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 January 31, 2023

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)

Delaware		61-0143150
(State or other jurisdiction of		(IRS Employer
incorporation or organization)		Identification No.)
850 Dixie Highway
Louisville,	Kentucky	40210
(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 class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock (voting), $0.15 par value	BFA	New York Stock Exchange
Class B Common Stock (nonvoting), $0.15 par value	BFB	New York Stock Exchange
1.200% Notes due 2026	BF26	New York Stock Exchange
2.600% Notes due 2028	BF28	New 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 filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller 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 28, 2023

Class A Common Stock (voting), $0.15 par value	169,240,059
Class B Common Stock (nonvoting), $0.15 par value	310,000,633
BROWN-FORMAN CORPORATION
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Index to Quarterly Report Form 10-Q
		Page
PART I - FINANCIAL INFORMATION		3
Item 1.	Financial Statements (Unaudited)	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	35
Item 4.	Controls and Procedures	36
PART II - OTHER INFORMATION		37
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
Item 6.	Exhibits	37
SIGNATURES		39

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 Ended				Nine Months Ended
	January 31,				January 31,
	2022		2023		2022		2023
Sales	$	1,365	$	1,406	$	3,831	$	4,078
Excise taxes	328		325		894		896
Net sales	1,037		1,081		2,937		3,182
Cost of sales	415		457		1,172		1,323
Gross profit	622		624		1,765		1,859
Advertising expenses	117		141		311		372
Selling, general, and administrative expenses	162		186		495		541
Other expense (income), net	(4)		124		1		117
Operating income	347		173		958		829
Non-operating postretirement expense	—		27		2		27
Interest income	(1)		(2)		(3)		(7)
Interest expense	20		24		61		61
Income before income taxes	328		124		898		748
Income taxes	69		24		211		172
Net income	$	259	$	100	$	687	$	576
Earnings per share:
Basic	$	0.54	$	0.21	$	1.43	$	1.20
Diluted	$	0.54	$	0.21	$	1.43	$	1.20

See notes to the condensed consolidated financial statements.

BROWN-FORMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in millions)

	Three Months Ended				Nine Months Ended
	January 31,				January 31,
	2022		2023		2022		2023
Net income	$	259	$	100	$	687	$	576
Other comprehensive income (loss), net of tax:
Currency translation adjustments	(27)		119		(49)		108
Cash flow hedge adjustments	16		(34)		40		(24)
Postretirement benefits adjustments	5		6		13		10
Net other comprehensive income (loss)	(6)		91		4		94
Comprehensive income	$	253	$	191	$	691	$	670

See notes to the condensed consolidated financial statements.

BROWN-FORMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in millions, except per share amounts)

	April 30, 2022		January 31,<br>2023
Assets
Cash and cash equivalents	$	868	$	428
Accounts receivable, less allowance for doubtful accounts of $13 at April 30 and $5 at January 31	813		944
Inventories:
Barreled whiskey	1,155		1,204
Finished goods	312		469
Work in process	225		316
Raw materials and supplies	126		171
Total inventories	1,818		2,160
Other current assets	277		311
Total current assets	3,776		3,843
Property, plant and equipment, net	875		955
Goodwill	761		1,455
Other intangible assets	586		1,145
Deferred tax assets	74		87
Other assets	301		269
Total assets	$	6,373	$	7,754
Liabilities
Accounts payable and accrued expenses	$	703	$	787
Dividends payable	—		98
Accrued income taxes	81		44
Short-term borrowings	—		1,004
Current portion of long-term debt	250		—
Total current liabilities	1,034		1,933
Long-term debt	2,019		2,024
Deferred tax liabilities	219		341
Accrued pension and other postretirement benefits	183		171
Other liabilities	181		247
Total liabilities	3,636		4,716
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	—		6
Retained earnings	3,242		3,437
Accumulated other comprehensive income (loss), net of tax	(352)		(258)
Treasury stock, at cost (5,511,000 and 5,370,000 shares at April 30 and January 31, respectively)	(225)		(219)
Total stockholders’ equity	2,737		3,038
Total liabilities and stockholders’ equity	$	6,373	$	7,754

See notes to the condensed consolidated financial statements.

BROWN-FORMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in millions)

	Nine Months Ended
	January 31,
	2022		2023
Cash flows from operating activities:
Net income	$	687	$	576
Adjustments to reconcile net income to net cash provided by operations:
Asset impairment charges	9		96
Depreciation and amortization	60		59
Stock-based compensation expense	11		13
Deferred income tax benefit	(3)		(6)
Other, net	15		17
Changes in assets and liabilities, excluding the effects of business acquisitions:
Accounts receivable	(59)		(106)
Inventories	(33)		(288)
Other current assets	—		(19)
Accounts payable and accrued expenses	(32)		66
Accrued income taxes	30		(36)
Other operating assets and liabilities	(2)		38
Cash provided by operating activities	683		410
Cash flows from investing activities:
Business acquisitions, net of cash acquired	—		(1,195)
Additions to property, plant, and equipment	(62)		(116)
Proceeds from sale of property, plant, and equipment	2		12
Computer software expenditures	(3)		(1)
Cash used for investing activities	(63)		(1,300)
Cash flows from financing activities:
Proceeds from short-term borrowings, maturities greater than 90 days	—		600
Net change in other short-term borrowings	(181)		402
Repayment of long-term debt	—		(250)
Payments of withholding taxes related to stock-based awards	(8)		(5)
Dividends paid	(741)		(279)
Cash provided by (used for) financing activities	(930)		468
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(28)		(15)
Net increase (decrease) in cash, cash equivalents, and restricted cash	(338)		(437)
Cash, cash equivalents, and restricted cash at beginning of period	1,150		874
Cash, cash equivalents, and restricted cash at end of period	812		437
Less: Restricted cash (included in other current assets) at end of period	—		(9)
Cash and cash equivalents at end of period	$	812	$	428

See notes to the condensed consolidated financial statements.

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 Ended				Nine Months Ended
	January 31,				January 31,
(Dollars in millions, except per share amounts)	2022		2023		2022		2023
Net income available to common stockholders	$	259	$	100	$	687	$	576
Share data (in thousands):
Basic average common shares outstanding	478,887		479,152		478,844		479,121
Dilutive effect of stock-based awards	1,680		1,308		1,755		1,361
Diluted average common shares outstanding	480,567		480,460		480,599		480,482
Basic earnings per share	$	0.54	$	0.21	$	1.43	$	1.20
Diluted earnings per share	$	0.54	$	0.21	$	1.43	$	1.20

We excluded common stock-based awards for approximately 789,000 shares and 1,257,000 shares from the calculation of diluted earnings per share for the three months ended January 31, 2022 and 2023, respectively. We excluded common stock-based awards for approximately 623,000 shares and 1,059,000 shares from the calculation of diluted earnings per share for the nine months ended January 31, 2022 and 2023, 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 $429 million higher than reported as of January 31, 2023. 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.

