Brown-Forman Corporation (the “Company,” “Brown-Forman,” “we,” “us,” or “our” below) was incorporated under the laws of the State of Delaware in 1933, successor to a business founded in 1870 as a partnership and later incorporated under the laws of the Commonwealth of Kentucky in 1901. We primarily manufacture, bottle, import, export, market, and sell a wide variety of alcoholic beverages under recognized brands. We employ approximately 4,700 people on six continents (excluding individuals that work on a part-time or temporary basis) including approximately 1,200 people in Louisville, Kentucky, USA, home of our world headquarters. We are the largest American-owned spirits and wine company with global reach. We are a “controlled company” under New York Stock Exchange rules because the Brown family owns more than 50% of our voting stock. Taking into account ownership of shares of our non-voting stock, the Brown family also controls more than 50% of the economic ownership in Brown-Forman. For a discussion of recent developments, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Executive Summary.”
Our global business is subject to commercial, political, and financial risks, including foreign currency exchange rate fluctuations and corruption risk.
Unfavorable economic conditions could negatively affect our operations and results.
Tax increases and changes in tax rules could adversely affect our financial results.
Our business performance is substantially dependent upon the continued health of the Jack Daniel’s family of brands.
Changes in consumer preferences and purchases, any decline in the social acceptability of our products, or governmental adoption of policies disadvantageous to beverage alcohol could negatively affect our business results.
Production facility disruption could adversely affect our business.
The inherent uncertainty in supply/demand forecasting could adversely affect our business, particularly with respect to our aged products.
Higher costs or unavailability of materials could adversely affect our financial results, as could our inability to obtain certain finished goods or to sell used materials.
Significant additional labeling or warning requirements or limitations on the availability of our products could inhibit sales of affected products.
We face substantial competition in our industry, including many new entrants into spirits; and consolidation among beverage alcohol producers, wholesalers, and retailers, or changes to our route-to-consumer model, could hinder the marketing, sale, or distribution of our products.
We might not succeed in our strategies for acquisitions and dispositions.
Counterfeiting or inadequate protection of our intellectual property rights could adversely affect our business prospects.
Product recalls or other product liability claims could materially and adversely affect our sales.
Litigation and legal disputes could expose our business to financial and reputational risk.
A cyber breach, a failure or corruption of one or more of our key information technology systems, networks, processes, associated sites, or service providers, or a failure to comply with personal data protection laws could have a material adverse impact on our business.
Cuts and Jobs Act (Tax Act), and (c) an increase in reported operating income. These benefits were partially offset by higher interest expense, which resulted from a new bond issuance in March 2018, and higher non-operating postretirement expense, which resulted from the pension settlement charge described above.
1See “Non-GAAP Financial Measures” above for details on our use of “underlying changes,” including how we calculate these measures and why we think this information is useful to readers.
2We retrospectively adjusted our fiscal 2017 and fiscal 2018 advertising expense, SG&A expense, and operating income as described in Note 2 to the accompanying financial statements and “Reclassifications” above. Our previously disclosed growth rates from fiscal 2017 vs. fiscal 2018 were as follows (reported/underlying): advertising expense (8% / 6%), SG&A expense (15% / 3%), and operating income (5% / 8%).