BF-B 10-K & 10-Q changes, risk factors and insider trading

Our business performance depends substantially on the continued health of the Jack DanielDaniel’s family of brands.

The Jack Daniel’s family of brands is the primary driver of our revenuerevenue, and Jack Daniel’s is an iconic global trademark with a loyal consumer fan base. We invest much effort and many resources to protect and preserve the brand’s reputation for authenticity, craftsmanship, and quality. A brand’s reputational value is based in large part on consumer perceptions, and even an isolated incident that causes harm – particularly one resulting in widespread negative publicity – could adversely influence these perceptions and erode consumer trust and confidence in the brand. Significant damage to the brand equity of the Jack Daniel’s family of brands would adversely affect our business. Given the importance of Jack Daniel’s to our overall success, a significant or sustained decline in sales of our Jack Daniel’s products, as a result of negative publicity or otherwise, would have a negative effect on our financial results. Additionally, if we are not successful in our efforts to maintain or increase the relevance of the Jack Daniel’s brand to current and future consumers, our business and operating results could suffer.

We use various business models to market and distribute our products in different countries around the world. In the United States, we sell our products either to distributors for resale to retail outlets or e-commerce retailers or, in those states that control alcohol sales, to state governments who then sell them to retail customers and consumers. In our non-U.S. markets, we use a variety of route-to-consumer models, and, in many markets, we rely on third parties to distribute, market, and sell our products. AsWe of May 1, 2025, we ownedown and operatedoperate 17 distribution companies in 18 countries. Transitioning from a third-party distribution model to an owned-distribution model involves a significant undertaking, and subjects us to additional operational and execution risks associated with thateach affected geographic region. If we are unsuccessful in our route-to-consumer strategies, including any transition to owned distribution, the sale and marketing of our products could be disrupted.

Changes to any of our route-to-consumer models or distribution partnersdistributors in important markets could result in temporary or longer-term sales disruption, higher costs, and harm to other business relationships we might have with that partner.distributor. Disruption of our distribution network or fluctuations in our product inventory levels at distributors, wholesalers, or retailers could negatively affect our results for a particular period. Moreover, other suppliers, as well as wholesalers and retailers of our brands, offer products that compete directly with ours for shelf space, promotional displays, and consumer purchases. Pricing (including price promotions, discounting, couponing, and free goods), marketing, new product introductions, entry into our distribution networks, and other competitive behavior by other suppliers, and by wholesalers and traditional and e-commerce retailers, could adversely affect our growth, business, and financial results. While we seek to take advantage of the efficiencies and opportunities that large retail customers can offer, they often seek lower pricing and increased purchase volume flexibility, offer competing private label products, and represent a large number of other competing products. If the buying power of these large retail customers continues to increase, it could negatively affect our financial results. Further, while we believe we have sufficient scale to succeed relative to our major competitors, we nevertheless face a risk that continuing consolidation of large beverage alcohol companies could put us at a competitive disadvantage.

Consolidation, whether domestically or internationally, among spirits producers, distributors, wholesalers, suppliers, or retailers and the increased growth of the e-commerce environment across the consumer product goods market hashave created and could continue to create a more challenging competitive landscape for our products. Consolidation at any level could hinder the distribution and sale of our products as a result of reduced attention and resources allocated to our brands because our brands might represent a smaller portion of the new business portfolio. Furthermore, consolidation of distributors may lead to the erosion of margins. Changes in distributors’ strategies, including a reduction in the number of brands they carry, the allocation of shelf space for our competitors’ brands, or private label products, may adversely affect our growth, business, financial results, and market share. Our competitors may respond to industry and economic conditions and shifts in consumer behaviors more rapidly or effectively than we do. To remain competitive, we must be agile and efficient in adopting digital technologies and building analytical capabilities, which our competitors may be able to achieve with more agility and resources.

We are subject to risks from changes to the trade policies, tariffs, and import and export regulations of the U.S.United States and foreign governments.

Changes in the import and export policies, including trade restrictions, new or increased tariffs or quotas, embargoes, sanctions and countersanctions, safeguards, or customs restrictions by the United States and foreign governments, could require us to change the way we conduct business and negatively affect our business performance, financial condition, results of operations, and our relationships with customers, suppliers, and employees. Likewise, changes in laws and policies governing foreign trade, manufacturing, development, and investment in the territories or countries where we currently sell our products or conduct our business could adversely affect our business.

