Delaware
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002-26821
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61-0143150
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(State or other jurisdiction
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(Commission File Number)
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(I.R.S. Employer
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of incorporation)
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Identification No.)
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850 Dixie Highway, Louisville, Kentucky
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40210
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(Address of principal executive offices)
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(Zip Code)
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(Date)
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Nelea A. Absher
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Vice President, Associate General Counsel and Assistant Corporate Secretary
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Growth in Underlying
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Growth in Reported
|
|||
Net Sales
|
Operating Income
|
Net Sales
|
Operating Income
|
|
Fiscal 2012 YTD
|
9 %
|
8 %
|
12 %
|
6 %
|
2nd Quarter
|
10 %
|
9%
|
12 %
|
5 %
|
1st Quarter
|
7 %
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7 %
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13 %
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8 %
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Fiscal 2011 YTD
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4 %
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6%
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6 %
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20 %
|
·
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declining or depressed global or regional economic conditions; political, financial, or credit or capital market instability; supplier, customer or consumer credit or other financial problems; bank failures or governmental debt defaults
|
·
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failure to develop or implement effective business and brand strategies and innovations, including route-to-consumer, and marketing and promotional activity
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·
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unfavorable trade or consumer reaction to our new products, product line extensions, or changes in formulation, packaging or pricing
|
·
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inventory fluctuations in our products by distributors, wholesalers, or retailers
|
·
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competitors’ pricing actions (including price reductions, promotions, discounting, couponing or free goods), marketing, category expansion, product introductions, entry or expansion in our geographic markets, or other competitive activities
|
·
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declines in consumer confidence or spending, whether related to the economy (such as austerity measures, tax increases, high fuel costs, or higher unemployment), wars, natural or other disasters, weather, pandemics, security concerns, terrorist attacks or other factors
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·
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changes in tax rates (including excise, sales, VAT, tariffs, duties, corporate, individual income, dividends, capital gains) or in related reserves, changes in tax rules (e.g., LIFO, foreign income deferral, U.S. manufacturing and other deductions) or accounting standards, or other restrictions affecting beverage alcohol, and the unpredictability and suddenness with which they can occur
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·
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governmental or other restrictions on our ability to produce, import, sell, price, or market our products, including advertising and promotion in either traditional or new media; regulatory compliance costs
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·
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business disruption, decline or costs related to organizational changes, reductions in workforce or other cost-cutting measures
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·
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lower returns or discount rates related to pension assets, interest rate fluctuations, inflation or deflation
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·
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fluctuations in the U.S. dollar against foreign currencies, especially the euro, British pound, Australian dollar, or Polish zloty
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·
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changes in consumer behavior or preferences and our ability to anticipate and respond to them, including societal attitudes or cultural trends that result in reduced consumption of our products; reduction of bar, restaurant, hotel or other on-premise business or travel
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·
