Item 8. Financial Statements and Supplementary Data

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Item 8. Financial Statements and Supplementary Data


Table of Contents
			Page
Reports of Management			50
Reports of Independent Registered Public Accounting Firms (PCAOB ID 238 and 42)			51
Consolidated Statements of Operations			55
Consolidated Statements of Comprehensive Income			56
Consolidated Balance Sheets			57
Consolidated Statements of Cash Flows			58
Consolidated Statements of Stockholders’ Equity			59
Notes to Consolidated Financial Statements			60

Reports of Management

Management’s Responsibility for Financial Statements

Our management is responsible for preparing, presenting, and ensuring the integrity of the financial information presented in this report. The consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States, including amounts based on management’s best estimates and judgments. In management’s opinion, the consolidated financial statements fairly present the Company’s financial position, results of operations, and cash flows.

The Audit Committee of the Board of Directors, comprising only independent directors, meets regularly with our external auditors, the independent registered public accounting firm Ernst & Young LLP (EY); with our internal auditors; and with representatives of management to review accounting, internal control structure, and financial reporting matters. Our internal auditors and EY have full, free access to the Audit Committee. As set forth in our Code of Conduct and Corporate Governance Guidelines, we are firmly committed to adhering to the highest standards of moral and ethical behavior in our business activities.

Management’s Report on Internal Control over Financial Reporting

Management is also responsible for establishing and maintaining effective internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

As of the end of our fiscal year, management conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework and criteria in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that our internal control over financial reporting was effective as of April 30, 2022. EY, which audited and reported on the Company’s consolidated financial statements, has audited the effectiveness of our internal control over financial reporting as of April 30, 2022, as stated in their report.


Dated:	June 17, 2022
		By:	/s/ Lawson E. Whiting
			Lawson E. Whiting
			President and Chief Executive Officer


		By:	/s/ Leanne D. Cunningham
			Leanne D. Cunningham
			Senior Vice President and Chief Financial Officer

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Brown-Forman Corporation

Opinion on the Financial Statements

We have audited the consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows of Brown-Forman Corporation and its subsidiaries (the “Company”) for the year ended April 30, 2020, including the related notes and schedule of valuation and qualifying accounts for the year ended April 30, 2020 appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the results of operations and cash flows of the Company for the year ended April 30, 2020 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Louisville, Kentucky

June 19, 2020

We served as the Company’s auditor from 1933 to 2020.

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Brown-Forman Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Brown-Forman Corporation and Subsidiaries (the Company) as of April 30, 2022 and 2021, the related consolidated statement of operations, comprehensive income, stockholders’ equity and cash flows for each of the two years in the period ended April 30, 2022, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at April 30, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended April 30, 2022, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of April 30, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated June 17, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosures to which it relates.


						Valuation of Other Intangible Assets with Indefinite Lives
Description of the Matter						At April 30, 2022, the balance of the Company’s other intangible assets with indefinite lives was $586 million. As discussed in Notes 1 and 4 to the consolidated financial statements, other intangible assets with indefinite lives include intangible brand names and trademarks (“brand names”) and are assessed for impairment at least annually, or more frequently, if circumstances indicate the carrying amount may be impaired. As described in Note 4, during the fourth quarter of 2022, the Company recognized an impairment charge of $52 million for its Finlandia brand name. The Company determined Finlandia’s fair value based on the relief from royalty method. Auditing management’s estimate of the fair value of brand names was complex due to the significant judgment required to determine the fair value of the brand names. The fair value estimates were sensitive to significant assumptions used in the valuation process, such as future net sales. The estimate also includes assumptions such as discount rates and royalty rates.
How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design and tested the operating effectiveness of controls that address the risks of material misstatement over the Company’s process to estimate the fair value of other intangible assets with indefinite lives, including controls over management’s review of the selection of assumptions, described above, used in the valuation model. To test the estimated fair value of the Company’s brand names, we performed audit procedures that included, among others, assessing methodologies used in the valuation model and testing the significant assumptions discussed above. This included comparing the significant assumptions used by management to observable market data, current industry and economic trends, changes in the Company’s business model and customer base, historical operating results and other relevant factors that would affect the significant assumptions. We assessed management’s historical estimates and performed sensitivity analyses of assumptions to evaluate the changes in the fair value of the brand names that would result from changes in the assumptions. We also involved valuation specialists to assist in evaluating valuation methodologies and certain assumptions used in the models.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2020.