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, 2023:

(Dollars in millions)	Goodwill		Other Intangible Assets
Balance at April 30, 2022	$	761	$	586
Acquisitions (Note 14)	653		620
Foreign currency translation adjustment	41		35
Impairment	—		(96)
Balance at January 31, 2023	$	1,455	$	1,145

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

During the third quarter of fiscal 2023, in connection with the preparation of the condensed consolidated financial statements for the three and nine months ended January 31, 2023, we determined that it was more likely than not that the Finlandia brand name had become impaired due to macroeconomic conditions, including rising interest rates. Accordingly, we performed an interim impairment assessment for the Finlandia brand name. Based on that assessment, we recognized a non-cash impairment charge of $96 million during the third quarter of fiscal 2023. The impairment largely reflects the effects of higher discount rates and input costs. The impairment charge is included in “other expense (income), net” in the accompanying consolidated statement of operations.

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 January 31, 2023.

6.    Debt

Our long-term debt (net of unamortized discount and issuance costs) consisted of:

(Principal and carrying amounts in millions)	April 30, 2022		January 31,<br>2023
2.250% senior notes, $250 principal amount, due January 15, 2023	$	250	$	—
3.500% senior notes, $300 principal amount, due April 15, 2025	298		299
1.200% senior notes, €300 principal amount, due July 7, 2026	315		325
2.600% senior notes, £300 principal amount, due July 7, 2028	374		368
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		2,024
Less current portion	250		—
	$	2,019	$	2,024

We repaid the $250 million principal amount of 2.25% notes on their maturity date of January 15, 2023.

Our short-term borrowings of $1,004 million as of January 31, 2023, included $404 million of borrowings under our commercial paper program. There were no borrowings under that program as of April 30, 2022.

(Dollars in millions)	April 30, 2022	January 31,<br>2023
Commercial paper	$—	$404
Average interest rate	—%	4.71%
Average remaining days to maturity	0	18

Our short-term borrowings as of January 31, 2023, also included $600 million of borrowings under a $600 million senior unsecured 364-day term loan credit agreement entered into with various U.S. and international banks on January 3, 2023. Borrowings under the credit agreement bear interest at variable rate reflecting the Secured Overnight Financing Rate applicable to the term of particular borrowing plus a margin based on our credit ratings. As of January 31, 2023, the weighted-average interest rate on these borrowings was 5.21%.

7.    Stockholders’ Equity

The following table shows the changes in stockholders’ equity by quarter during the nine months ended January 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, 2021	$	25	$	47	$	—	$	3,243	$	(422)	$	(237)	$	2,656
Net income							192						192
Net other comprehensive income (loss)									8				8
Declaration of cash dividends							(172)						(172)
Stock-based compensation expense					4								4
Stock issued under compensation plans											5		5
Loss on issuance of treasury stock issued under compensation plans					(2)		(8)						(10)
Balance at July 31, 2021	25		47		2		3,255		(414)		(232)		2,683
Net income							236						236
Net other comprehensive income (loss)									2				2
Stock-based compensation expense					3								3
Stock issued under compensation plans											1		1
Loss on issuance of treasury stock issued under compensation plans					(2)								(2)
Balance at October 31, 2021	25		47		3		3,491		(412)		(231)		2,923
Net income							259						259
Net other comprehensive income (loss)									(6)				(6)
Declaration of cash dividends							(659)						(659)
Stock-based compensation expense					4								4
Stock issued under compensation plans											2		2
Loss on issuance of treasury stock issued under compensation plans					(4)								(4)
Balance at January 31, 2022	$	25	$	47	$	3	$	3,091	$	(418)	$	(229)	$	2,519

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 income							249						249
Net other comprehensive income (loss)									1				1
Declaration of cash dividends							(180)						(180)
Stock-based compensation expense					4								4
Stock issued under compensation plans											4		4
Loss on issuance of treasury stock issued under compensation plans					(4)		(4)						(8)
Balance at July 31, 2022	25		47		—		3,307		(351)		(221)		2,807
Net income							227						227
Net other comprehensive income (loss)									2				2
Stock-based compensation expense					5								5
Stock issued under compensation plans											1		1
Loss on issuance of treasury stock issued under compensation plans					(2)								(2)
Balance at October 31, 2022	25		47		3		3,534		(349)		(220)		3,040
Net income							100						100
Net other comprehensive income (loss)									91				91
Declaration of cash dividends							(197)						(197)
Stock-based compensation expense					4								4
Stock issued under compensation plans											1		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

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, 2023:

(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)	108		(24)		10		94
Balance at January 31, 2023	$	(131)	$	13	$	(140)	$	(258)

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, 2023:

Declaration Date	Record Date	Payable Date	Amount per Share
May 26, 2022	June 8, 2022	July 1, 2022	$0.1885
July 28, 2022	September 6, 2022	October 3, 2022	$0.1885
November 17, 2022	December 2, 2022	January 3, 2023	$0.2055
January 24, 2023	March 8, 2023	April 3, 2023	$0.2055

8.    Net Sales

The following table shows our net sales by geography:

	Three Months Ended				Nine Months Ended
	January 31,				January 31,
(Dollars in millions)	2022		2023		2022		2023
United States	$	488	$	439	$	1,400	$	1,455
Developed International1	318		345		884		927
Emerging2	196		245		533		629
Travel Retail3	25		32		74		110
Non-branded and bulk4	10		20		46		61
Total	$	1,037	$	1,081	$	2,937	$	3,182

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.

The following table shows our net sales by product category:

	Three Months Ended				Nine Months Ended
	January 31,				January 31,
(Dollars in millions)	2022		2023		2022		2023
Whiskey1	$	744	$	754	$	2,036	$	2,215
Ready-to-Drink2	112		121		329		369
Tequila3	69		79		212		237
Wine4	54		53		176		164
Vodka5	29		27		86		74
Non-branded and bulk6	10		20		46		61
Rest of portfolio7	19		27		52		62
Total	$	1,037	$	1,081	$	2,937	$	3,182

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.

7Includes Chambord, Korbel Brandy, Fords Gin, Gin Mare, and Diplomático.

