Brown Forman Inc · NYSE:BF.A
Brown Forman — Q3 2017 Earnings Presentation
27 slides from Brown Forman's earnings presentation, Mar 7, 2017
Slide 1: Brown-Forman 3Q17 and YTD17 Results
Brown-Forman 3Q17 and YTD17 Results March 7, 2017 * The following slides accompany the March 7, 2017 earnings call to discuss Brown-Forman Corporation’s financial results for the third fiscal quarter and nine month period ended January 31, 2017. This information should be read in conjunction with th
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,” “continue,” “could,” “envision,” “estimate,” “expect,” “expectatio
Slide 3: 3Q17 and YTD17 Highlights
3Q17 and YTD17 Highlights Reported Underlying Operating EPS Outlook Results Net Sales Leverage Reaffirmed fiscal Reported results Underlying(1) net sales Operating expense 2017 EPS outlook continued to be growth accelerated leverage continued of $1.71-1.76 negatively impacted sequentially from 1Q17
Slide 4: YTD17 Income Statement
YTD17 Income Statement Foreign Net Change Reported Acquisitions & In Estimated Underlying Exchange Change Divestitures Distributor Change (%) +/- Impact Inventories (%) (+/-) (+/-) Sales -3% 3% 2% 0% 3% Gross Profit -6% 5% 3% 0% 2% Advertising -8% 10% 2% 0% 4% SG&A -4% 0% 1% 0% -2% Operating -4% 6%
Slide 5: YTD17 Underlying Sales Growth
YTD17 Underlying Sales Growth 3% 0% +3% +2% +3% 0% -3% -3% Reported Acquisitions & Foreign Exchange Net Change in Underlying Divestitures Estimated Distributor Inventories 5
Slide 6: Net Sales by Geography - Accelerated in 3Q17
Net Sales by Geography - Accelerated in 3Q17 Reported Underlying YTD17 3Q17 11% YTD17 3Q17 13% 0% 1% 7% 0% -1% -1% -2% 5% 4% -3% -3% 4% 4% 3% 3% 3% 1% -8% US Developed - Emerging Global Travel Total US Developed - Emerging Global Travel Total ex US Retail ex US Retail * See appendix for additional d
Slide 7: YTD17 Sales Change in Top Markets
YTD17 Sales Change in Top Markets Reported/Underlying United States Poland -1% / +4% +5% / +8% Continued growth Strong JDTW growth, soft Finlandia United Kingdom France -12% / +4% +6% / +9% Strong off-premise Sustained strong growth Australia Turkey -1%/ 0% -28% / -11% Soft economy and high Signs of
Slide 8: YTD17 Underlying Sales Growth Highlights
YTD17 Underlying Sales Growth Highlights +3% +21% * See appendix for additional details +13% 8
Slide 9: YTD17 Gross Margin
YTD17 Gross Margin 120 bps 69.1% 90 bps 10 bps 67.0% YTD16 Acquisitions & Foreign Exchange Organic YTD17 Divestitures Change/Other 9
Slide 10: Summary of Operating Performance
Summary of Operating Performance Three Months Nine Months Ended January 31, 2017 Ended January 31, 2017 Reported Change Underlying Change Reported Change Underlying Changes (%) (%) (%) (%) Net Sales 0% 4% -3% 3% Gross Profit -3% 3% -6% 2% Advertising -4% 10% -8% 4% SG&A -3% -2% -4% -2% Operating Inc
Slide 11: FY17 Outlook
FY17 Outlook Underlying Underlying Net Operating Diluted EPS Sales Income 3 – 4% 5 – 7% $1.71-$1.76 11
Slide 12: Emerging Markets' Trends Appear to be Improving
Emerging Markets’ Trends Appear to be Improving Emerging Markets Underlying Sales Contribution 4% 3% 2% 1% 0% -1% -2% 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 Source: Company reports Notes – Net of excise taxes and excludes Soco and Tuaca 12
Slide 13: Appendix
Appendix
Slide 14: Non-GAAP Reconciliation
Non-GAAP Reconciliation We present changes in certain income statement line-items that are adjusted to an “underlying” basis, which are non-GAAP measures that we believe assists in understanding both our performance from period to period on a consistent basis, and the trends of our business. To calc
Slide 15: Reconciliation
Reconciliation Fiscal 2017 Net Sales Growth by Geography Three Months Ending January 31, 2017 Acquisitions & Net Change in Estimated Geographic area Reported (%) Foreign Exchange (+/-) Underlying (%) Divestitures (+/-) Distributor Inventories (+/-) US -2% 6% 0% -2% 3% Developed – ex US 0% 5% -3% 1%
