Brown Forman Inc · NYSE:BF.A
Brown Forman — 1H FY19 Earnings Presentation
20 slides from Brown Forman's earnings presentation, Dec 5, 2018
Slide 1: 1H FY19 Results & FY19 Outlook
1H FY19 Results & FY19 Outlook December 5, 2018
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation 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,” “exp
Slide 3: 1H FY19 Highlights & FY19 Outlook
1H FY19 Highlights & FY19 Outlook Reported Underlying Operating Fiscal 2019 Outlook1 Results Net Sales1 Leverage • +6-7% underlying net • Net sales +2% • Underlying net sales +5% • Underlying operating sales growth ◦ Balanced geographic and income +4% • Operating income flat broad-based portfolio gr
Slide 4: 2H FY19 Comparisons Ease Significantly
2H FY19 Comparisons Ease Significantly Underlying Sales Growth Underlying Operating Income Growth 8 15 6 10 % % 4 5 2 0 0 1H 2H FY 1H 2H FY FY18 FY19 Average FY18 FY19 Average Note: The average shown above is a simple straight average derived by summing the first half for fiscal 2018 and fiscal 2019
Slide 5: 1H FY19 Results - Continued Underlying Momentum Despite Tariff Costs and Difficult Prior Year Comparisons
1H FY19 Results - Continued Underlying Momentum Despite Tariff Costs and Difficult Prior Year Comparisons Reported New Foreign Estimated Underlying Change Accounting Exchange Net Change In Change (%) Standard* Impact Distributor (%) (+/-) (+/-) Inventories (+/-) Net Sales 2% 1% 2% —% 5% Gross Profit
Slide 6: 1H FY19 Reported Growth of 2% Driven by Solid Underlying Net Sales Growth of 5%
1H FY19 Reported Growth of 2% Driven by Solid Underlying Net Sales Growth of 5% 0% +5% +2% +1% +2% Reported New Accounting Foreign Estimated Underlying Standard* Exchange Net Change in Distributor Inventories 6 * Adoption of ASC 606 (Revenue from Contracts with Customers)
Slide 7: 1H FY19 Net Sales Growth Driven by Broad-based Geographic Gains
1H FY19 Net Sales Growth Driven by Broad-based Geographic Gains Underlying +14% +10% Reported +5% +5% 5% +3% +2% +2% +3% +1% United Developed Emerging Travel Retail Total United Developed Emerging Travel Retail Total States International States International 7 * See appendix for additional details
Slide 8: Balanced Growth Across Our Top Markets
Balanced Growth Across Our Top Markets 1H FY19 Net Sales Growth - Reported (Underlying) United States France +1% (+3%) +2% (+4%) Volume-driven growth led Led by JDTH by bourbons & tequilas volumes and Rye launch United Kingdom Poland -5% (+4%) +4% (+2%) Led by higher volumes of Volume growth led by
Slide 9: 2H FY19 Sales Comparisons Also Ease in the United States
2H FY19 Sales Comparisons Also Ease in the United States United States Underlying Sales Growth 8 6 % 4 2 0 1H 2H FY FY18 FY19 Average Note: The average shown above is a simple straight average derived by summing the first half for fiscal 2018 and fiscal 2019 and dividing by two. 9
Slide 10: Broad-Based Portfolio Growth
Broad-Based Portfolio Growth 1H FY19 Net Sales Growth - Reported (Underlying) Jack Daniel's Family Old Forester & Woodford Reserve +2% (+5%) +21% (+24%) Tequila - Herradura, el Jimador & New Mix +7% (+12%) * See appendix for additional details 10
Slide 11: 1H FY19 Gross Margins pressured by tariff costs, higher input costs and new accounting standard
1H FY19 Gross Margins pressured by tariff costs, higher input costs and new accounting standard 67.4% (0.3)% (0.3)% —% 66.4% (0.4)% FY18 Underlying Change/ Tariffs New Accounting Foreign FY19 Other Standard* Exchange 11 * Adoption of ASC 606 (Revenue from Contracts with Customers)
Slide 12: 1H FY19 Underlying Operating Income Growth led by Solid Underlying Net Sales Growth
1H FY19 Underlying Operating Income Growth led by Solid Underlying Net Sales Growth Three Months Six Months Ended October 31, 2018 Ended October 31, 2018 Reported Change Underlying Change Reported Change Underlying Change (%) (%) (%) (%) Net Sales —% 3% 2% 5% Gross Profit -3% 1% 1% 5% Advertising -7
Slide 13: FY19 Outlook
FY19 Outlook Growth Underlying Underlying Diluted EPS Net Sales Operating Income 6 - 7% 4 - 6% $1.65 - $1.75 11 - 18% Growth 13
Slide 14: Appendix
Appendix 14
Slide 15: Non-GAAP Reconciliation
Non-GAAP Reconciliation We use certain financial measures in this presentation 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 op
Slide 16: Definitions
Definitions 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 spirits category. Below,
Slide 17: Definitions
Definitions Other Metrics. • “Depletions.” We generally record revenues when we ship our products to our customers. Depending on our route-to-consumer (RTC), we ship products to either (a) retail or wholesale customers in owned distribution markets or (b) our distributor customers in other markets.
Slide 18: Reconciliation: 1H FY19 by Top Markets
Reconciliation 1H FY19 Net Sales Growth by Top Markets Six Months Ending October 31, 2018 Estimated Net Change in New Accounting Geographic Area Reported Foreign Exchange (+/-) Distributor Inventories Underlying Standard* (+/-) (+/-) United States 1% 1% —% —% 3% Developed International 2% 1% 3% -1%
Slide 19: Reconciliation: 1H FY19 for Brand Aggregations
Reconciliation 1H FY19 Net Sales Growth for Brand Aggregations Six Months Ending October 31, 2018 Estimated Net Change in New Accounting Aggregated Brands Reported Foreign Exchange (+/-) Distributor Inventories Underlying Standard* (+/-) (+/-) Jack Daniel's Family of 2% 1% 2% —% 5% Brands Old Forest
Slide 20: Reconciliation: 2H FY18 Growth
Reconciliation 2H FY18 Growth Six Months Ending April 30, 2018 Estimated Net Change in Geographic Area Account Reported Foundation* (+/-) Foreign Exchange (+/-) Distributor Inventories Underlying (+/-) United States Net Sales 4% —% —% -1% 4% Total Company Net Sales 7% —% -2% —% 5% Total Company Oper