Brown Forman Inc · NYSE:BF.A
Brown Forman — FY2018 Earnings Presentation
24 slides from Brown Forman's earnings presentation, Jun 6, 2018
Slide 1: FY18 Results & FY19 Outlook
FY18 Results & June 6, 2018 FY19 Outlook
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: FY18 Highlights and FY19 Outlook
FY18 Highlights and FY19 Outlook Reported Underlying Operating Fiscal 2019 Results Net Sales1 Leverage Underlying Outlook • Net sales +8% • +6.5% underlying net • +8% underlying • +6-7% net sales growth sales growth operating income growth • Operating income +5% • +7-9% operating ◦ Broad-based and •
Slide 4: 4Q18 Results - Negatively Impacted by Timing of Operating Expenses and Creation of a $70 Million Charitable Foundation
4Q18 Results - Negatively Impacted by Timing of Operating Expenses and Creation of a $70 Million Charitable Foundation Reported Acquisitions Foreign Net Change Underlying Change & Divestitures Foundation Exchange In Estimated Change (%) (+/-) (+/-) Impact Distributor (%) (+/-) Inventories (+/-) Net
Slide 5: FY18 Results - Strong and Accelerated Underlying Growth & Continued SG&A Leverage
FY18 Results - Strong and Accelerated Underlying Growth & Continued SG&A Leverage Reported Acquisitions Foreign Net Change Underlying Change & Divestitures Foundation Exchange In Estimated Change (%) (+/-) (+/-) Impact Distributor (%) (+/-) Inventories (+/-) Net Sales 8% —% —% -1% -1% 6% Gross Profi
Slide 6: FY18 Reported Growth of 8% Driven by Strong Underlying Net Sales Growth of 6%
FY18 Reported Growth of 8% Driven by Strong Underlying Net Sales Growth of 6% 0% -1% +8% -1% +6% Reported Acquisitions & Foreign Net Change in Underlying Divestitures Exchange Estimated Distributor Inventories 6
Slide 7: FY18 Net Sales Growth Driven by Broad-based Geographic Gains
FY18 Net Sales Growth Driven by Broad-based Geographic Gains Reported Underlying +18% +13% +13% +8% +8% +7% +6% 6% +5% +5% US Developed - ex US Emerging Travel Retail Total US Developed - ex US Emerging Travel Retail Total * See appendix for additional details 7
Slide 8: Balanced Growth Across Our Top Markets
Balanced Growth Across Our Top Markets FY18 Net Sales Growth - Reported (Underlying) United States France +7% (+5%) +11% (+6%) Volume-driven Growth led by JDTW growth and JDTH United Kingdom Poland +4% (+3%) +15% (+7%) Solid growth led by American Led by JDTW whiskeys & innovation Australia Brazil +
Slide 9: Emerging Markets Are Strengthening - Two Year Stack
Emerging Markets Are Strengthening - Two Year Stack* Underlying Net Sales Growth 12% 10% 8% 6% 4% 2% 0% 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 * "Two year stack" is the two year compounded growth rate of underlying net sales. ** Please see "Endnote 2 - Non-GAAP Financial Measures" in the accompanyi
Slide 10: Broad-Based Portfolio Growth
Broad-Based Portfolio Growth FY18 Net Sales Growth - Reported (Underlying) Jack Daniel's Family Old Forester & Woodford Reserve +8% (+6%) +27% (+23%) Herradura, el Jimador & New Mix +16% (+13%) * See appendix for additional details 10
Slide 11: FY18 Reported Gross Margins Expanded 30bps
FY18 Reported Gross Margins Expanded 30bps +0.4% 67.8% 67.5% +0.3% -0.4% FY17 Underlying Change/ Acquisitions & Foreign FY18 Other Divestitures Exchange 11
Slide 12: FY18 Underlying Operating Income Growth due to Leveraging Prior Investments and Strong Cost Discipline