Slide 16: Reconciliation
Reconciliation YTD 2017 Net Sales Growth by Top Markets Net Change in Acquisitions & Geographic area Reported % Foreign Exchange +/- Estimated Distributor Underlying % Divestitures +/- Inventories +/- United States -1% 6% 0% 0% 4% United Kingdom -12% 11% 5% 0% 4% Germany -2% 2% 5% 0% 4% Poland 5% -1
Slide 17: Reconciliation
Reconciliation YTD 2017 Net Sales Growth for Aggregated Brands Net Change in Aggregated Acquisitions & Foreign Estimated Reported % Underlying % Brands Divestitures +/- Exchange +/- Distributor Inventories +/- Old Forester & Woodford 17% 0% 1% 4% 21% Reserve el Jimador, Herradura, & New 4% 0% 9% 0%
Slide 18: Reconciliation
Reconciliation 3Q17 Income Statement Foreign Net Change Reported Acquisitions & In Estimated Underlying Exchange Change Divestitures Distributor Change (%) +/- Impact Inventories (%) (+/-) (+/-) Sales 0% 4% 1% -1% 4% Gross Profit -3% 5% 3% -2% 3% Advertising -4% 11% 3% 0% 10% SG&A -3% 0% 1% 0% -2% O
Slide 19: Summary Slides from Investor Day
Summary Slides from Investor Day
Slide 20: 30 Year CAGR for Jack Daniel's FOB of 5%
30 Year CAGR for Jack Daniel’s FOB of 5% JD FoB 10yr CAGR = 3% JD FoB 10yr CAGR = 5% JD FoB 10yr CAGR = 6% JDTW 10yr CAGR = 3% JDTW 10yr CAGR = 5% JDTW 10yr CAGR = 4% 14 brands 20 m +240% 18 m 8 brands 16 m +288% 14 m 12 m 10 m 15 brands 8m 3 brands +54% 6m 2 brands 4m 2 m 2 brands m 1985 1990 1995
Slide 21: Growth Through Evolved Global Footprint
Growth Through Evolved Global Footprint 1M+ 501K – 1M 201K – 500K 50K – 200K South Africa Russia Greece Indonesia Bulgaria China Belgium Austria India Emerging Africa Romania Chile Netherlands Turkey Spain Switzerland Ukraine Italy Czech Republic U.A.E. Philippines Source: IWSR, 9L Depletions 2015 2
Slide 22: Consistent Revenue Growth
Consistent Revenue Growth Brown-Forman CAGRs 5 Year CAGR vs. Benchmarks 3% +7% Underlying 3% 6% 5% 5% 4% +4% Reported 4% 4% 4% 2% 35-Year 25-Year 10-Year 5-Year S&P500 Staples Comp Set B-F 22
Slide 23: Balanced Geographic Growth Drivers
Balanced Geographic Growth Drivers US Developed Emerging 8% +7% 6% 2% 4% 2% 2% 3% 0% 5 Year CAGR Source: Factset and company information. The competitive set is a weighted average based upon the last five fiscal years sales growth, and includes Diageo, Pernod, Campari, and Remy. See Brown-Forman Cor
Slide 24: Strong and Improved Operating Margins
Strong and Improved Operating Margins Brown-Forman Reported Operating Margin Financial Attractiveness (2006 – 2016) 30% 35% ROIC 30% 15% CONSUMER STAPLES COMPETITIVE SET 25% S&P 500 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 0% 0% 20% 40% Operating Margin Source: Factset and company info
Slide 25: Consistent Investments Behind Brands and People
Consistent Investments Behind Brands and People Underlying A&P and SG&A Growth 6% 5% A&P SG&A A 5 Yr CAGR 5 YEAR CAGR Source: Factset and company information. The competitive set is a weighted average based upon the last five fiscal years sales growth, and includes Diageo, Pernod, Campari, and Remy.
Slide 26: Consistent Long-Term Operating Income Growth
Consistent Long-Term Operating Income Growth Brown-Forman CAGRs 5 Year CAGR vs. Benchmarks 5% +10% Underlying 5% 7% 7% 6% 5% +5% Reported 5% 4% 2% 2% 35-Year 25-Year 10-Year 5-Year S&P500 Staples Comp Set B-F Source: Factset and company information. The competitive set is a weighted average based up
Slide 27: Shareholder-Friendly Capital Allocation
Shareholder-Friendly Capital Allocation Average Annual ‘Yield’ of 4.3% Over Last Decade; 43% Return of Capital Million $s Return % of Mkt Cap $1,500 10% $1,250 7% 7% 7% $1,000 $750 5% 4% 4% 4% $500 3% 3% $250 2% 1% $0 0% FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 Dividends Special Dividends &