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 Ended				Nine Months Ended
	January 31,				January 31,
(Dollars in millions)	2022		2023		2022		2023
Service cost	$	7	$	5	$	20	$	16
Interest cost	5		8		16		24
Expected return on plan assets	(11)		(11)		(34)		(33)
Amortization of:
Prior service cost	—		—		1		1
Net actuarial loss	6		2		18		7
Settlement charge	—		27		1		27
Net cost	$	7	$	31	$	22	$	42

During the three months ended January 31, 2023, we recognized a pension settlement charge of $27 million, triggered by fiscal year-to-date lump-sum payments under certain pension plans surpassing total annual service and interest cost for those plans.

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 24.3%, 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 23.0% for the nine months ended January 31, 2023, is lower than the expected tax rate of 24.3% on ordinary income for the full fiscal year, primarily due to the reversal of valuation allowances in the current period and the beneficial impact of prior fiscal year true-ups, which is 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 23.0% for the nine months ended January 31, 2023, was lower than the effective tax rate of 23.4% for the same period last year, primarily due to increased beneficial impact of prior year true-ups and the reversal of valuation allowances in the current period, which is 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 $703 million at January 31, 2023. The maximum term of outstanding derivative contracts was 36 months at April 30, 2022 and 27 months at January 31, 2023.

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 $487 million at January 31, 2023.

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.

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)	Classification	2022		2023
Currency derivatives designated as cash flow hedges:
Net gain (loss) recognized in AOCI	n/a	$	23	$	(33)
Net gain (loss) reclassified from AOCI into earnings	Sales	2		11
Currency derivatives not designated as hedging instruments:
Net gain (loss) recognized in earnings	Sales	$	5	$	(11)
Net gain (loss) recognized in earnings	Other income (expense), net	(1)		2
Foreign currency-denominated debt designated as net investment hedge:
Net gain (loss) recognized in AOCI	n/a	$	17	$	(32)
Total amounts presented in the accompanying condensed consolidated statements of operations for line items affected by the net gains (losses) shown above:
Sales		$	1,365	$	1,406
Other income (expense), net		4		(124)
		Nine Months Ended
---	---	---	---	---	---
		January 31,
(Dollars in millions)	Classification	2022		2023
Currency derivatives designated as cash flow hedges:
Net gain (loss) recognized in AOCI	n/a	$	53	$	3
Net gain (loss) reclassified from AOCI into earnings	Sales	1		34
Currency derivatives not designated as hedging instruments:
Net gain (loss) recognized in earnings	Sales	$	8	$	(2)
Net gain (loss) recognized in earnings	Other income (expense), net	(1)		11
Foreign currency-denominated debt designated as net investment hedge:
Net gain (loss) recognized in AOCI	n/a	$	38	$	10
Total amounts presented in the accompanying condensed consolidated statements of operations for line items affected by the net gains (losses) shown above:
Sales		$	3,831	$	4,078
Other income (expense), net		(1)		(117)

We expect to reclassify $9 million of deferred net gains on cash flow hedges recorded in AOCI as of January 31, 2023, 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, 2022				January 31, 2023
(Dollars in millions)	Classification	Derivative Assets		Derivative Liabilities		Derivative Assets		Derivative Liabilities
Designated as cash flow hedges:
Currency derivatives	Other current assets	$	32	$	(3)	$	18	$	(8)
Currency derivatives	Other assets	20		(1)		6		(1)
Currency derivatives	Accrued expenses	—		—		1		(2)
Not designated as hedges:
Currency derivatives	Other current assets	—		—		3		—
Currency derivatives	Accrued 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 January 31, 2023.

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)		4		(1)		1		—
January 31, 2023
Derivative assets	28		(10)		18		(1)		17
Derivative liabilities	(11)		10		(1)		1		—

No cash collateral was received or pledged related to our derivative contracts as of April 30, 2022, or January 31, 2023.

12.    Fair Value Measurements

The following table summarizes the assets and liabilities measured or disclosed at fair value on a recurring basis:

	April 30, 2022				January 31, 2023
	Carrying		Fair		Carrying		Fair
(Dollars in millions)	Amount		Value		Amount		Value
Assets
Cash and cash equivalents	$	868	$	868	$	428	$	428
Currency derivatives, net	48		48		18		18
Liabilities
Currency derivatives, net	1		1		1		1
Short-term borrowings	—		—		1,004		1,004
Long-term debt (including current portion)	2,269		2,239		2,024		1,915

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, cash equivalents, and short-term borrowings 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). As discussed in Note 4, 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. As discussed in Note 14, we used the relief-from-royalty method and the Monte Carlo simulation model to determine fair values in connection with our accounting for business combinations. The fair value measurements determined using these models are categorized as Level 3 within the valuation hierarchy. No other material nonrecurring fair value measurements were required during the periods presented in these financial statements.

13.    Other Comprehensive Income

The following table shows the components of net other comprehensive income (loss):

	Three Months Ended						Three Months Ended
	January 31, 2022						January 31, 2023
(Dollars in millions)	Pre-Tax		Tax		Net		Pre-Tax		Tax		Net
Currency translation adjustments:
Net gain (loss) on currency translation	$	(23)	$	(4)	$	(27)	$	111	$	8	$	119
Reclassification to earnings	—		—		—		—		—		—
Other comprehensive income (loss), net	(23)		(4)		(27)		111		8		119
Cash flow hedge adjustments:
Net gain (loss) on hedging instruments	23		(5)		18		(33)		7		(26)
Reclassification to earnings1	(2)		—		(2)		(11)		3		(8)
Other comprehensive income (loss), net	21		(5)		16		(44)		10		(34)
Postretirement benefits adjustments:
Net actuarial gain (loss) and prior service cost	—		—		—		(21)		5		(16)
Reclassification to earnings2	6		(1)		5		29		(7)		22
Other comprehensive income (loss), net	6		(1)		5		8		(2)		6
Total other comprehensive income (loss), net	$	4	$	(10)	$	(6)	$	75	$	16	$	91
	Nine Months Ended						Nine Months Ended
	January 31, 2022						January 31, 2023
(Dollars in millions)	Pre-Tax		Tax		Net		Pre-Tax		Tax		Net
Currency translation adjustments:
Net gain (loss) on currency translation	$	(40)	$	(9)	$	(49)	$	110	$	(2)	$	108
Reclassification to earnings	—		—		—		—		—		—
Other comprehensive income (loss), net	(40)		(9)		(49)		110		(2)		108
Cash flow hedge adjustments:
Net gain (loss) on hedging instruments	53		(12)		41		3		(1)		2
Reclassification to earnings1	(1)		—		(1)		(34)		8		(26)
Other comprehensive income (loss), net	52		(12)		40		(31)		7		(24)
Postretirement benefits adjustments:
Net actuarial gain (loss) and prior service cost	(1)		—		(1)		(21)		5		(16)
Reclassification to earnings2	19		(5)		14		34		(8)		26
Other comprehensive income (loss), net	18		(5)		13		13		(3)		10
Total other comprehensive income (loss), net	$	30	$	(26)	$	4	$	92	$	2	$	94

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.

