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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 January 31, 2024
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: February 29, 2024
Class A Common Stock (voting), $0.15 par value169,108,086 
Class B Common Stock (nonvoting), $0.15 par value303,416,148 





2


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 EndedNine Months Ended
January 31,January 31,
2023202420232024
Sales$1,406 $1,406 $4,078 $4,137 
Excise taxes325 337 896 923 
Net sales1,081 1,069 3,182 3,214 
Cost of sales457 434 1,323 1,257 
Gross profit624 635 1,859 1,957 
Advertising expenses141 143 372 414 
Selling, general, and administrative expenses186 203 541 595 
Other expense (income), net124 (84)117 (91)
Operating income173 373 829 1,039 
Non-operating postretirement expense27 1 27 2 
Interest income(2)(3)(7)(7)
Interest expense24 33 61 93 
Income before income taxes124 342 748 951 
Income taxes24 57 172 193 
Net income$100 $285 $576 $758 
Earnings per share:
Basic$0.21 $0.60 $1.20 $1.59 
Diluted$0.21 $0.60 $1.20 $1.58 
See notes to the condensed consolidated financial statements.
3


BROWN-FORMAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(Dollars in millions)
 
Three Months EndedNine Months Ended
January 31,January 31,
2023202420232024
Net income$100 $285 $576 $758 
Other comprehensive income (loss), net of tax:
Currency translation adjustments119 75 108 10 
Cash flow hedge adjustments(34)(10)(24)(3)
Postretirement benefits adjustments6 1 10 4 
Net other comprehensive income (loss)91 66 94 11 
Comprehensive income$191 $351 $670 $769 
See notes to the condensed consolidated financial statements.
4


BROWN-FORMAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in millions, except per share amounts)
April 30, 2023January 31,
2024
Assets
Cash and cash equivalents$374 $589 
Accounts receivable, less allowance for doubtful accounts of $7 at April 30 and $7 at January 31
855 878 
Inventories:
Barreled whiskey1,262 1,439 
Finished goods509 479 
Work in process321 388 
Raw materials and supplies191 223 
Total inventories2,283 2,529 
Assets held for sale 161 
Other current assets289 258 
Total current assets3,801 4,415 
Property, plant and equipment, net1,031 1,014 
Goodwill1,457 1,464 
Other intangible assets1,164 1,004 
Deferred tax assets66 66 
Other assets258 274 
Total assets$7,777 $8,237 
Liabilities
Accounts payable and accrued expenses$827 $747 
Dividends payable 103 
Accrued income taxes22 19 
Short-term borrowings235 728 
Liabilities held for sale 15 
Total current liabilities1,084 1,612 
Long-term debt2,678 2,678 
Deferred tax liabilities323 289 
Accrued pension and other postretirement benefits171 171 
Other liabilities253 242 
Total liabilities4,509 4,992 
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 capital1 15 
Retained earnings3,643 3,995 
Accumulated other comprehensive income (loss), net of tax(235)(224)
Treasury stock, at cost (5,215,000 and 12,047,000 shares at April 30 and January 31, respectively)
(213)(613)
Total stockholders’ equity3,268 3,245 
Total liabilities and stockholders’ equity$7,777 $8,237 
 See notes to the condensed consolidated financial statements.
5