The United States has announced and/or implemented significant new tariffs on importsimported goods from a wide range of countries, which has prompted retaliatory tariffs by a number of countries and a cycle of retaliatory tariffs by both the United States and other countries. In early April 2025, actions were taken by the United States and certain other countries to delay the effective date of certain of these tariffs, but as of the date of this report, a number of new tariffs remain in effect. These actions have, and are expected to continue to, result in retaliatory measures on U.S. goods. For example, in March 2025, several Canadian provinces removed all American beverage alcohol from store shelves, including Jack Daniel’s, in response to the United States announcing a 25% tariff on goods imported from Canada. IfWhile maintained,certain U.S. tariffs were struck down by the U.S. Supreme Court in February 2026, the United States subsequently announced additional new tariffs on nonexempt imports, and the U.S. tariff rate remains at a historically high level. Additionally, newly announced tariffs, particularly in light of the U.S. Supreme Court’s decision invalidating the use of the International Emergency Economic Powers Act to authorize certain tariffs and the potential escalation of trade disputesdisputes, could pose a significant risk to our business, including an increase to the cost of our products and, to the extent we absorb the costs of tariffs and do not pass them through to our customers, higher cost of goods sold and lower gross profit and margins. The extent and duration of the tariffs and the resulting impact on general economic conditions on our business are uncertain and depend on various factors, including negotiations between the United States and affected countries, modifications and delays to or invalidation of various tariffs and associated refund procedures, the responses of other countries or regions, exemptions or exclusions that may be granted, availability and cost of alternative sources of supply, and demand for our products in affected markets. Further, actions we take to adapt to new tariffs or trade restrictions may cause us to modify our operations or forgo business opportunities. Likewise, tariffs and import and export regulations could also limit the availability of our products, prompt consumers to seek alternative products, and provide an opportunity for competitors not subject to such tariffs to establish a presence in markets where we conduct our business.

We are a branded consumer products company in a highly competitive market, and our success depends substantially on our continued ability to offer consumers appealing, high-quality products. Consumer preferences and purchases may shift, often in unpredictable ways, as a result of a variety of factors, including health and wellness trendstrends, consumer dietary preference changes, weight loss regimens and pharmaceuticals, including GLP-1 drugs; changes in economic conditions, demographic, and social trends; public health policies and initiatives; changes in government regulation of beverage alcohol products; concerns or regulations related to product safety; legalization of cannabis and its use on a more widespread basis in the markets where we operate; and changes in trends related to travel, leisure, dining, gifting, entertaining, and beverage consumption. As a result, consumers may begin to shift their consumption and purchases away from our premium and super-premium products, or away from alcoholic beverages entirely. This shift further includes consumption at home as a result of various factors, including shifts in social trends and shifts in the channels for the purchases of our products. These shifts in consumption and purchasing channels could adversely impact our profitability. Consumers may also begin to prefer the products of competitors or may generally reduce their demand for brands produced by larger companies. Over the past several decades, the number of small, local distilleries in the United States has grown significantly. This growth is being driven by a trend of consumers showing increasing interest in locally produced, regionally sourced products. As more brands enter the market, increased competition could negatively affect demand for our premium and super-premium American whiskey brands, including Jack Daniel’s. In addition, we could experience unfavorable business results if we fail to attract consumers from diverse backgrounds and ethnicities in all our markets.

Our products use materials and ingredients that we purchase from suppliers. Our ability to make and sell our products depends on the availability of the raw materials, product ingredients, finished products, oak barrels, glass and PET bottles, cans, bottle closures, packaging, and other materials used to produce and package them. Without sufficient quantities of one or more of our key materials, our business and financial results could suffer. For instance, only a few glass producers make bottles on a scale sufficient for our requirements, and a single producer supplies most of our glass requirements. Inability of our primary glass provider to produce sufficient quantities to meet our needs would increase our cost to produce and constrain supply of some of our products. Likewise, we recently closed our last remaining barrel-making operation. As a result, we now source our oak barrelsbarrels, in which we age our North American whiskeyswhiskey, from an external supplier. If supply chain challenges occur in the future,future with respect to glass, oak barrels, or other key materials or ingredients that we purchase from suppliers, it would be difficult and more expensive to produce and deliver our products. Likewise,Similarly, our operations and financial results could suffer if any of our key suppliers were no longer able to meet our timing, quality, or capacity requirements, ceased doing business with us, or significantly raised prices, and we could not promptly develop alternative cost-effective sources of supply or production.