14.    Acquisitions

As discussed below, we completed two acquisitions 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 $524 million, which consisted of $468 million in cash paid at the acquisition date plus contingent consideration of $56 million.

We preliminarily allocated the purchase price based on management’s estimates and independent valuations as follows:

(Dollars in millions)	Initial Allocation
Trademarks and brand names (indefinite-lived)	$	308
Goodwill	288
Total assets	596
Deferred tax liabilities	72
Net assets acquired	$	524

The contingent consideration of $56 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. The estimated fair value of the contingent consideration was determined using a Monte Carlo simulation, which requires the use of significant 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 a maximum of €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 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 $727 million.

We preliminarily allocated the purchase price based on management’s estimates and independent valuations as follows:

(Dollars in millions)	Initial Allocation
Accounts receivable	$	11
Inventories	33
Other current assets	25
Property, plant, and equipment	36
Trademarks and brand names (indefinite-lived)	312
Goodwill	365
Total assets	782
Accounts payable and accrued expenses	10
Deferred tax liabilities	45
Total liabilities	55
Net assets acquired	$	727

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 initial allocation of the purchase price for each acquisition was based on preliminary estimates and may be revised as asset valuations are finalized and further information is obtained on the fair value of liabilities. The primary matters to be finalized consist of the identification and valuation of identifiable intangible assets, any related tax effects, and any resulting impact on residual goodwill.

The amounts initially 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 projected future net sales, discount rates, and royalty rates.

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 preliminary goodwill of $288 million to be deductible for tax purposes. For the Diplomático acquisition, we expect $109 million of the preliminary goodwill of $365 million to be deductible for tax purposes.

Results for Gin Mare and Diplomático have been included in our consolidated financial statements since their acquisition dates. Pro forma results are not presented as the aggregate impact is not material to our consolidated statements of operations.

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, 2023		Nine Months Ended January 31, 2023
Selling, general, and administrative expenses	$	3	$	8
Other expense (income), net	42		42
Total transaction expenses	$	45	$	50

The transaction expenses largely reflects payments made to terminate certain distribution contracts related to the acquired brands.

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 nine months ended January 31, 2023, 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. During the third quarter of fiscal 2023, we acquired Gin Mare Brand, S.L.U. and Mareliquid Vantguard, S.L.U., which own the Gin Mare brand (Gin Mare). Also, during the third quarter of fiscal 2023, we acquired (a) International Rum and Spirits Distributors Unipessoal, Lda., (b) Diplomático Branding Unipessoal Lda., (c) International Bottling Services, S.A., (d) International Rum & Spirits Marketing Solutions, S.L., and (e) certain assets of Destilerias Unidas Corp., which collectively own the Diplomático Rum brand and related assets (Diplomático).

This adjustment removes (a) the net sales and operating expenses recognized pursuant to the TSA related to the divestiture of Early Times, Canadian Mist, and Collingwood brands and related assets for the non-comparable period, which is activity during the first quarter of fiscal 2022, (b) transaction, transition, and integration costs related to the acquisitions, (c) operating activity for Gin Mare for the non-comparable period, which is activity in the third quarter of fiscal 2023, and (d) operating activity for Diplomático for the non-comparable period, which is activity in the third quarter of fiscal 2023. We believe that these adjustments allow 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 three quarters of fiscal 2022, we recognized non-cash impairment charges of $9 million for certain fixed assets. During the third quarter of fiscal 2023, we recognized a non-cash impairment charge of $96 million for the Finlandia brand name. See “Critical Accounting Estimates” below and Note 12 to the Condensed Consolidated Financial Statements for more information. We believe that these adjustments allow for us to better understand our organic results on a comparable basis.

1 Operating expenses include advertising expense, SG&A expense, and other expense (income), net.

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 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.

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.

•“Rest of Portfolio” includes Chambord, Korbel Brandy, Fords Gin, Gin Mare, and Diplomático.

•“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), 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

•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).

Overview

For the nine months ended January 31, 2023, we experienced 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 in certain emerging and developed international markets. The rebuilding of distributor inventories reflects the easing of supply chain constraints during the first nine months 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, pound sterling, and Polish zloty.

Finlandia Impairment

During the third quarter of fiscal 2023, in connection with the preparation of the condensed consolidated financial statements for the three and nine months ended January 31, 2023, included in this report, we recognized a non-cash impairment charge of $96 million for the Finlandia brand name, largely due to macroeconomic conditions including rising interest rates and increasing costs. See “Critical Accounting Estimates” below and Note 12 to the Condensed Consolidated Financial Statements for more information. We further discuss the effect of this impairment on our results where relevant below.

Tariffs

The removal of the European Union and United Kingdom tariffs on American whiskey (tariffs) positively affected our results for the nine months ended January 31, 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 tariffs on our results where relevant below.

Acquisitions

During the third quarter of fiscal 2023, we acquired the Gin Mare brand and the Diplomático brand and related assets. Although reported net sales were positively affected by the acquisition of these brands, the overall impact was not material to our consolidated year-to-date reported net sales growth rate. These acquisitions had a negative effect on reported operating income largely driven by transaction expenses of $42 million related to the termination of certain distribution contracts (certain post-closing costs and expenses). We further discuss the effect of these acquisitions on our results where relevant below.

Russia’s Invasion of Ukraine

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 on our results where relevant below.

Supply Chain Disruptions

Supply chain disruptions continued to affect our business for the nine months ended January 31, 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.

Fiscal 2023 Year-to-Date Highlights

•We delivered reported net sales of $3.2 billion, for the nine months ended January 31, 2023, an increase of 8% 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 premium bourbons, JDTW, and Ready-to-Drinks.

◦From a geographic perspective, emerging markets, the United States, developed international markets, and the Travel Retail channel all contributed significantly to reported net sales growth.