BROWN-FORMAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in millions)
Nine Months Ended
January 31,
 20232024
Cash flows from operating activities:  
Net income$576 $758 
Adjustments to reconcile net income to net cash provided by operations: 
Gain on sale of business (90)
Asset impairment charges96  
Depreciation and amortization59 66 
Stock-based compensation expense13 18 
Deferred income tax provision (benefit)
(6)3 
Change in fair value of contingent consideration 1 
Other, net17 (2)
Changes in assets and liabilities:
Accounts receivable(106)(21)
Inventories(288)(320)
Other current assets(19)28 
Accounts payable and accrued expenses66 (69)
Accrued income taxes(36)(2)
Other operating assets and liabilities38 (8)
Cash provided by operating activities410 362 
Cash flows from investing activities:  
Proceeds from sale of business 194 
Business acquisitions, net of cash acquired(1,195) 
Additions to property, plant, and equipment(116)(148)
Proceeds from sale of property, plant, and equipment12 13 
Other, net(1)4 
Cash provided by (used for) investing activities
(1,300)63 
Cash flows from financing activities:  
Proceeds from short-term borrowings, maturities greater than 90 days600  
Net change in other short-term borrowings402 492 
Repayment of long-term debt(250) 
Payments of withholding taxes related to stock-based awards(5)(4)
Acquisition of treasury stock (400)
Dividends paid(279)(300)
Cash provided by (used for) financing activities468 (212)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(15)2 
Net increase (decrease) in cash, cash equivalents, and restricted cash
(437)215 
Cash, cash equivalents, and restricted cash at beginning of period874 384 
Cash, cash equivalents, and restricted cash at end of period437 599 
Less: Restricted cash (included in other current assets) at end of period(9)(10)
Cash and cash equivalents at end of period$428 $589 
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, 2023 (2023 Form 10-K). We prepared the accompanying financial statements on a basis that is substantially consistent with the accounting principles applied in our 2023 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 EndedNine Months Ended
January 31,January 31,
(Dollars in millions, except per share amounts)2023202420232024
Net income available to common stockholders$100 $285 $576 $758 
Share data (in thousands):  
Basic average common shares outstanding479,152 474,806 479,121 477,542 
Dilutive effect of stock-based awards1,308 760 1,361 902 
Diluted average common shares outstanding480,460 475,566 480,482 478,444 
Basic earnings per share$0.21 $0.60 $1.20 $1.59 
Diluted earnings per share$0.21 $0.60 $1.20 $1.58 

We excluded common stock-based awards for approximately 1,257,000 shares and 1,658,000 shares from the calculation of diluted earnings per share for the three months ended January 31, 2023 and 2024, respectively. We excluded common stock-based awards for approximately 1,059,000 shares and 1,544,000 shares from the calculation of diluted earnings per share for the nine months ended January 31, 2023 and 2024, 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 $429 million higher than reported as of April 30, 2023, and $473 million higher than reported as of January 31, 2024. 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 nine months ended January 31, 2024:
(Dollars in millions)Goodwill
Other Intangible Assets
Balance at April 30, 2023
$1,457 $1,164 
Purchase accounting adjustment (Note 14)40 (53)
Sale of business (Note 15)
(10)(89)
Reclassification to assets held for sale (Note 16)
(18) 
Foreign currency translation adjustment(5)(18)
Balance at January 31, 2024
$1,464 $1,004 

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

5.    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 January 31, 2024.

6.    Debt
Our long-term debt (net of unamortized discount and issuance costs) consisted of:
(Principal and carrying amounts in millions)April 30, 2023January 31,
2024
3.50% senior notes, $300 principal amount, due April 15, 2025
$299 $299 
1.20% senior notes, €300 principal amount, due July 7, 2026
330 325 
2.60% senior notes, £300 principal amount, due July 7, 2028
375 379 
4.75% senior notes, $650 principal amount, due April 15, 2033
642 643 
4.00% senior notes, $300 principal amount, due April 15, 2038
295 295 
3.75% senior notes, $250 principal amount, due January 15, 2043
248 248 
4.50% senior notes, $500 principal amount, due July 15, 2045
489 489 
$2,678 $2,678 
Our short-term borrowings consisted of borrowings under our commercial paper program, as follows:
(Dollars in millions)April 30, 2023January 31,
2024
Commercial paper (par amount)$235$730
Average interest rate5.17%5.48%
Average remaining days to maturity2120