Higher costs or insufficient availability of suitable grain, agave, water, molasses, oak barrels, glass, closures, and other input materials, or higher associated labor costs or insufficient availability of labor, could adversely affect our financial results. Similarly, when energy costs rise, our transportation, freight, and other operating costs, such as distilling and bottling expenses, also could increase. Our freight costcosts and the timely delivery of our products could be adversely affected by a number of factors, including driver or equipment shortages, higher fuel costs, weather conditions, traffic congestion, ocean freight lane disruptions, shipment container availability, rail shutdowns, customs importation delays, and increased government regulation. For example, during the COVID-19 pandemic and subsequent economic recovery, we experienced supply chain disruptions in connection with the availability of timely modes of transportation to ship our products globally, which resulted in higher costs and delays in supplying some of our products.

International or domestic geopolitical or other events, including the imposition of tariffs or quotas by governmental authorities on any raw materials that we use in the production of our products, could adversely affect the supply and cost of these raw materials to us. Additionally, changes in global grain and commodity pricing and availability may impact the markets where we operate. If we cannot offset higher raw material costs with higher selling prices, increased sales volume, or reductions in other costs, our profitability could be adversely affected. For example, armed conflicts in the Middle East have contributed to elevated freight rates and longer transit times compared to historical levels, and prolonged or escalating conflicts could result in additional supply chain disruption, including higher transportation costs (such as a result of increased fuel costs), shipping delays, or increased costs from using air freight instead of ocean freight to mitigate inventory delays.

Unfavorable global or regional economic conditions may be triggered by numerous developments beyond our control, including geopolitical events, health crises, and other events that trigger economic volatility on a global or regional basis. Those types of unfavorable economic conditions could adversely affect our business and financial results. In particular, a significant deterioration in economic conditions, including economic slowdowns or recessions, increased unemployment levels, inflationary pressures, or disruptions to credit and capital markets could lead to decreased consumer confidence and consumer spending, thus reducing consumer demand for our products and sales of used barrels. Unfavorable economic conditions could also cause governments to increase taxes on beverage alcohol to attempt to raise revenue, reducing consumers’willingnessconsumers’ willingness to make discretionary purchases of beverage alcohol products or pay for premium brands such as ours.

From time to time, we acquireconsider acquiring or investinvesting in additional brands or businesses.businesses or undertaking other strategic transactions. We expect to continue to seek acquisitionacquisition, investment, and investmentother strategic opportunities that we believe will increase long-term stockholder value, but we may not besuccessfully ableidentify topotential findacquisition or investment opportunities, identify suitable counterparties willing to transact with us, or consummate the purchase of brands or businesses,businesses or other strategic transactions at acceptable prices and terms. AcquisitionsAcquisitions, investments and investmentsother transactions involve risks and uncertainties, including payingthe potential to pay more than a brand or business is ultimately determined to be worth; potential difficulties integrating acquired brands and personnel; if applicable, difficulties in obtaining governmental approvals; the possible loss of key customers or employees most knowledgeable about the acquired business; implementing and maintaining consistent U.S. public company standards, controls, procedures, policies, and information systems; exposure to unknown liabilities; possible business disruption; and possible management distraction or departure. We have in the past, and could in the future, incur restructuring charges or record impairment losses on the value of intangible assets resulting from previous acquisitions. Whether or not completed, the evaluation, negotiation, announcement, or pursuit of any such transactions may involve significant costs, management distraction, disruption to our business relationships, employee uncertainty, and litigation risk.

From time to time, we also consider disposing of assets or businesses that may no longer meet our financial or strategic objectives. In selling assets or businesses, we may not get prices or terms as favorable as we anticipated. We could also encounter difficulty in finding buyers on acceptable terms in a timely manner, which could delay accomplishment of our strategic objectives. Expected cost savings from reduced overhead,overhead relating to the sold assets,assets may not materialize. The overhead reductions associated with such dispositions could temporarily disrupt our other business operations. Any of these outcomes could negatively affect our financial results.

Negative publicity or our inability or failure to recognize, respond to, and effectively manage the increased impact of social media could affect our business performance.

Unfavorable publicity, whether accurate or not, related to our industry or to us or our products, brands, marketing, executive leadership, employees, Board of Directors, family stockholders, operations, current or anticipated business performance, or environmental, social, or governance efforts could negatively affect our corporate reputation, stock price, ability to attract and retain high-quality talent, or the performance of our brands and business. Adverse publicity or negative commentary on social media, whether accurate or not, particularly any that go “viral,” could cause consumers or other stakeholders to react by disparaging or avoiding our brands or company, which could materially negatively affect our financial results. Additionally, investor advocacy groups, institutional investors, other market participants, stockholders, employees, consumers, customers, influencers, and policymakers have focused increasingly on the environmental, social, and governance or “sustainability” positions and practices of companies, with particular emphasis on diversity, equity, and inclusion efforts.companies. If our positions or practices do not meet investor or other stakeholder expectations and standards, which continue to evolve, our corporate reputation, stock price, ability to attract and retain high-quality talent, and the performance of our brands and business may be negatively affected. Stakeholders and others who disagree with our company’s actions, positions, or statements may speak negatively or advocate against the company,Company, with the potential to harm our reputation or business through negative publicity, adverse government treatment, or other means.