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consumer shifts away from spirits or premium-priced spirits products; shifts to discount store purchases or other price-sensitive consumer behavior
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·
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distribution and other route-to-consumer decisions or changes that affect the timing of our sales, temporarily disrupt the marketing or sale of our products, or result in implementation-related costs
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·
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effects of acquisitions, dispositions, joint ventures, business partnerships or investments, or portfolio strategies, including integration costs, disruption or other difficulties, or impairment in the recorded value of assets (e.g. receivables, inventory, fixed assets, goodwill, trademarks and other intangibles)
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·
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lower profits, due to factors such as fewer or less profitable used barrel sales, lower production volumes, decreased demand for products we sell, sales mix shift toward lower priced or lower margin SKUs, or cost increases in energy or raw materials, such as grain, agave, wood, glass, plastic, or closures
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·
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natural disasters, climate change, agricultural uncertainties, environmental or other catastrophes, our suppliers’ financial hardships or other factors that affect the availability, price, or quality of agave, grain, glass, energy, closures, plastic, water, wood, or finished goods
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·
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negative publicity related to our company, brands, marketing, personnel, operations, business performance or prospects
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·
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product counterfeiting, tampering, contamination, or recalls and resulting negative effects on our sales, brand equity, or corporate reputation
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·
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significant costs or other adverse developments stemming from class action, intellectual property, governmental, or other major litigation; or governmental investigations of beverage alcohol industry business, trade, or marketing practices by us, our importers, distributors, or retailers
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2010
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2011
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Change
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|||
Net sales
|
$905.7
|
$1,013.7
|
12%
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||
Excise taxes
|
207.3
|
232.6
|
12%
|
||
Cost of sales
|
239.6
|
279.2
|
16%
|
||
Gross profit
|
458.8
|
501.9
|
9%
|
||
Advertising expenses
|
93.5
|
106.7
|
14%
|
||
Selling, general, and administrative expenses
|
132.9
|
146.8
|
10%
|
||
Amortization expense
|
1.3
|
1.3
|
|||
Other (income) expense, net
|
(3.9)
|
0.8
|
|||
Operating income
|
235.0
|
246.3
|
5%
|
||
Interest expense, net
|
6.1
|
7.1
|
|||
Income before income taxes
|
228.9
|
239.2
|
5%
|
||
Income taxes
|
74.9
|
81.6
|
|||
Net income
|
$154.0
|
$157.6
|
2%
|
||
Earnings per share:
|
|||||
Basic
|
$1.06
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$1.10
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4%
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Diluted
|
$1.05
|
$1.09
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4%
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Gross margin
|
50.7%
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49.5%
|
|||
Operating margin
|
25.9%
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24.3%
|
|||
Effective tax rate
|
32.7%
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34.1%
|
|||
Cash dividends paid per common share
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$0.30
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$0.32
|
|||
Shares (in thousands) used in the
|
|||||
calculation of earnings per share
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|||||
Basic
|
145,649
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143,209
|
|||
Diluted
|
146,504
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144,184
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2010
|
2011
|
Change
|
|||
Net sales
|
$1,650.6
|
$1,854.0
|
12%
|
||
Excise taxes
|
382.8
|
435.1
|
14%
|
||
Cost of sales
|
430.2
|
496.7
|
15%
|
||
Gross profit
|
837.6
|
922.2
|
10%
|
||
Advertising expenses
|
169.8
|
197.5
|
16%
|
||
Selling, general, and administrative expenses
|
264.9
|
285.9
|
8%
|
||
Amortization expense
|
2.5
|
2.5
|
|||
Other (income) expense, net
|
(7.3)
|
4.1
|
|||
Operating income
|
407.7
|
432.2
|
6%
|
||
Interest expense, net
|
12.4
|
14.2
|
|||
Income before income taxes
|
395.3
|
418.0
|
6%
|
||
Income taxes
|
129.9
|
142.4
|
|||
Net income
|
$265.4
|
$275.6
|
4%
|
||
Earnings per share:
|
|||||
Basic
|
$1.81
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$1.91
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6%