•We delivered reported operating income of $829 million for the nine months ended January 31, 2023, a decrease of 13% compared to the same period last year reflecting lower gross margin, a non-cash impairment charge of $96 million for the Finlandia brand name, and higher operating expenses (including certain post-closing costs and expenses in connection with the acquisitions of Diplomático and Gin Mare).

•We delivered diluted earnings per share of $1.20, a decrease of 16% from the $1.43 reported for the same period last year, driven primarily by the decrease in reported operating income and a $27 million pension settlement charge recognized during the third quarter of fiscal 2023 (See Note 9 to the Condensed Consolidated Financial Statements for more information).

Summary of Operating Performance
	Three Months Ended January 31,										Nine Months Ended January 31,
(Dollars in millions)	2022			2023			Reported Change		Organic Change1			2022			2023			Reported Change		Organic Change1
Net sales	$	1,037		$	1,081		4	%	5	%		$	2,937		$	3,182		8	%	12	%
Cost of sales	415			457			10	%	10	%		1,172			1,323			13	%	14	%
Gross profit	622			624			—	%	2	%		1,765			1,859			5	%	11	%
Advertising	117			141			21	%	23	%		311			372			20	%	24	%
SG&A	162			186			14	%	14	%		495			541			9	%	11	%
Other expense (income), net	(4)			124			nm		nm			1			117			nm		nm
Operating income	347			173			(50	%)	(11	%)		958			829			(13	%)	9	%
Total operating expenses2	$	275		$	451		64	%	18	%		$	807		$	1,030		28	%	14	%
As a percentage of net sales3
Gross profit	60.0		%	57.7		%	(2.3)	pp				60.1		%	58.4		%	(1.7)	pp
Operating income	33.5		%	15.9		%	(17.6)	pp				32.6		%	26.0		%	(6.6)	pp
Non-operating postretirement expense	$	—		$	27		nm					$	2		$	27		nm
Interest expense, net	$	19		$	22		15	%				$	58		$	54		(7	%)
Effective tax rate	21.0		%	19.5		%	(1.5)	pp				23.4		%	23.0		%	(0.4)	pp
Diluted earnings per share	$	0.54		$	0.21		(61	%)				$	1.43		$	1.20		(16	%)
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).

Results of Operations – Fiscal 2023 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 nine months ended January 31, 2023 compared to the same period last year.

Top Markets1
Nine months ended January 31, 2023	Net Sales % Change vs. 2022
Geographic area2	Reported		Acquisitions and Divestitures		Foreign Exchange		Organic3
United States	4	%	—	%	—	%	4	%
Developed International	5	%	(1	%)	9	%	13	%
Germany	3	%	—	%	10	%	13	%
Australia	3	%	—	%	4	%	7	%
United Kingdom	(5	%)	—	%	8	%	2	%
France	(18	%)	—	%	8	%	(10	%)
Canada	28	%	—	%	6	%	33	%
Rest of Developed International	26	%	(2	%)	13	%	37	%
Emerging	18	%	—	%	8	%	26	%
Mexico	30	%	—	%	(4	%)	26	%
Poland	2	%	—	%	16	%	18	%
Brazil	61	%	—	%	—	%	61	%
Chile	(41	%)	—	%	—	%	(41	%)
Rest of Emerging	15	%	—	%	14	%	29	%
Travel Retail	48	%	(2	%)	5	%	52	%
Non-branded and bulk	34	%	10	%	2	%	46	%
Total	8	%	—	%	4	%	12	%
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 4% driven by (a) higher volumes of Woodford Reserve, partially reflecting an estimated net increase in distributor inventories; and (b) higher prices across our portfolio, led by the Jack Daniel’s family of brands. This growth was partially offset by lower volumes of JDTW and Korbel California Champagne due in part to an estimated net decrease in distributor inventories.

Developed International

•Germany’s reported net sales increased 3% driven by volumetric gains of JDTW and JD RTDs, largely offset by the negative effect of foreign exchange.

•Australia’s reported net sales increased 3% led by higher volumes and prices of JD RTDs, partially offset by the negative effect of foreign exchange.

•United Kingdom’s reported net sales declined 5% driven by the negative effect of foreign exchange, partially offset by higher prices of JDTW.

•France’s reported net sales declined 18% due to the negative effect of foreign exchange along with lower volumes of JDTW and JDTH driven by whiskey category declines and higher promotional pricing.

•Canada’s reported net sales increased 28% led by higher JDTW volumes, partially due to an estimated net increase in distributor inventories.

•Reported net sales in the Rest of Developed International increased 26% fueled by JDTW gains, led by Japan, Korea, and Belgium, 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 30% fueled by higher volumes and prices of New Mix, which gained market share in the RTD category.

•Poland’s reported net sales increased 2% driven by growth across our portfolio led by JDTW, partially offset by the negative effect of foreign exchange.

•Brazil’s reported net sales increased 61% led by higher volumes and prices of JDTW. An estimated net increase in distributor inventories positively impacted reported net sales.

•Chile’s reported net sales declined 41% 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 15% led by JDTW growth in Türkiye, the United Arab Emirates, and Sub-Saharan Africa, 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 48% driven primarily by higher volumes across much of our portfolio as travel continued to rebound from the COVID-19-related travel restrictions.

Non-branded and bulk reported net sales increased 34% driven by higher prices for used barrels.

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 nine months ended January 31, 2023 compared to the same period last year.

Major Brands
Nine months ended January 31, 2023	Net Sales % Change vs 2022
Product category / brand family / brand1	Reported		Acquisitions and Divestitures		Foreign Exchange		Organic2
Whiskey	9	%	—	%	5	%	14	%
JDTW	6	%	—	%	6	%	12	%
JDTH	2	%	—	%	4	%	6	%
Gentleman Jack	8	%	—	%	6	%	14	%
JDTF	6	%	—	%	3	%	9	%
JDTA	(11	%)	—	%	5	%	(6	%)
Woodford Reserve	34	%	—	%	1	%	35	%
Old Forester	30	%	—	%	—	%	30	%
Rest of Whiskey	12	%	—	%	6	%	18	%
Ready-to-Drink	12	%	—	%	3	%	15	%
JD RTD/RTP	6	%	—	%	5	%	10	%
New Mix	45	%	—	%	(4	%)	41	%
Tequila	12	%	—	%	—	%	11	%
Herradura	10	%	—	%	(1	%)	9	%
el Jimador	18	%	—	%	1	%	19	%
Wine	(7	%)	—	%	—	%	(7	%)
Vodka (Finlandia)	(13	%)	—	%	9	%	(5	%)
Rest of Portfolio	19	%	(16	%)	5	%	9	%
Non-branded and bulk	34	%	10	%	2	%	46	%
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 6% driven by (a) higher volumes in emerging markets, developed international markets, and the Travel Retail channel partially reflecting an estimated net increase in distributor inventories; and (b) higher prices. This growth was partially offset by lower volumes in the United States, due in part to an estimated net decrease in distributor inventories, and the negative effect of foreign exchange.