Our products are sold in more than 170 countries; accordingly, we are subject to risks associated with doing business globally, including commercial, political, and financial risks. In addition, we are subject to potential business disruption caused by military conflicts, including the ongoing conflict with Iran and/or Iranian-sponsored actors, other conflicts in the Middle East, and the ongoing conflict in Ukraine and the resulting sanctions imposed on Russia by the United States and other countries; potentially unstable governments or legal systems; social, racial, civil, or political upheaval or unrest; local labor policies and conditions, including labor strikes and work stoppages; possible expropriation, nationalization, or confiscation of assets; problems with repatriation of foreign earnings; economic or trade sanctions; closure of markets to imports; anti-American sentiment; terrorism, kidnapping, extortion, or other types of violence in or outside the United States; and health crises. Violent crime is increasing in markets around the globe, including the United States. If a violent event should occur at one of our sites, it could disrupt business operations, impair brand reputation, increase insurance and security expenses, and adversely affect the price of our stock.

Some of the countries where we do business have a higher risk of corruption than others.others, particularly those with emerging economies. While we are committed to doing business in accordance with all applicable laws, including anti-corruption laws and global trade restrictions, we remain subject to the risk that an employee, or one of our many direct or indirect business partners,associates, may take action determined to be in violation of international trade, money laundering, anti-corruption, or other laws, sanctions, or regulations, including the U.S. Foreign Corrupt Practices Act of 1977, the U.K. Bribery Act 2010, or equivalent local laws. Any determination that our operations or activities are not in compliance with applicable laws or regulations, particularly those related to anti-corruption and international economic or trade sanctions, could result in investigations,investigations; interruption of business,business; loss of business partner relationships,relationships; suspension or termination of credit agreements, licenses, and permits (our own or those of our partnersbusiness associates),; imposition of fines,fines; legal or equitable sanctions,sanctions; negative publicity,publicity; and management distraction or departure. Further, our obligation to comply with applicable anti-corruption, economic and trade sanctions, or other laws or regulations, our Code of Conduct, Code of Ethics for Senior Financial Officers, and our other policies could result in higher operating costs, delays, or even competitive disadvantages as compared to competitors based in different parts of the world.

Our business is sensitive to changes in both direct and indirect taxes. New tax rules, new accounting standards or pronouncements, and changes in the interpretation of existing rules, standards, or pronouncements could have a materialsignificant adverse effect on our business and financial results. As a multinational company based in the United States, we are more exposed to the impact of changes in U.S. tax legislation and regulations than most of our major competitors, especially changes that affect the corporate income tax rate. As of January 2025, the change in U.S. presidential administration and control of U.S. Congress may result in changes to U.S. tax legislation. In addition, aspects of U.S. tax laws may lead foreign jurisdictions to enact tax legislation that is unfavorable to us. While we are unable tocannot predict whether any of these changes will ultimately be enacted, if these or similar proposals are enacted into law, they could negatively impact our effective tax rate and earnings.

At the global level, potential changes in tax rules or the interpretation of tax rules arising out of the Base Erosion and Profit Shifting project initiated by the Organization for Economic Co-operation and Development (OECD) include increased residual profit allocations to market jurisdictions and the implementation of a global minimum tax rate. In December 2021, the OECD issued Pillar Two model rules, which would establish a global per-country minimum tax of 15%, and the European Union has approved a directive requiring member states to incorporate similar provisions into their respective domestic laws. The directive requiresrequired the rules to initially become effective for fiscal years starting on or after December 31, 2023. While it is uncertain whether the United States willhas enactnot yet enacted legislation to adopt Pillar Two, numerous countries have enacted such legislation, or have indicated their intent to adopt legislation,such tolegislation. implementIn January 2026, the OECD released new administrative guidance introducing a "side-by-side" framework (the package). The package modifies key aspects of Pillar Two, introducing safe harbors and largely exempting U.S.-headquartered companies from the application of certain aspects of Pillar Two effective January 1, 2024, with general implementation of the remaining global minimum tax regime in recognition of existing U.S. minimum tax rules. These updated model rules must be incorporated into local tax legislation by January 1, 2025. The OECD and implementing countries are expected to continuebecome toeffective. reviseThe their legislation and release additional guidance. We continue to evaluate the potential impact of the developments on our consolidated financial statements and related disclosures. We currently do not expect the impact to be material based on available guidance; however, the adoptiondetails of these orminimum othertax proposalsregimes are still being considered and could haveincrease atax materialuncertainty adversein the short term. The ultimate enactment and interpretation of these evolving rules could adversely impact on our netfinancial incomeresults, cash flows, and cashresults flowsof operations in the future. Furthermore, changes in the earnings mix or applicable foreign tax laws could also negatively impact our net income.