FY18 Underlying Operating Income Growth due to Leveraging Prior Investments and Strong Cost Discipline Reported Margins Reduced due to Creation of $70 Million Charitable Foundation Twelve Months Ended April 30, 2018 Reported Change Underlying Change (%) (%) Net Sales 8% 6% Gross Profit 9% 6% Adverti
Slide 13: Fiscal 2019 Outlook
Fiscal 2019 Outlook Underlying Underlying Net Sales Operating Income Diluted EPS Growth Growth 6 - 7% 7 - 9% $1.75 - $1.85 18 - 25% Growth 13
Slide 14: Fiscal 2019 EPS Outlook
Fiscal 2019 EPS Outlook EPS FY18 Reported EPS $1.48 One-Time Tax Reform Items and Foundation1 $0.19 Baseline FY18 EPS $1.67 Underlying OI growth of 7-9% $0.11 - $0.16 Lower Tax Rate of 21% $0.04 - $0.05 Interest Expense, Foreign Exchange and Inventory Changes ($0.07) - ($0.03) FY19 EPS Range $1.75 -
Slide 15: Leverage & Reallocation to Our Brands - Investment Index
Leverage & Reallocation to Our Brands 130 125 120 Investment Index 115 110 105 100 95 F13 F14 F15 F16 F17 F18 Advertising SG&A * See appendix for additional details 15
Slide 16: Appendix
Appendix 16
Slide 17: 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 18: Definitions
Definitions From time to time, in order 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 and we aggregate brands by spirits category. Bel
Slide 19: Definitions
Definitions Other Metrics. • “Depletions.” When discussing volume, unless otherwise specified, we refer to “depletions,” a term commonly used in the beverage alcohol industry. Depending on the context, “depletions” means either (a) our shipments directly to retailers or wholesalers, or (b) shipments
Slide 20: Fiscal 2018 - One-Time Tax Reform Items and Foundation
Fiscal 2018 - One-Time Tax Reform Items and Foundation EPS Tax Reform: Repatriation tax ($0.19) Remeasurement of US net deferred taxes $0.10 Establishment of Charitable Foundation ($0.10) Total FY18 One-Time Items ($0.19) 20 Note: Totals may differ due to rounding
Slide 21: Reconciliation: FY18 Net Sales Growth by Geography
Reconciliation FY18 Net Sales Growth by Geography Twelve Months Ending April 30, 2018 Acquisitions & Net Change in Estimated Geographic area Reported (%) Foreign Exchange (+/-) Underlying (%) Divestitures (+/-) Distributor Inventories (+/-) US 7% —% —% -2% 5% Developed – ex US 6% —% -3% 1% 5% Emergi
Slide 22: Reconciliation: FY18 Net Sales Growth by Top Markets
Reconciliation FY18 Net Sales Growth by Top Markets Net Change in Estimated Acquisitions & Geographic area Reported % Foreign Exchange +/- Distributor Inventories Underlying % Divestitures +/- +/- United States 7% —% —% -2% 5% United Kingdom 4% —% -1% —% 3% Germany 14% —% -4% —% 10% France 11% —% -5
Slide 23: Reconciliation: FY18 Net Sales Growth for Aggregated Brands
Reconciliation FY18 Net Sales Growth for Aggregated Brands Net Change in Estimated Aggregated Brands Reported % Foreign Exchange +/- Distributor Inventories Underlying % +/- Jack Daniel's Family 8% -1% -1% 6% Old Forester and 27% —% -4% 23% Woodford Reserve el Jimador, Herradura, & 16% -2% -1% 13% N
Slide 24: Reconciliation: FY13 to FY18 Advertising & SG&A
Reconciliation FY13 to FY18 Advertising & SGA Advertising Acquisitions & Fiscal Year Reported % Foreign Exchange +/- Underlying % Divestitures +/- FY13 3% 1% 2% 6% FY14 7% —% 1% 8% FY15 —% —% 4% 4% FY16 -4% 2% 5% 2% FY17 -8% 8% 2% 2% FY18 8% —% -3% 6% SG&A Acquisitions & Fiscal Year Reported % Found