•Reported net sales for JDTH increased 2% driven by growth in the United States and emerging markets, due in part to an estimated net increase in distributor inventories, partially offset by the negative effect of foreign exchange.

•Reported net sales for Gentleman Jack increased 8% led by growth in emerging markets, partially offset by the negative effect of foreign exchange.

•JDTF grew reported net sales 6% driven by higher volumes in the United States, partially offset by the negative effect of foreign exchange.

•JDTA reported net sales declined 11% due to lower volumes in the United States and Chile, largely driven by an estimated net decrease in distributor inventories, and the negative effect of foreign exchange.

•Woodford Reserve reported net sales increased 34% driven by higher volumes in the United States, partially due to an estimated net increase in distributor inventories.

•Old Forester reported net sales increased 30% driven by higher volumes in the United States, partially due to an estimated net increase in distributor inventories.

•Reported net sales for Rest of Whiskey increased 12% led by the launch of Jack Daniel’s Bonded and Jack Daniel’s Triple Mash in the United States, partially offset by the negative effect of foreign exchange.

Ready-to-Drink

•The JD RTD/RTP brands reported net sales grew 6% led by growth in Australia and Germany, partially offset by the negative effect of foreign exchange.

•New Mix grew reported net sales 45% fueled by higher volumes and prices in Mexico with market share gains.

Tequila

•Herradura reported net sales increased 10% driven largely by volumetric growth in the United States, partially due to an estimated net increase in distributor inventories, and higher prices in Mexico.

•el Jimador reported net sales increased 18% led by growth in the United States and Mexico.

Wine reported net sales declined 7% 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 13% 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 growth across other international markets.

Rest of Portfolio reported net sales increased 19% largely driven by Gin Mare which was acquired during the third quarter of fiscal 2023.

Non-branded and bulk reported net sales increased 34% driven by higher prices for used barrels.

Year-Over-Year Period Comparisons

Net Sales
	3 Months						9 Months
Percentage change versus the prior year period ended January 31	Volume		Price/mix		Total		Volume		Price/mix		Total
Change in reported net sales	3	%	1	%	4	%	10	%	(1	%)	8	%
Acquisitions and divestitures	—	%	—	%	(1	%)	—	%	—	%	—	%
Foreign exchange	—	%	1	%	1	%	—	%	4	%	4	%
Change in organic net sales	3	%	2	%	5	%	9	%	3	%	12	%
Note: Results may differ due to rounding

For the three months ended January 31, 2023, reported net sales were $1.1 billion, an increase of $44 million, or 4%, compared to the same period last year largely driven by higher volumes of New Mix and Woodford Reserve. Price/mix reflects higher prices across much of our portfolio led by JDTW, partially offset by the negative effect of foreign exchange. Reported net sales were negatively impacted by an estimated net decrease in distributor inventories.

For the nine months ended January 31, 2023, reported net sales were $3.2 billion, an increase of $245 million, or 8%, compared to the same period last year 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 nine months ended January 31, 2023.

Cost of Sales
	3 Months						9 Months
Percentage change versus the prior year period ended January 31	Volume		Cost/mix		Total		Volume		Cost/mix		Total
Change in reported cost of sales	3	%	7	%	10	%	10	%	3	%	13	%
Acquisitions and divestitures	—	%	—	%	(1	%)	—	%	—	%	—	%
Foreign exchange	—	%	—	%	—	%	—	%	1	%	1	%
Change in organic cost of sales	3	%	7	%	10	%	9	%	5	%	14	%
Note: Results may differ due to rounding

For the three months ended January 31, 2023, reported cost of sales were $457 million, an increase of $42 million, or 10%, compared to the same period last year largely driven by (a) inflation on input costs and supply chain disruptions, and (b) higher volumes of New Mix and Woodford Reserve. These factors were partially offset by the removal of tariffs. An estimated net decrease in distributor inventories positively impacted reported cost of sales.

For the nine months ended January 31, 2023, reported cost of sales were $1.3 billion, an increase of $151 million, or 13%, compared to the same period last year largely driven by higher volumes of New Mix, JDTW, and JD RTDs. Cost/mix reflects inflation on input costs and supply chain disruptions. These factors were largely offset by (a) the removal of tariffs, (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.

Gross Profit
Percentage change versus the prior year period ended January 31	3 Months		9 Months
Change in reported gross profit	—	%	5	%
Acquisitions and divestitures	(1	%)	—	%
Foreign exchange	2	%	6	%
Change in organic gross profit	2	%	11	%
Note: Results may differ due to rounding
Gross Margin
---	---	---	---	---
For the period ended January 31	3 Months		9 Months
Prior year gross margin	60.0	%	60.1	%
Price/mix	0.9	%	2.0	%
Cost (excluding tariffs)	(4.7)	%	(4.3)	%
Acquisitions and divestitures	0.1	%	0.1	%
Tariffs1	2.0	%	1.7	%
Foreign exchange	(0.6	%)	(1.2	%)
Change in gross margin	(2.3	%)	(1.7	%)
Current year gross margin	57.7	%	58.4	%
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 January 31, 2023, reported gross profit of $624 million increased $2 million, compared to the same period last year. Gross margin decreased 2.3 percentage points to 57.7% from 60.0% in the same period last year. The decrease in gross margin was driven by (a) inflation on input costs, (b) higher cost related to supply chain disruptions, and (c) the negative effect of foreign exchange, partially offset by the removal of tariffs and favorable price/mix.

For the nine months ended January 31, 2023, reported gross profit of $1.9 billion increased $94 million, or 5%, compared to the same period last year. Gross margin decreased 1.7 percentage points to 58.4% from 60.1% in the same period last year. The decrease in gross margin was driven by (a) inflation on 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 tariffs.