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7.    Stockholders’ Equity
The following table shows the changes in stockholders’ equity by quarter during the nine months ended January 31, 2023:
(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)1 1 
Declaration of cash dividends (180)(180)
Stock-based compensation expense4 4 
Stock issued under compensation plans4 4 
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)2 2 
Stock-based compensation expense5 5 
Stock issued under compensation plans1 1 
Loss on issuance of treasury stock issued under compensation plans(2)(2)
Balance at October 31, 202225 47 3 3,534 (349)(220)3,040 
Net income100 100 
Net other comprehensive income (loss)91 91 
Declaration of cash dividends(197)(197)
Stock-based compensation expense4 4 
Stock issued under compensation plans1 1 
Loss on issuance of treasury stock issued under compensation plans(1)(1)
Balance at January 31, 2023$25 $47 $6 $3,437 $(258)$(219)$3,038 

9


The following table shows the changes in stockholders’ equity by quarter during the nine months ended January 31, 2024:
(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, 2023$25 $47 $1 $3,643 $(235)$(213)$3,268 
Net income231 231 
Net other comprehensive income (loss)36 36 
Declaration of cash dividends(197)(197)
Stock-based compensation expense4 4 
Stock issued under compensation plans3 3 
Loss on issuance of treasury stock issued under compensation plans(4)(3)(7)
Balance at July 31, 202325 47 1 3,674 (199)(210)3,338 
Net income242 242 
Net other comprehensive income (loss)(91)(91)
Acquisition of treasury stock(42)(42)
Stock-based compensation expense7 7 
Balance at October 31, 202325 47 8 3,916 (290)(252)3,454 
Net income285 285 
Net other comprehensive income (loss)66 66 
Declaration of cash dividends(206)(206)
Acquisition of treasury stock(361)(361)
Stock-based compensation expense7 7 
Balance at January 31, 2024$25 $47 $15 $3,995 $(224)$(613)$3,245 

The following table shows the change in each component of accumulated other comprehensive income (AOCI), net of tax, during the nine months ended January 31, 2024:
(Dollars in millions)
Currency Translation Adjustments
Cash Flow Hedge Adjustments
Postretirement Benefits Adjustments
Total AOCI
Balance at April 30, 2023
$(104)$10 $(141)$(235)
Net other comprehensive income (loss)10 (3)4 11 
Balance at January 31, 2024
$(94)$7 $(137)$(224)

The following table shows the cash dividends declared per share on our Class A and Class B common stock during the nine months ended January 31, 2024:
Declaration DateRecord DatePayable DateAmount per Share
May 25, 2023June 8, 2023July 3, 2023$0.2055
July 27, 2023September 5, 2023October 2, 2023$0.2055
November 16, 2023December 1, 2023January 2, 2024$0.2178
January 23, 2024March 8, 2024April 1, 2024$0.2178

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8.    Net Sales 
The following table shows our net sales by geography:
Three Months EndedNine Months Ended
January 31,January 31,
(Dollars in millions)2023202420232024
United States
$439 $469 $1,455 $1,442 
Developed International1
345 311 927 913 
Emerging2
245 238 629 688 
Travel Retail3
32 33 110 113 
Non-branded and bulk4
20 18 61 58 
Total$1,081 $1,069 $3,182 $3,214 
1Represents net sales of branded products to “advanced economies” as defined by the International Monetary Fund (IMF), excluding the United States. Our top developed international markets are Germany, Australia, the United Kingdom, France, Canada, and Japan.
2Represents net sales of branded products to “emerging and developing economies” as defined by the IMF. Our top emerging markets are Mexico, Poland, and Brazil.
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 services, and non-branded bulk whiskey and wine, regardless of customer location.

The following table shows our net sales by product category:
Three Months EndedNine Months Ended
January 31,January 31,
(Dollars in millions)2023202420232024
Whiskey1
$754 $731 $2,215 $2,167 
Ready-to-Drink2
121 127 369 397 
Tequila3
79 76 237 238 
Wine4
53 51 164 168 
Vodka5
27 26 74 75 
Non-branded and bulk6
20 18 61 58 
Rest of portfolio7
27 40 62 111 
Total$1,081 $1,069 $3,182 $3,214 
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 which we divested on November 1, 2023. Net sales for the three months ended January 31, 2024 were recognized pursuant to the transition services agreement related to distribution services in certain markets.
6Includes net sales of used barrels, contract bottling services, and non-branded bulk whiskey and wine.
7Includes Chambord, Gin Mare, Korbel Brandy, Diplomático, and Fords Gin.
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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 EndedNine Months Ended
January 31,January 31,
(Dollars in millions)2023202420232024
Service cost$5 $5 $16 $14 
Interest cost8 8 24 25 
Expected return on plan assets(11)(10)(33)(30)
Amortization of:    
Prior service cost  1  
Net actuarial loss
2 2 7 5 
Settlement charge27  27  
Net cost$31 $5 $42 $14 

