentage change versus the prior year period ended October 31
3 Months
ReportedAcquisitions and DivestituresImpairment ChargesForeign ExchangeOrganic
Advertising16 %— %— %%22 %
SG&A%— %— %%15 %
Total operating expenses1
12 %1 %1 %5 %18 %
6 Months
Advertising19 %— %— %%25 %
SG&A%— %— %%11 %
Total operating expenses1
9 % %2 %2 %13 %
Note: Results may differ due to rounding
1Total operating expenses include advertising expense, SG&A expense, and other expense (income), net.
For the three months ended October 31, 2022, reported operating expenses totaled $300 million, an increase of $32 million, or 12%, compared to the same period last year.
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Reported advertising expense increased 16% for the three months ended October 31, 2022 driven primarily by increased investment in JDTW across all geographic clusters and the launch of Jack Daniel’s Bonded in the United States, partially offset by the positive effect of foreign exchange.
Reported SG&A expense increased 9% for the three months ended October 31, 2022 driven primarily by higher compensation-related expenses and higher discretionary spend, partially offset by the positive effect of foreign exchange.
For the six months ended October 31, 2022, reported operating expenses totaled $579 million, an increase of $47 million, or 9%, compared to the same period last year.
Reported advertising expense increased 19% for the six months ended October 31, 2022 driven largely by increased investment in JDTW, Herradura, the launch of Jack Daniel’s Bonded, and Woodford Reserve in the United States, partially offset by the positive effect of foreign exchange.
Reported SG&A expense increased 7% for the six months ended October 31, 2022 driven primarily by higher compensation-related expenses and higher discretionary spend, partially offset by the positive effect of foreign exchange.
Operating Income
Percentage change versus the prior year period ended October 313 Months
6 Months
Change in reported operating income(2 %)%
Acquisitions and divestitures(1 %)— %
Impairment charges(1 %)(1 %)
Foreign exchange12 %14 %
Change in organic operating income%19 %
Note: Results may differ due to rounding
For the three months ended October 31, 2022, reported operating income totaled $313 million, a decrease of $9 million, or 2%, compared to the same period last year. Operating margin decreased 3.6 percentage points to 28.7% from 32.3% in the same period last year.
For the six months ended October 31, 2022, reported operating income totaled $656 million, an increase of $45 million, or 8%, compared to the same period last year. Operating margin decreased 0.9 percentage points to 31.2% from 32.1% in the same period last year.
The effective tax rate for the three months ended October 31, 2022, was 23.7% compared to 21.6% for the same period last year. The increase in our effective tax rate was driven primarily by increased state taxes and deferred taxes recorded in connection with a change in indefinite reinvestment assertion, partially offset by decreased prior fiscal year true-ups and the reversal of valuation allowances in the current period.
The effective tax rate for the six months ended October 31, 2022, was 23.7% compared to 24.9% for the same period last year. The decrease in our effective tax rate was driven primarily by decreased prior fiscal year true-ups and the reversal of valuation allowances in the current period partially offset by increased state taxes and increased contingent tax liabilities.
Diluted earnings per share of $0.47 for the three months ended October 31, 2022, decreased 4% from the $0.49 reported for the same period last year, driven by the decline in operating income and a higher effective tax rate. Diluted earnings per share of $0.99 for the six months ended October 31, 2022, increased 11% from the $0.89 reported for the same period last year, driven by the increase in reported operating income and the benefit of a lower effective tax rate.
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 on our GAAP income statement measures.
This updated outlook revises certain aspects of the fiscal 2023 outlook included in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our 2022 Form 10-K.
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Reflecting the strength of our portfolio of brands, stronger consumer demand, and the easing of supply chain constraints, we expect organic net sales growth in the high-single digit range.
The reported gross margin decline during the first half of fiscal 2023 was driven by higher inflation, supply chain disruption costs, and the negative effect of foreign exchange. For the full year, reported gross margin is expected to be consistent with the first half of fiscal 2023.
Based on the above expectations, we anticipate high-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.