Operating Expenses
Percentage change versus the prior year period ended January 31
3 Months	Reported		Acquisitions and Divestitures		Impairment Charges		Foreign Exchange		Organic
Advertising	21	%	(1	%)	—	%	2	%	23	%
SG&A	14	%	(2	%)	—	%	2	%	14	%
Total operating expenses1	64	%	(17	%)	(35	%)	6	%	18	%
9 Months
Advertising	20	%	—	%	—	%	5	%	24	%
SG&A	9	%	(2	%)	—	%	4	%	11	%
Total operating expenses1	28	%	(6	%)	(11	%)	4	%	14	%
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 January 31, 2023, reported operating expenses totaled $451 million, an increase of $176 million, or 64%, compared to the same period last year. The increase in reported operating expenses was largely driven by a non-cash impairment charge for the Finlandia brand name and certain post-closing costs and expenses in connection with the acquisitions of Diplomático and Gin Mare.

•Reported advertising expense increased 21% for the three months ended January 31, 2023 driven primarily by increased investment in JDTW and Woodford Reserve in the United States and developed international markets.

•Reported SG&A expense increased 14% for the three months ended January 31, 2023 driven primarily by (a) higher compensation-related expenses, (b) higher discretionary spend, and (c) costs related to the transaction, transition, and integration of the Gin Mare and Diplomático brands, which were acquired during the third quarter of fiscal 2023, partially offset by the positive effect of foreign exchange.

For the nine months ended January 31, 2023, reported operating expenses totaled $1 billion, an increase of $223 million, or 28%, compared to the same period last year. The increase in reported operating expenses was driven by (a) a non-cash

impairment charge for the Finlandia brand name, (b) higher reported advertising expense, (c) certain post-closing costs and expenses in connection with the acquisitions of Diplomático and Gin Mare, and (d) higher reported SG&A expense.

•Reported advertising expense increased 20% for the nine months ended January 31, 2023 driven largely by increased investment in JDTW, Woodford Reserve, the launch of Jack Daniel’s Bonded, and Herradura in the United States, partially offset by the positive effect of foreign exchange.

•Reported SG&A expense increased 9% for the nine months ended January 31, 2023 driven primarily by (a) higher compensation-related expenses, (b) higher discretionary spend, and (c) costs related to the transaction, transition, and integration of the Gin Mare and Diplomático brands, which were acquired during the third quarter of fiscal 2023, partially offset by the positive effect of foreign exchange.

Operating Income
Percentage change versus the prior year period ended January 31	3 Months		9 Months
Change in reported operating income	(50	%)	(13	%)
Acquisitions and divestitures	12	%	5	%
Impairment charges	28	%	9	%
Foreign exchange	—	%	9	%
Change in organic operating income	(11	%)	9	%
Note: Results may differ due to rounding

For the three months ended January 31, 2023, reported operating income totaled $173 million, a decrease of $174 million, or 50%, compared to the same period last year. Operating margin decreased 17.6 percentage points to 15.9% from 33.5% in the same period last year.

For the nine months ended January 31, 2023, reported operating income totaled $829 million, a decrease of $129 million, or 13%, compared to the same period last year. Operating margin decreased 6.6 percentage points to 26.0% from 32.6% in the same period last year.

The effective tax rate for the three months ended January 31, 2023, was 19.5% compared to 21.0% for the same period last year. The decrease in our effective tax rate was driven primarily by increased benefit from foreign tax credits, increased beneficial impact of foreign operations, and the reversal of valuation allowances in the current period, which is partially offset by increased state taxes and the impact of tax rate changes.

The effective tax rate for the nine months ended January 31, 2023, was 23.0% compared to 23.4% for the same period last year. The decrease in our effective tax rate was driven primarily by the beneficial impact of prior fiscal year true-ups and the reversal of valuation allowances in the current period, which is partially offset by increased state taxes and increased contingent tax liabilities.

Diluted earnings per share of $0.21 for the three months ended January 31, 2023, decreased 61% from the $0.54 reported for the same period last year, driven primarily by the decrease in reported operating income and a $27 million pension settlement charge recognized during the quarter (See Note 9 to the Condensed Consolidated Financial Statements for more information). Diluted earnings per share of $1.20 for the nine months ended January 31, 2023, decreased 16% from the $1.43 reported for the same period last year, driven primarily by the decrease in reported operating income and a $27 million pension settlement charge recognized during the third quarter of fiscal 2023.

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 I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Form 10-Q for the period ended October 31, 2022, filed with the SEC on December 7.

An estimated net increase in distributor inventories, largely reflecting the rebuilding of finished goods inventories due to the easing of supply chain constraints, positively impacted our results during the first nine months of fiscal 2023. For the full year,

the effect of the estimated net change in distributor inventories could range from no impact to a moderate unfavorable impact on our results as we lap significant inventory rebuilding during the fourth quarter of fiscal 2022. The guidance below assumes that there will be no impact from an estimated net change in distributor inventories for the full year.

•Reflecting the continued strength of our portfolio of brands, strong consumer demand, and the return of inventories to more normalized levels, we now expect organic net sales growth in the 8-10% range.

•We continue to expect reported gross margin for the full year to be consistent with the reported gross margin during the first half of fiscal 2023.

•Based on the above expectations, we continue to anticipate high-single digit organic operating income growth.

•Our full year effective tax rate expectation continues to be in the range of approximately 22% to 23%.

•We continue to expect capital expenditures in the range of $190 to $210 million.

Critical Accounting Estimates

Our Annual Report on Form 10-K for the fiscal year ended April 30, 2022 (2022 Form 10-K), includes a discussion of our critical accounting estimates, including those related to the valuation of our brand names and trademarks (“brand names”).

We assess our brand names for impairment at least annually. A brand name is impaired when its carrying amount exceeds its estimated fair value, in which case we write down the brand name to its estimated fair value. We estimate the fair value of a brand name using the “relief from royalty” method. We also consider market values for similar assets when available. Considerable management judgment is necessary to estimate fair value, including making assumptions about future cash flows, discount rates, and royalty rates.

As discussed in our 2022 Form 10-K, we concluded that none of our brand names were impaired as of April 30, 2022. Further, we estimated that the fair value of each brand name substantially exceeded its carrying amount, except for the Finlandia brand name, which we had written down to its estimated fair value during the fourth quarter of 2022.

During the third quarter of fiscal 2023, in connection with the preparation of the condensed consolidated financial statements for the three and nine months ended January 31, 2023, we determined that it was more likely than not that the Finlandia brand name had again become impaired due to macroeconomic conditions, including rising interest rates. Accordingly, we performed an interim impairment assessment for the Finlandia brand name. Based on that assessment, we recognized a non-cash impairment charge of $96 million during the third quarter of fiscal 2023. The impairment largely reflects the effects of higher discount rates and input costs.