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 effective tax rate on ordinary income for the full fiscal year is expected to be 20.1%, which is lower than the U.S. federal statutory rate of 21.0%, due to the beneficial impact of the foreign-derived intangible income deduction and tax rate differences on the sale of the Finlandia vodka business, partially offset by the impact of state taxes and the tax effects of foreign operations.

The effective tax rate of 20.3% for the nine months ended January 31, 2024, was higher than the expected tax rate of 20.1% on ordinary income for the full fiscal year ending April 30, 2024, primarily due to the impact of tax rate changes which was partially offset by favorable resolution of uncertain tax positions in the current period. The effective tax rate of 20.3% for the nine months ended January 31, 2024, was lower than the effective tax rate of 23.0% for the same period last year, primarily due to decreased impact of state taxes, the reversal of contingent tax liabilities in the current period, and the beneficial impact of tax rate differences on the sale of the Finlandia vodka business, which was partially offset by the absence of benefit from the reversal of valuation allowances in the current period.

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 two 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 $747 million at April 30, 2023, and $560 million at January 31, 2024. The maximum term of outstanding derivative contracts was 24 months at both April 30, 2023 and January 31, 2024.

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
12


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 $495 million at April 30, 2023, and $496 million at January 31, 2024.

During the three months ended January 31, 2024, we reclassified $26 million of gains on net investment hedges from AOCI to earnings in connection with the divestiture of Finlandia (Note 15).

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 assess the effectiveness of our hedges continually. If we determine that any financial instruments designated as hedges are no longer highly effective, we discontinue hedge accounting for those instruments.

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.

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
January 31,
(Dollars in millions)Classification20232024
Currency derivatives designated as cash flow hedges:   
Net gain (loss) recognized in AOCIn/a$(33)$(11)
Net gain (loss) reclassified from AOCI into earningsSales11 3 
Currency derivatives not designated as hedging instruments:   
Net gain (loss) recognized in earningsSales$(11)$(3)
Net gain (loss) recognized in earningsOther income (expense), net2 2 
Foreign currency-denominated debt designated as net investment hedge:
Net gain (loss) recognized in AOCIn/a$(32)$(19)
Net gain (loss) reclassified from AOCI into earningsOther income (expense), net 26 
Total amounts presented in the accompanying condensed consolidated statements of operations for line items affected by the net gains (losses) shown above:
Sales$1,406 $1,406 
Other income (expense), net(124)84 
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Nine Months Ended
January 31,
(Dollars in millions)Classification20232024
Derivative Instruments
Currency derivatives designated as cash flow hedges:   
Net gain (loss) recognized in AOCIn/a$3 $6 
Net gain (loss) reclassified from AOCI into earningsSales34 11 
Currency derivatives not designated as hedging instruments:   
Net gain (loss) recognized in earningsSales$(2)$(1)
Net gain (loss) recognized in earningsOther income (expense), net11 8 
Foreign currency-denominated debt designated as net investment hedge:
Net gain (loss) recognized in AOCIn/a$10 $(2)
Net gain (loss) reclassified from AOCI into earningsOther income (expense), net 26 
Total amounts presented in the accompanying condensed consolidated statements of operations for line items affected by the net gains (losses) shown above:
Sales$4,078 $4,137 
Other income (expense), net(117)91 

We expect to reclassify $4 million of deferred net gains on cash flow hedges recorded in AOCI as of January 31, 2024 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.