|
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Diluted
|
$1.80
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$1.90
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5%
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Gross margin
|
50.7%
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49.7%
|
|||
Operating margin
|
24.7%
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23.3%
|
|||
Effective tax rate
|
32.9%
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34.1%
|
|||
Cash dividends paid per common share
|
$0.60
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$0.64
|
|||
Shares (in thousands) used in the
|
|||||
calculation of earnings per share
|
|||||
Basic
|
146,113
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143,912
|
|||
Diluted
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146,948
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144,919
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April 30,
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October 31,
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||
2010
|
2011
|
||
Assets:
|
|||
Cash and cash equivalents
|
$567.1
|
$380.1
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Accounts receivable, net
|
495.9
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641.9
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|
Inventories
|
646.7
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694.5
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Other current assets
|
266.1
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229.1
|
|
Total current assets
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1,975.8
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1,945.6
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Property, plant, and equipment, net
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393.4
|
383.0
|
|
Goodwill
|
625.4
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621.8
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Other intangible assets
|
670.1
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672.1
|
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Other assets
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47.4
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51.1
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Total assets
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$3,712.1
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$3,673.6
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|
Liabilities:
|
|||
Accounts payable and accrued expenses
|
$411.5
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$453.3
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|
Current portion of long-term debt
|
254.9
|
253.5
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|
Other current liabilities
|
40.4
|
45.9
|
|
Total current liabilities
|
706.8
|
752.7
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|
Long-term debt
|
504.5
|
504.2
|
|
Deferred income taxes
|
149.6
|
162.3
|
|
Accrued postretirement benefits
|
203.3
|
171.2
|
|
Other liabilities
|
87.5
|
77.0
|
|
Total liabilities
|
1,651.7
|
1,667.4
|
|
Stockholders’ equity
|
2,060.4
|
2,006.2
|
|
Total liabilities and stockholders’ equity
|
$3,712.1
|
$3,673.6
|
2010
|
2011
|
||
Cash provided by operating activities
|
$177.8
|
$155.5
|
|
Cash flows from investing activities:
|
|||
Proceeds from sale of property, plant, and equipment
|
12.1
|
--
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Additions to property, plant, and equipment
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(15.1)
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(18.8)
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Acquisitions of brand names and trademarks
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--
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(7.2)
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Other
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(1.3)
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(0.7)
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Cash used for investing activities
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(4.3)
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(26.7)
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Cash flows from financing activities:
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|||
Net (repayment) issuance of debt
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(59.7)
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1.1
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|
Acquisition of treasury stock
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(106.6)
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(216.1)
|
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Dividends paid
|
(87.9)
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(92.4)
|
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Other
|
3.0
|
2.8
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Cash used for financing activities
|
(251.2)
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(304.6)
|
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Effect of exchange rate changes
|
|||
on cash and cash equivalents
|
1.8
|
(11.2)
|
|
Net decrease in cash and cash equivalents