Our business operations are also subject to numerous duties or taxes not based on income, sometimes referred to as “indirect taxes.” These indirect taxes include excise taxes, sales or value-added taxes, property taxes, payroll taxes, import and export dutiesduties, and tariffs. Increases in or the imposition of new indirect taxes on our operations or products would increase the cost of our products or materials used to produce our products or, to the extent levied directly on consumers, make our products less affordable, which could negatively affect our financial results by reducing purchases of our products and encouraging consumers to switch to lower-priced or lower-taxed product categories. As governmental entities look for increased sources of revenue, they may increase taxes on beverage alcohol products. In fiscal 2025,2026, we have observedsaw excise tax increases in several markets, including Canada, Czechia, France, Türkiye, and the United Kingdom. Additionally, in fiscal 2025,2026, Australia continued to make an annual increase in excise taxes based on the consumer price index.

Various jurisdictions have adopted or may seek to adopt significant additional product labeling or warning requirements or impose limitations on the availability of our products relating to the content or perceived adverse health consequences of some of our products. Several such labeling regulations or laws require warnings on any product with substances that the jurisdiction lists as potentially associated with cancer or birth defects. Our products already raise health and safety concerns for some regulators, and heightened requirements could be imposed. For example, in May 2023, Ireland introduced aIreland’s Public Health (Alcohol) (Labelling) regulation, whichregulation sets unique health labeling requirements for alcohol being sold in the Irish market and relevant provisions will enter into force in 2026.market. The regulation mandates that all alcoholic beverages display warnings on product packaging informing consumers about the risk of consuming alcohol when pregnant and the risk of liver disease and fatal cancers from alcohol consumption. Such campaigns could result in additional governmental regulations concerning the production, marketing, labeling, or availability of our products, any of which could damage our reputation, make our premium brands unrecognizable, or reduce demand for our products, which could adversely affect our profitability. If additional or more severe requirements of this type are imposed on one or more of our major products under current or future health, environmental, or other laws or regulations, they could inhibit sales of such products. Further, we cannot predict whether our products will become subject to increased rules and regulations, which, if enacted, could increase our costs or adversely impact sales.

As discussed throughout these risk factors, governmental actions around the world are a continuing compliance risk for global companies such as ours. In addition, as a U.S. public company, we are exposed to the risk of securities-related class action suits, particularly following a precipitous drop in the share price of our stock. Adverse developments in major lawsuits concerning these or other matters could result in management distraction and have a material adverse effect on our financial results and business.

Unauthorized access or other cyber-related interruptions to our IT infrastructure, or those of our service providers, suppliers, customers, or other direct or indirect business partners,associates, could result in failure of our IT systems, networks, or services to function properly. This could lead to the loss or unauthorized disclosure of our business strategy or other confidential information; disruptions to our business operations; misappropriation of personal data; and reputational, competitive, or business harm. Each of these events may adversely affect our business operations or financial results, or may cause financial and reputational damage, undermine consumer confidence, subject us to government enforcement actions (including fines), or result in private litigation against us, which could result in loss of revenue, increased costs, liability for monetary damages, fines, or criminal prosecution.

We have two classes of common stock. Our Class A common stock is entitled to full voting powers, including in the elections of directors, while our Class B common stock may not vote except as provided by the laws of Delaware. We have had two classes of common stock since 1959, when our stockholders approved the issuance of two shares of Class B non-voting common stock to every holder of our voting common stock. Our common stock dual-class share structure is perpetual, and we do not have a sunset provision in our Restated Certificate of Incorporation or By-laws that provides for the eventual reclassification of the non-voting common stock to voting common stock. Dual-class share structures have come under the scrutiny of major indices, institutional investors, and proxy advisory firms, with some calling for the reclassification of non-voting common stock.

A majority of our voting stock is controlled by members of the Brown family, and, collectively, they have the ability to control the outcome of stockholder votes, including the election of all of our directors and the approval or rejection of any merger, change of control, or other significant corporate transactions. We believe that having a long-term-focused, committed, and engaged stockholder base providescan provide us with aan distinct strategic advantage, particularlyadvantage in a business with aged products and multi-generational brands. ThisThe extent of this advantage couldmay bevary erodedover ortime lost,depending however,on, shouldamong other things, the Brown familyfamily’s members cease, collectively, to be controlling stockholderslevel of ownership in the Company.