Liquidity and Financial Condition
Liquidity. We generate strong cash flow from operations, which enables 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 $868 million at April 30, 2022, and $1,087 million at October 31, 2022. As of October 31, 2022, approximately 67% 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 Condensed Consolidated Financial Statements for outstanding commercial paper balances, interest rates, and days to maturity at April 30, 2022, and October 31, 2022. The average balances, interest rates, and original maturities during the periods ended October 31, 2021 and 2022, are presented below.
Three Months AverageSix Months Average
October 31,October 31,
(Dollars in millions)2021202220212022
Average commercial paper$45$31$117$15
Average interest rate0.17%3.66%0.16%3.66%
Average days to maturity at issuance33313231
Our commercial paper program is supported by available commitments under our $800 million bank credit facility that expires in November 2024. At October 31, 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 notes maturing in January 2023, dividend payments, capital investments, and funding our previously-announced acquisitions of the Gin Mare and Diplomático brands. We expect to meet our planned short-term liquidity needs through cash generated from operations, borrowings under our commercial paper program, and financing in the credit markets and the debt capital markets. Our most significant longer-term cash requirements primarily include payments related to our long-term debt, employee benefit obligations, and deferred tax liabilities.
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 short- and long-term financial commitments.
Cash flows. Cash provided by operations of $316 million during the six months ended October 31, 2022, declined $19 million from the same period last year, reflecting increased working capital offset partially by improved operating results. The increase
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in working capital was primarily attributable to higher levels of inventory, which were affected by significantly higher input costs and other effects of supply chain disruptions.
Cash used for investing activities was $58 million during the six months ended October 31, 2022, compared to $35 million for the same period last year. The $23 million increase largely reflects increased capital spending to expand our production capacity to meet anticipated future consumer demand.
Cash provided by financing activities was $1 million during the six months ended October 31, 2022, compared to $362 million in cash used for financing activities during the same prior-year period. The $363 million change largely reflects a $370 million increase in net proceeds from short-term borrowings.
Dividends. See Note 7 to the Condensed Consolidated Financial Statements included in Part I, Item I of this Quarterly Report for information about cash dividends declared per share on our Class A and Class B common stock during fiscal 2023.

Item 3. Quantitative and Qualitative Disclosures about Market Risk
We face market risks arising from changes in foreign currency exchange rates, commodity prices, and interest rates. Foreign currency fluctuations affect our net investments in foreign subsidiaries and foreign currency-denominated cash flows. Commodity price changes can affect our production and supply chain costs. 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. 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. Since April 30, 2022, there have been no material changes to the market risks faced by us or to our risk management program.

Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO) (our principal executive and principal financial officers), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act)), as of the end of the period covered by this report. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures: (a) are effective to ensure that information required to be disclosed by the Company in the reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms; and (b) include controls and procedures designed to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including the CEO and the CFO, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting. There has been no change in our internal control over financial reporting during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. 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 legal proceedings will have, individually or in the aggregate, a material adverse effect on our financial position, results of operations, or liquidity.

Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the risks and uncertainties discussed in Part I, Item 1A. Risk Factors in our 2022 Form 10-K, which could materially adversely affect our business, financial condition, or future results. There have been no material changes to the risk factors disclosed in our 2022 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 
None.

Item 3. Defaults Upon Senior Securities
None.

Item 4. Mine Safety Disclosures
Not applicable.

Item 5. Other Information
None.

Item 6. Exhibits
The following documents are filed with this report:
Exhibit Index
10.1
31.1
31.2
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101The following materials from Brown-Forman Corporation's Quarterly Report on Form 10-Q for the quarter ended October 31, 2022, in Inline XBRL (eXtensible Business Reporting Language) format: (a) Condensed Consolidated Statements of Operations, (b) Condensed Consolidated Statements of Comprehensive Income, (c) Condensed Consolidated Balance Sheets, (d) Condensed Consolidated Statements of Cash Flows, and (e) Notes to the Condensed Consolidated Financial Statements.
104Cover Page Interactive Data File in Inline XBRL format (included in Exhibit 101).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


 BROWN-FORMAN CORPORATION
 (Registrant)
   
Date:December 7, 2022By:/s/ Leanne D. Cunningham
  Leanne D. Cunningham
  Senior Vice President
and Chief Financial Officer
  (On behalf of the Registrant and
as Principal Financial Officer)

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