|
(75.9)
|
(187.0)
|
|
Cash and cash equivalents, beginning of period
|
231.6
|
567.1
|
|
Cash and cash equivalents, end of period
|
$155.7
|
$380.1
|
Three Months Ended
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Six Months Ended
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Fiscal Year Ended
|
|||||
October 31, 2011
|
October 31, 2011
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April 30, 2011
|
|||||
Reported change in net sales
|
12%
|
12%
|
6%
|
||||
Estimated net change in distributor inventories
|
(3%)
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(1%)
|
-
|
||||
Impact of Hopland-based wine business sale
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1%
|
1%
|
-
|
||||
Impact of foreign currencies
|
-
|
(3%)
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(2%)
|
||||
Underlying change in net sales
|
10%
|
9%
|
4%
|
||||
Reported change in gross profit
|
9%
|
10%
|
7%
|
||||
Estimated net change in distributor inventories
|
(4%)
|
(2%)
|
-
|
||||
Impact of foreign currencies
|
2%
|
(2%)
|
(2%)
|
||||
Impact of Hopland-based wine business sale
|
3%
|
2%
|
-
|
||||
Underlying change in gross profit
|
10%
|
8%
|
5%
|
||||
Reported change in advertising
|
14%
|
16%
|
5%
|
||||
Impact of Hopland-based wine business sale
|
1%
|
1%
|
-
|
||||
Impact of foreign currencies
|
-
|
(4%)
|
(1%)
|
||||
Underlying change in advertising
|
15%
|
13%
|
4%
|
||||
Reported change in SG&A
|
10%
|
8%
|
6%
|
||||
Impact of foreign currencies
|
(1%)
|
(3%)
|
(1%)
|
||||
Impact of Hopland-based wine business sale
|
1%
|
1%
|
(1%)
|
||||
Dispute settlement
|
-
|
-
|
1%
|
||||
Underlying change in SG&A
|
10%
|
6%
|
5%
|
||||
Reported change in operating income
|
5%
|
6%
|
20%
|
||||
Estimated net change in distributor inventories
|
(6%)
|
(5%)
|
(1%)
|
||||
Impact of Hopland-based wine business sale
|
4%
|
5%
|
(7%)
|
||||
Impact of foreign currencies
|
6%
|
2%
|
(3%)
|
||||
Dispute settlement
|
-
|
-
|
(1%)
|
||||
Impairment charge
|
-
|
-
|
(2%)
|
||||
Underlying change in operating income
|
9%
|
8%
|
6%
|
% Change vs. YTD FY2011
|
||||
Depletions4
|
Net Sales5
|
|||
Brand
|
9-Liter
|
Equivalent Conversion6
|
Reported
|
Constant Currency
|
Jack Daniel’s Family
|
14%
|
14%
|
20%
|
16%
|
Jack Daniel’s Family of Whiskey Brands7
|
14%
|
14%
|
19%
|
16%
|
Jack Daniel’s RTD
|
15%
|
15%
|
25%
|
13%
|
el Jimador Family
|
11%
|
6%
|
6%
|
4%
|
el Jimador
|
4%
|
4%
|
1%
|
0%
|
New Mix RTD8
|
13%
|
13%
|
13%
|
12%
|
Finlandia Family
|
7%
|
3%
|
14%
|
9%
|
Finlandia
|
3%
|
3%
|
12%
|
7%
|
Finlandia RTD
|
NA
|
NA
|
NA
|
NA
|
Southern Comfort Family
|
(4%)
|
(4%)
|
(5%)
|
(7%)
|
Southern Comfort9
|
(4%)
|
(4%)
|
(5%)
|
(6%)
|
Southern Comfort RTD/RTP10
|
(2%)
|
(2%)
|
(2%)
|
(10%)
|
Hopland Wines11
|
(14%)
|
(14%)
|
(15%)
|
(16%)
|
Canadian Mist
|
(6%)
|
(6%)
|
(9%)
|
(9%)
|
Korbel Champagne
|
(4%)
|
(4%)
|
(3%)
|
(3%)
|
Super-Premium Other12
|
11%
|
11%
|
10%
|
9%
|
Rest of Brand Portfolio (excl. Discontinued Brands)
|
6%
|
6%
|
10%
|
7%
|
Total Active Brands
|
8%
|
5%
|
12%
|
9%
|
·
|
Total active brands depletions were up high single digits and reported net sales increased low double digits during the second quarter of fiscal 2012. Constant-currency net sales grew low double digits for the company’s active brands in the quarter.
|
·
|
For the Jack Daniel’s Family of Whiskey Brands, which includes Jack Daniel’s Tennessee Honey, fiscal 2012 first six-month depletion gains in the U.S., Germany, the UK, Mexico, France, Poland and Turkey outpaced declines in Australia.
|
·
|
International depletions for Jack Daniel’s Tennessee Whiskey grew double digits in the second quarter of fiscal 2012. U.S. depletions for the brand were up low single digits for the quarter.
|
·
|
Gentleman Jack and Jack Daniel’s Single Barrel depletions and constant-currency net sales grew double digits, with double-digit growth in both the U.S. and international markets for the six-month period.
|
·
|
Jack Daniel’s RTDs registered double-digit growth in net sales on both a reported and constant-currency basis for the first half of fiscal 2012, as the brands continued to benefit from strong volumetric gains in Germany, U.K., Mexico, and Italy and further geographic expansion into other markets such as Japan, South Africa, Poland and Turkey.
|
·
|
Finlandia’s global depletions were up low-single digits in the second quarter as Russia and Poland returned to growth.
|
·
|
We believe Southern Comfort liqueur in the U.S. continued to be negatively affected by increased competition from flavored whiskeys, flavored vodkas, and spiced rums, particularly those consumed in the more traditional shot occasion. The company continued to pursue a number of initiatives to reverse Southern Comfort’s trends, including a new consumer engagement plan, focus on flavored line extensions including Lime and Fiery Pepper, and RTD introductions in new international markets.
|
·
|
el Jimador’s depletions grew low-single digits for the first half of the year, as growth in the U.S. offset flat results in Mexico.
|
·
|
For the super-premium brands, first-half depletion growth was led by double-digit gains for Herradura, Woodford Reserve and Sonoma Cutrer.
|
·
|
The addition of the agency Appleton brands in Mexico accounted for the increase in the rest of the portfolio.
|