The following table presents the fair values of our derivative instruments:
April 30, 2023January 31, 2024
(Dollars in millions)
Classification
Derivative Assets
Derivative Liabilities
Derivative Assets
Derivative Liabilities
Designated as cash flow hedges:
Currency derivativesOther current assets$20 $(11)$10 $(4)
Currency derivativesOther assets5 (1)1  
Currency derivativesAccrued expenses (1)1 (1)
Currency derivativesOther liabilities (1) (1)
Not designated as hedges:
Currency derivativesOther current assets3    

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.

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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. The aggregate fair value of our derivatives with creditworthiness requirements that were in a net liability position was $1 million at April 30, 2023, and $1 million at January 31, 2024.

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, 2023
Derivative assets$28 $(12)$16 $(1)$15 
Derivative liabilities(14)12 (2)1 (1)
January 31, 2024
Derivative assets12 (5)7  7 
Derivative liabilities(6)5 (1) (1)

No cash collateral was received or pledged related to our derivative contracts as of April 30, 2023, or January 31, 2024.

12.    Fair Value Measurements
The following table summarizes the assets and liabilities measured or disclosed at fair value on a recurring basis:
April 30, 2023January 31, 2024
 CarryingFairCarryingFair
(Dollars in millions)AmountValueAmountValue
Assets  
Cash and cash equivalents$374 $374 $589 $589 
Currency derivatives, net16 16 7 7 
Liabilities  
Currency derivatives, net2 2 1 1 
Short-term borrowings235 235 728 728 
Long-term debt2,678 2,556 2,678 2,570 
Contingent consideration (Note 14)63 63 62 62 

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.
15



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, cash equivalents, and short-term borrowings approximate the carrying amounts due to the short maturities of these instruments.

We determine the fair value of our contingent consideration liability using a Monte Carlo simulation model, which requires the use of Level 3 inputs, such as projected future net sales, discount rates, and volatility rates. Changes in any of these Level 3 inputs could result in material changes to the fair value of the contingent consideration and could materially impact the amount of noncash expense (or income) recorded each reporting period.

The following table shows the changes in our contingent consideration liability during the nine months ended January 31, 2024:
(Dollars in millions)
Balance at April 30, 2023$63 
Purchase accounting adjustment (Note 14)(1)
Change in fair value1
1 
Foreign currency translation adjustment(1)
Balance at January 31, 2024
$62 
1Classified as “other expense (income), net” in the accompanying condensed consolidated statement of operations.

See Note 14 for additional information about the contingent consideration liability.

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). During the third quarter of fiscal 2023, we recognized a non-cash impairment charge of $96 million related to the Finlandia brand name. The impairment charge was based on the estimated fair value of the brand name, which we determined using the relief from royalty method, and which is classified as Level 3 within the valuation hierarchy. The impairment charge is included in “other expense (income), net” in the accompanying consolidated statement of operations.

As discussed in Note 14, we also used the relief-from-royalty method to determine fair values in connection with our accounting for business combinations.

No other 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
January 31, 2023January 31, 2024
(Dollars in millions)Pre-TaxTaxNetPre-TaxTaxNet
Currency translation adjustments:
Net gain (loss) on currency translation$111 $8 $119 $61 $4 $65 
Reclassification to earnings   4 6 10 
Other comprehensive income (loss), net111 8 119 65 10 75 
Cash flow hedge adjustments:
Net gain (loss) on hedging instruments(33)7 (26)(11)3 (8)
Reclassification to earnings1
(11)3 (8)(3)1 (2)
Other comprehensive income (loss), net(44)10 (34)(14)4 (10)
Postretirement benefits adjustments:
Net actuarial gain (loss) and prior service cost(21)5 (16)   
Reclassification to earnings2
29 (7)22 1  1 
Other comprehensive income (loss), net8 (2)6 1  1 
Total other comprehensive income (loss), net$75 $16 $91 $52 $14 $66 
Nine Months EndedNine Months Ended
January 31, 2023January 31, 2024
(Dollars in millions)Pre-TaxTaxNetPre-TaxTaxNet
Currency translation adjustments:
Net gain (loss) on currency translation$110 $(2)$108 $ $ $ 
Reclassification to earnings   4 6 10 
Other comprehensive income (loss), net110 (2)108 4 6 10 
Cash flow hedge adjustments:
Net gain (loss) on hedging instruments3 (1)2 6 (1)5 
Reclassification to earnings1
(34)8 (26)(11)3 (8)
Other comprehensive income (loss), net(31)7 (24)(5)2 (3)
Postretirement benefits adjustments:
Net actuarial gain (loss) and prior service cost(21)5 (16)   
Reclassification to earnings2
34 (8)26 5 (1)4 
Other comprehensive income (loss), net13 (3)10 5 (1)4 
Total other comprehensive income (loss), net$92 $2 $94 $4 $7 $11 
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
As discussed below, we have finalized the purchase price allocations for our Gin Mare and Diplomático acquisitions, both of which we acquired during the third quarter of fiscal 2023. Each acquisition was accounted for as a business combination.