We believe that itoperating isas inan independent, family-controlled business currently serves the interests of allour stockholders that we remain independent and family-controlled,stockholders, and we believe the Brown family stockholders share these interests. Thus, our common stock dual-class share structure, as it has existed since 1959, is perpetual, and we do not have a sunset provision in our Restated Certificate of Incorporation or By-laws that provides for the eventual reclassification of the non-voting common stock to voting common stock. However, the Brown family’s interests may not always be aligned with other stockholders’ interests. By exercising their control, the Brown family could cause the Company to take actions that are at odds with the investment goals or interests of institutional, short-term, non-voting, or other non-controlling investors, or that have a negative effect on our stock price. Further, because the Brown family controls the majority of our voting stock, Brown-Forman might be a less attractive takeover target, which could adversely affect the market price of both our voting and our non-voting common stock. And the difference in voting rights for our common stock could also adversely and disproportionately affect the value of our Class B non-voting common stock to the extent that investors view, or any potential future purchaser of our Company views, the superior voting rights and control represented by the Class A common stock to have value.

“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) impairment charges, (3) other items, and (4) foreign exchange. We explain these adjustments below.

•“Acquisitions and divestitures.” This adjustment removes (a) the gain or loss recognized on the sale of divested brands and certain assets, (b) any non-recurring effects related to our acquisitions and divestitures (e.g., transaction, transition, and integration costs), (c) the effects of operating activity related to acquired and divested brandsbrands, including certain divested agency brands, for periods not comparable year over year (non-comparable periods), and (d) fair value changes to contingent consideration liabilities. 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. For the periods presented, we had the following acquisitions and divestitures adjustments:

During fiscal 2023, we acquired Gin Mare Brand, S.L.U. and Mareliquid Vantguard, S.L.U., which owned the Gin Mare brand (Gin Mare). ThisThe adjustmentpurchase removesprice consisted of cash paid at the fairacquisition valuedate adjustments to Gin Mare’splus contingent consideration liability that is payable in cash upon exercise by the sellers no later than July 2027. We recognized $43 million and $15 million in favorable fair value adjustments to Gin Mare’s contingent consideration liability during fiscal 2025.2025 and fiscal 2026, respectively. This adjustment removes the fair value impact from our other expense (income), net and operating income for the periods presented.

During fiscal 2024, we recognized a gain of $7 million on the sale of certain fixed assets related to a divested mill. During fiscal 2025, we recognized a gain of $12 million on the sale of the Alabama cooperage. This adjustment removes the gainsgain from our other expense (income), net and operating income.

During fiscal 2024, we recognized a non-cash impairment charge of $7 million for an immaterial discontinued brand name. During fiscal 2025, we recognized a non-cash impairment charge of $47 million for the Gin Mare brand name. During fiscal 2026, we recognized non-cash impairment charges of $45 million and $87 million for the Gin Mare and Diplomático brand names, respectively. See “Critical Accounting Policies and Estimates” below and Notes 4 and 1716 to the Consolidated Financial Statements for more information.

“Restructuring initiative.” During fiscal 2025, our Board of Directors approved a plan to reduce our structural cost base and realign resources toward future sources of growth. This included reducing our workforce by approximately 12% and closing the Louisville-based Brown-Forman Cooperage. We also offered a special, one-time early retirement benefit to qualifying U.S. employees. Collectively,In fiscal 2025, we incurred $63 million1 in charges related to the restructuring initiative. During fiscal 2026, we incurred $19 million in restructuring and other charges associated with this initiative and completed the sale of Brown-Forman Cooperage facility and related assets. This adjustment removes the $63restructuring million1initiative impact from our cost of sales, operating expenses,expenses and operating income fromfor the thirdperiods and fourth quarters of fiscal 2025.presented. See NotesNote 6 and 21 to the Consolidated Financial Statements for more information.

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 the 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 20252026 Brand Highlights,” “Results of Operations - Fiscal 20252026 Market Highlights,” and “Results of Operations - Year-Over-Year 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. 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, as the GAAP 1Thismeasure adjustmentwill comprisesinclude $60items millionthat ofare costsdifficult includedto inquantify restructuringor andpredict otherwith chargesreasonable andcertainty, $3such millionas offoreign restructuring-relatedexchange, inventorywhich chargescould includedhave ina costsignificant ofimpact sales.to our GAAP income statement measures.