As of January 31, 2023, the remaining carrying amount of Finlandia reflects its estimated fair value of $90 million, using current assumptions. Reasonably possible changes in those assumptions could result in additional non-cash impairment charges in the future. For example, we estimate that, all else equal, (a) a 15% decline in projected future net sales would result in an impairment charge of approximately $23 million or (b) a 1 percentage point increase in the discount rate would result in an impairment charge of approximately $13 million.

We determined that no interim impairment testing was necessary for any other brand names, whose estimated fair values substantially exceeded their carrying amounts as of the most recent annual impairment test. We will perform the next annual impairment tests for these brand names during the fourth quarter of fiscal 2023.

Liquidity and Financial Condition

Liquidity. We generate strong cash flows from operations, which enable 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 flows from operations are 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 $428 million at January 31, 2023. As of January 31, 2023, approximately 38% 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 requirements and may decide to repatriate additional cash held by our foreign subsidiaries, which may require us to provide for and pay additional taxes.

On January 3, 2023, we entered into a $600 million senior unsecured 364-day term loan credit agreement (see Note 6 to the Condensed Consolidated Financial Statements). The term loan agreement matures on January 2, 2024, and, at the option of the Company, may be prepaid before that date without penalty or premium. The borrowings under the term loan agreement have and will be used for working capital and general corporate purposes.

We repaid the $250 million principal amount of 2.25% notes on their maturity date of January 15, 2023.

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 January 31, 2023. The average balances, interest rates, and original maturities during the periods ended January 31, 2022 and 2023, are presented below.

	Three Months Average		Nine Months Average
		January 31,
(Dollars in millions)		2022	2023	2022	2023
Average commercial paper		$—	286	$78	$105
Average interest rate		—%	4.61%	0.16%	4.55%
Average days to maturity at issuance		—	52	32	50

All values are in US Dollars.

Our commercial paper program is supported by available commitments under our $800 million bank credit facility that expires in November 2024. At January 31, 2023, 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), dividend payment, capital investments, and repayment of our senior unsecured 364-day term loan credit agreement. 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 $410 million during the nine months ended January 31, 2023, declined $273 million from the same period last year, primarily reflecting increased working capital. The increase 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. The decline in cash from operations also reflects $50 million of transaction costs related to our acquisitions of Gin Mare and Diplomático.

Cash used for investing activities was $1,300 million during the nine months ended January 31, 2023, compared to $63 million for the same period last year. The $1,237 million increase largely reflects our acquisitions of Gin Mare ($468 million) and Diplomático ($727 million) during the third quarter of fiscal 2023.

Cash provided by financing activities was $468 million during the nine months ended January 31, 2023, compared to $930 million in cash used for financing activities during the same prior-year period. The $1,398 million change largely reflects: (a) borrowings of $600 million from a 364-day term loan in January 2023; (b) a $583 million increase in net proceeds from issuance in commercial paper; (c) a $462 million decline in dividend payments (largely reflecting the $479 million special dividend paid in December 2021); partially offset by (d) our repayment of the $250 million principal amount of 2.25% notes that matured in January 2023.

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.

We are in the process of implementing our standard control procedures in connection with our acquisitions of Gin Mare and Diplomático, and expect the implementation to be completed during fiscal 2024.

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
31.1	CEO Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
31.2	CFO Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
32	CEO and CFO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (not considered to be filed).
101	The following materials from Brown-Forman Corporation's Quarterly Report on Form 10-Q for the quarter ended January 31, 2023, 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.
104	Cover Page Interactive Data File in Inline XBRL format (included in Exhibit 101).

The following documents have been previously filed:

Exhibit Index
10.1	Credit Agreement, dated as of January 3, 2023, among Brown-Forman Corporation and certain lenders party thereto, U.S. Bank National Association, as Administrative Agent, Bank of America, N.A., Citibank, N.A. and JPMorgan Chase Bank, N.A., as Co-Syndication Agents, The Bank of Nova Scotia, as Documentation Agent, and U.S. Bank National Association, BofA Securities, Inc., Citibank N.A. and JPMorgan Chase Bank, N.A., as Joint Lead Arrangers and Joint Bookrunners, incorporated into this report by reference to Exhibit 10.1 of Brown-Forman Corporation’s Form 8-K filed on January 5, 2023 (File No. 001-00123). \[portions of Exhibit have been omitted\]
10.2	Amendment No. 2 to Amended and Restated Five-Year Credit Agreement, dated as of January 3, 2023, among Brown-Forman Corporation, U.S. Bank National Association, as Administrative Agent, and the other lenders party thereto, incorporated into this report by reference to Exhibit 10.2 of Brown-Forman Corporation’s Form 8-K filed on January 5, 2023 (File No. 001-00123). \[portions of Exhibit have been omitted\]
10.3	Amendment No. 1 to Securities and Asset Purchase Agreement, dated as of January 4, 2023, by and among Brown-Forman Corporation, Destillers United Group S.L., and Destilerias Unidas Corp, incorporated into this report by reference to Exhibit 10.3 of Brown-Forman Corporation’s Form 8-K filed on January 5, 2023 (File No. 001-00123). \[portions of Exhibit have been omitted\]

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:	March 8, 2023	By:	/s/ Leanne D. Cunningham
			Leanne D. Cunningham
			Executive Vice President<br>and Chief Financial Officer
			(On behalf of the Registrant and<br>as Principal Financial Officer)

39

Document

Exhibit 31.1

CERTIFICATION PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT OF 2002

I, Lawson E. Whiting, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of Brown-Forman Corporation;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)      Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)      Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)      Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)      Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)      All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)      Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated:	March 8, 2023	By:	/s/ Lawson E. Whiting
			Lawson E. Whiting
			President and Chief Executive Officer

Document

Exhibit 31.2

CERTIFICATION PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT OF 2002

I, Leanne D. Cunningham, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of Brown-Forman Corporation;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)      Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)      Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)      Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)      All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)      Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated:	March 8, 2023	By:	/s/ Leanne D. Cunningham
			Leanne D. Cunningham
			Executive Vice President and Chief Financial Officer

Document

Exhibit 32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Brown-Forman Corporation (“the Company”) on Form 10-Q for the period ended January 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in the capacity as an officer of the Company, that:

(1)The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:	March 8, 2023
		By:	/s/ Lawson E. Whiting
			Lawson E. Whiting
			President and Chief Executive Officer
		By:	/s/ Leanne D. Cunningham
			Leanne D. Cunningham
			Executive Vice President and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

This certificate is being furnished solely for purposes of Section 906 and is not being filed as part of the Report.