On November 3, 2022, we acquired the Gin Mare and Gin Mare Capri brands through our purchase of 100% of the equity interests of Gin Mare Brand, S.L.U., a Spanish company, and Mareliquid Vantguard, S.L.U., a Spanish company (the “Gin Mare acquisition”). The purchase price of the Gin Mare acquisition was $523 million, which consisted of $468 million in cash paid at the acquisition date plus contingent consideration of $55 million. The purchase price for the Gin Mare acquisition decreased by $1 million as a result of certain fair value adjustments to the contingent consideration made during the first half of fiscal 2024, which were primarily a result of changes in the discount rates used to calculate the fair value as of the acquisition date.

We have allocated the purchase price based on management’s estimates and independent valuations as follows:
(Dollars in millions)
Prior Allocation1
AdjustmentsFinal Allocation
Trademarks and brand names (indefinite-lived)$307 $(24)$283 
Goodwill289 17 306 
Total assets596 (7)589 
Deferred tax liabilities72 (6)66 
Net assets acquired$524 $(1)$523 
1As reported in Note 12 to our consolidated financial statements in our 2023 Form 10-K.

The adjustments to the prior Gin Mare purchase price allocation reflect revised valuations for the trademarks and brand names, which were driven by an increase in the discount rates used to calculate fair values as of the acquisition date, partially offset by higher projections of future cash flows. The Gin Mare purchase price allocation was finalized during the second quarter of fiscal 2024.

The contingent consideration of $55 million reflects the estimated fair value, at the acquisition date, of contingent future cash payments of up to €90 million to the sellers under an “earn-out” provision of the acquisition agreement. We determined the estimated fair value of the contingent consideration using a Monte Carlo simulation, which requires the use of assumptions, such as projected future net sales, discount rates, and volatility rates.

Any contingent consideration earned by the sellers will be payable in cash no earlier than July 2024 and no later than July 2027, depending on when the sellers choose to exercise the right to receive the payment. The amount payable will depend on the achievement of net sales targets for Gin Mare for the latest fiscal year completed prior to the date of exercise by the sellers. The possible payments range from zero to €90 million (approximately $89 million as of the acquisition date).

At the acquisition date, we also entered into a supply agreement with the sellers for the production and supply of Gin Mare products to us, at market terms, for an initial period of 10 years (subject to subsequent renewal periods).

On January 5, 2023, we acquired the Diplomático and Botucal rum brands through our purchase of (i) 100% of the equity interests of (a) International Rum and Spirits Distributors Unipessoal, Lda., a Portuguese company, (b) Diplomático Branding Unipessoal Lda., a Portuguese company, (c) International Bottling Services, S.A., a Panamanian corporation, and (d) International Rum & Spirits Marketing Solutions, S.L., a Spanish company; and (ii) certain assets of Destilerias Unidas Corp. (the “Diplomático acquisition”). The purchase price of the Diplomático acquisition consisted of cash of $723 million (net of a post-closing working capital adjustment of $4 million).