•“Developed International” markets are “advanced economies” as defined by the IMF, excluding the United States. Our top developed international markets were Germany, Australia, the United Kingdom, France, and Canada.Spain. This aggregation represents our net sales of branded products to these markets.

Beginning in fiscal 2025, we aggregated the “Wine” and “Vodka” product categories with “Rest of Portfolio,” due to the divestitures of Sonoma-Cutrer and Finlandia. Please refer to the new definition of “Rest of Portfolio” for more information. The fiscal 2024 “Rest of Portfolio” amounts have been adjusted accordingly for comparison purposes.

•“Jack Daniel’s RTD/RTP” products include all RTD line extensions of Jack Daniel’s, such as Jack Daniel’s & Coca-Cola RTD, Jack Daniel’s & Cola, Jack Daniel’s Double Jack, Jack Daniel’s Country Cocktails,Cocktails (JDCC)1, and other malt- and spirit-based Jack Daniel’s RTDs, along with Jack Daniel’s Winter Jack RTP.

•“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 Apple (JDTA), Jack Daniel’s Tennessee Blackberry (JDTB), Jack Daniel’s Tennessee Fire (JDTF), Jack Daniel’s Single Barrel Collection (JDSB), Jack Daniel’s Bonded Series, Jack Daniel’s Sinatra Select, Jack Daniel’s Bonded10-Year-Old Tennessee Whiskey, Jack Daniel’s Bonded Rye Tennessee Whiskey, Jack Daniel’s Triple Mash Blended Straight Whiskey, Jack Daniel’s American Single Malt, Jack Daniel’s 1214-Year-Old YearTennessee Old,Whiskey, Jack Daniel’s 1412-Year-Old YearTennessee Old, Jack Daniel’s 10 Year Old,Whiskey, and other Jack Daniel’s expressions.

1Announced1The the end of the sales, marketing, and distributionKorbel relationship with Korbel Champagne Cellarsended effective June 30, 2025.

Below, we discuss the significant developments in our business during fiscal 20242025 and fiscal 2025.2026. These developments relate to divestitures, Ginbrand Marename impairmentimpairments and earn-out valuation, the restructuring initiative, the United States distributor evolution, innovation, and capital deployment.

During fiscal 2024, we sold the FinlandiaSonoma-Cutrer vodkawine business for $196 million cash and entered into a relatedTSA, TSAwhich for this business. This transaction resultedended in aAugust pre-tax2024. gainDuring offiscal $922026, million.we ended the Korbel relationship, effective June 30, 2025. The absence of thethese brandbrands negatively impacted our net sales and operating income, thoughbut positively impacted our gross margin for fiscal 2025.2026.

GinBrand MareName ImpairmentImpairments and Earn-out Valuation

During fiscal 2025, we recognized a non-cash impairment charge of $47 million for the Gin Mare brand name,name. During fiscal 2026, we recognized non-cash impairment charges of $45 million and $87 million for the Gin Mare and Diplomático brand names, respectively. These brand name impairments over the past two fiscal years largely reflectingreflect a decline in our financial forecast assumptions due to the moresoftening category outlook and challenging macroeconomic environment in Europe.many of our top markets for these brands. Given this, during fiscal 2025 and fiscal 2026, we also lowered the financial forecast assumptions used to estimate the fair value of Gin Mare’s contingent consideration liability, which is remeasured to fair value on a recurring basis. As a result, we recognized $43 million and $15 million in favorable fair value adjustments to Gin Mare’s contingent consideration liability during fiscal 2025.2025 and fiscal 2026, respectively. The net impact of these non-cash impairment charges and fair value adjustments and impairment charges negatively impacted our operating expenses and operating income for fiscal 2025.2025 and 2026. See Notes 4 and 1716 to the Consolidated Financial Statements for more information.

During fiscal 2025, our Board of Directors approved a plan to reduce our structural cost base and realign resources toward future sources of growth. This included reducing the company’sour workforce by approximately 12% and closing the Louisville-based Brown-Forman Cooperage. We also offered a specialspecial, one-time early retirement benefit to qualifying U.S. employees. TheseDuring initiativesfiscal resulted2026, inwe incurred additional restructuring charges associated with this initiative and completed the sale of $63the millionBrown-Forman inCooperage facility and related assets. While these actions negatively impacted our operating expenses and operating income for fiscal 2025.2026, Thiswe comprisesbenefited $60from millionlower ofrestructuring costs includedwhen incompared restructuringto andthe othersame chargesprior-year and $3 million of restructuring-related inventory charges included in cost of sales.period. See Note 6 to the Consolidated Financial Statements for more information.