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We have allocated the purchase price based on management’s estimates and independent valuations as follows:
(Dollars in millions)
Prior Allocation1
Adjustments
Final Allocation
Accounts receivable$11 $ $11 
Inventories36 (2)34 
Other current assets25  25 
Property, plant, and equipment38  38 
Trademarks and brand names (indefinite-lived)312 (29)283 
Goodwill363 23 386 
Other assets2  2 
Total assets787 (8)779 
Accounts payable and accrued expenses13 1 14 
Deferred tax liabilities45 (5)40 
Other liabilities2  2 
Total liabilities60 (4)56 
Net assets acquired$727 $(4)$723 
1As reported in Note 12 to our consolidated financial statements in our 2023 Form 10-K.

The adjustments to the prior Diplomático purchase price allocation reflect revised valuations for the trademarks and brand names, which were driven by an increase in the discount rates used to calculate fair values as of the acquisition date, partially offset by higher projections of future cash flows. The adjustments also reflect certain other immaterial net working capital adjustments. The Diplomático purchase price allocation was finalized during the third quarter of fiscal 2024.

At the acquisition date, we also entered into a supply agreement with the sellers for their production and supply of rum to us, at market terms, for an initial period of 10 years (subject to subsequent renewal periods).

The amounts allocated to trademarks and brand names for each acquisition were estimated using the relief-from royalty method, which requires the use of significant assumptions, such as discount rates and projected future net sales.

Goodwill is calculated as the excess of the purchase price over the fair value of the net identifiable assets acquired. The goodwill recorded for each acquisition is primarily attributable to the value of leveraging our distribution network and brand-building expertise to grow sales of the acquired brands. For the Gin Mare acquisition, we expect none of the goodwill of $306 million to be deductible for tax purposes. For the Diplomático acquisition, we expect $108 million of the goodwill of $386 million to be deductible for tax purposes.

In connection with the acquisitions, we recognized transaction expenses of $50 million during the nine months ended January 31, 2023, of which $45 million was recognized during the third quarter. The following table shows the classification of the transaction expenses in the accompanying consolidated statements of operations.

(Dollars in millions)Three Months Ended January 31, 2023Nine Months Ended January 31, 2023
Selling, general, and administrative expenses$3 $8 
Other expense (income), net4242
Total transaction expenses$45 $50 
The transaction expenses largely reflects payments made to terminate certain distribution contracts related to the acquired brands.

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15.    Finlandia Divestiture
On November 1, 2023, we sold the Finlandia vodka business to Coca-Cola HBC AG for $194 million in cash. The sale reflects the continued evolution of our portfolio strategy to focus on premium spirits brands. The net carrying amount of the related business assets and liabilities included in the sale was $100 million, consisting largely of goodwill and other intangible assets. As a result of the sale, we recognized a pre-tax gain of $90 million during the third quarter of fiscal 2024, which consisted of the following:
(Dollars in millions)
November 1,
2023
Proceeds from sale
$194 
Net carrying amount of assets and liabilities sold(100)
Amounts reclassified from AOCI:
Cumulative translation losses(30)
Net investment hedge gain (Note 11)
26 
Net pre-tax gain on sale1
$90 
1Classified as “other expense (income), net” in the accompanying condensed consolidated statements of operations.

16.    Assets Held for Sale
In November 2023, we reached an agreement to sell our Sonoma-Cutrer wine business to The Duckhorn Portfolio, Inc. in exchange for an ownership percentage of approximately 21.5% in The Duckhorn Portfolio, Inc. and cash of $50 million. The transaction, which is subject to certain customary closing adjustments and conditions, is expected to close in the fourth quarter of fiscal 2024.

The net carrying amount of the related business assets and liabilities as of January 31, 2024, was $146 million and consisted of the following:
(Dollars in millions)January 31,
2024
Inventories$62 
Property, plant, and equipment81 
Goodwill18 
Total assets held for sale161 
Accounts payable and accrued expenses3 
Deferred tax liabilities12 
Total liabilities held for sale15