◦In fiscal 2025, we launched Jack Daniel’s 1414-Year-Old YearTennessee OldWhiskey in the United States.

•In fiscal 2025, we launched Woodford Reserve Double Double Oaked acrossin the United States.

We have focused our capital deployment initiatives on (a) investing fully in our existing business, (b) continuing our acquisitionsbusiness and divestitures strategy, and (c) returning cash to our stockholders.

•Investments. During fiscal 20242025 and fiscal 2025,2026, our capital expenditures totaled $395$274 million and focused on enabling the growth of our whiskey, tequila,whiskey and rumtequila brands. This included completing a $125$50 million expansion of our bourbon makingscotch-making capacity in KentuckyScotland. andAdditionally, constructingwe constructed additional barrel warehouses for Jack Daniel’s, Woodford Reserve, Glenglassaugh, Diplomatico, and our tequilas.

During fiscal 2025,2026, the operating environment remained challenging due to ongoing macroeconomic pressures and geopolitical uncertainties,instability, which we believe negatively impacted consumer confidencebehavior and reducedbeverage discretionaryalcohol spendingconsumption, inparticularly manywithin of our topdeveloped markets.

•We delivered net sales of $4.0$3.9 billion, a decrease of 5%1% compared to fiscal 2024.2025. The decrease was driven by (a) the negative effect of acquisitions and divestitures;divestitures, (b)partially offset by the negativepositive effect of foreign exchange; and (c) the impact of JDCC, partially offset by higher volumes. Organic net sales increased 1% compared to fiscal 2024.

◦From a brand perspective, net sales declines were leddriven by the Finlandiaend of the Korbel relationship, the decline of used barrel sales, and Sonoma-Cutrerlower divestitures, our Tequila portfolio, and the impactvolumes of JDCC,JDTW, partially offset by growththe launch of Woodford ReserveJDTB and the non-brandedgrowth andof bulkNew business (primarily used barrel sales).Mix.

•We delivered gross profit of $2.3$2.4 billion, aan decreaseincrease of 7%2% compared to fiscal 2024.2025. Gross margin decreasedincreased to 60.5% in fiscal 2026, up 1.6 percentage points from 58.9% in fiscal 2025, down 1.5 percentage points from 60.5% in fiscal 2024.2025. The decreaseincrease in gross margin was driven by higher costs, the negative effect of foreign exchange, and the negative effect of the restructuring initiative, partially offset by favorable price/mix, the impact of JDCC, and the positive effect of acquisitions and divestitures.divestitures, the positive effect of foreign exchange, and lower costs.

•We delivered diluted earnings per share of $1.84,$1.53, a decrease of 14%17% compared to fiscal 2024,2025, driven by the decrease inlower operating income,income partiallyand offsetthe byabsence of the gain on the sale of our investment in The Duckhorn andPortfolio, aInc. lower effective tax rate.(Duckhorn).

•Our return on average invested capital decreased to 11.9% in fiscal 2026, compared to 14.4% in fiscal 2025, compared to 17.3% in fiscal 2024.2025. This decrease was driven by lower operating income and higherthe investedabsence capital, partially offset byof the gain on the sale of our investment in DuckhornDuckhorn, andpartially offset by the benefit of a lower effective tax rate.

2Operating expenses include advertising expense,expenses, SG&A expense,expenses, restructuring and other charges, other intangible assets impairment, and other expense (income), net.

•In a challenging economic environment, Germany’s net sales decreaseddeclined 4%,2%, drivenled by declineslower involumes of JDTW and JDunfavorable RTDs,timing of retailer ordering patterns. These declines were partially offset by the positive contributioneffect fromof Diplomáticoforeign exchange and higherthe volumeslaunch of Gentleman Jack.JDTB.

•Australia’s net sales decreasedincreased 2%,1%, driven by the negativeel effectJimador ofRTD foreign exchange, the loss of an agency brand, and the divestiture of Finlandia,launch, partially offset by growthlower volumes of JDel RTDs reflecting higher prices.Jimador.

This MD&A is intended to help the reader better understand Brown-Forman, our operations, our financial results, and our current business environment. 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 on2026 Form 10-K for the fiscal year ended April 30, 2025 (2025 Form 10-K).10-K. Note that the results of operations for the ninethree months ended JanuaryJuly 31, 2026, are not necessarily indicative of future or annual results. InUnless thisotherwise Item,indicated, “we,”all “us,”related “our,”commentary “Brown-Forman,”is on a reported basis and is for the “Company”three refermonths ended July 31, 2026, compared to Brown-Formanthe Corporationsame andperiod itslast consolidated subsidiaries, collectively.year.

PresentationResults Basisof Operations