Louisville, Kentucky

June 17, 2022

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Brown-Forman Corporation

Opinion on Internal Control Over Financial Reporting

We have audited Brown-Forman Corporation and Subsidiaries’ internal control over financial reporting as of April 30, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), (the COSO criteria). In our opinion, Brown-Forman Corporation and Subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of April 30, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of April 30, 2022 and 2021, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the two years in the period ended April 30, 2022, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) and our report dated June 17, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Louisville, Kentucky

June 17, 2022

Brown-Forman Corporation and Subsidiaries

Consolidated Statements of Operations

(Dollars in millions, except per share amounts)


Year Ended April 30,	2020		2021		2022
Sales	$	4,306	$	4,526	$	5,081
Excise taxes	943		1,065		1,148
Net sales	3,363		3,461		3,933
Cost of sales	1,236		1,367		1,542
Gross profit	2,127		2,094		2,391
Advertising expenses	383		399		438
Selling, general, and administrative expenses	642		671		690

Gain on sale of business	—		(127)		—
Other expense (income), net	11		(15)		59
Operating income	1,091		1,166		1,204
Non-operating postretirement expense	5		6		13
Interest income	(5)		(2)		(5)
Interest expense	82		81		82
Income before income taxes	1,009		1,081		1,114
Income taxes	182		178		276
Net income	$	827	$	903	$	838
Earnings per share:
Basic	$	1.73	$	1.89	$	1.75
Diluted	$	1.72	$	1.88	$	1.74

The accompanying notes are an integral part of the consolidated financial statements.

Brown-Forman Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Dollars in millions)


Year Ended April 30,	2020		2021		2022
Net income	$	827	$	903	$	838
Other comprehensive income (loss), net of tax:
Currency translation adjustments	(94)		123		(60)
Cash flow hedge adjustments	30		(76)		53
Postretirement benefits adjustments	(77)		78		77
Net other comprehensive income (loss)	(141)		125		70
Comprehensive income	$	686	$	1,028	$	908

The accompanying notes are an integral part of the consolidated financial statements.

Brown-Forman Corporation and Subsidiaries

Consolidated Balance Sheets

(Dollars in millions)


April 30,	2021		2022
Assets
Cash and cash equivalents	$	1,150	$	868
Accounts receivable, net	753		813
Inventories:
Barreled whiskey	1,101		1,155
Finished goods	323		312
Work in process	199		225
Raw materials and supplies	128		126
Total inventories	1,751		1,818

Other current assets	263		277
Total current assets	3,917		3,776
Property, plant, and equipment, net	832		875
Goodwill	779		761
Other intangible assets	676		586
Deferred tax assets	70		74
Other assets	248		301
Total assets	$	6,522	$	6,373
Liabilities
Accounts payable and accrued expenses	$	679	$	703
Accrued income taxes	34		81

Short-term borrowings	205		—
Current portion of long-term debt	—		250
Total current liabilities	918		1,034
Long-term debt	2,354		2,019
Deferred tax liabilities	169		219
Accrued pension and other postretirement benefits	219		183
Other liabilities	206		181
Total liabilities	3,866		3,636
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

Retained earnings	3,243		3,242
Accumulated other comprehensive income (loss), net of tax	(422)		(352)
Treasury stock, at cost (5,803,000 and 5,511,000 shares in 2021 and 2022, respectively)	(237)		(225)
Total stockholders' equity	2,656		2,737
Total liabilities and stockholders' equity	$	6,522	$	6,373

The accompanying notes are an integral part of the consolidated financial statements.

Brown-Forman Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Dollars in millions)


Year Ended April 30,	2020		2021		2022
Cash flows from operating activities:
Net income	$	827	$	903	$	838
Adjustments to reconcile net income to net cash provided by operations:
Gain on sale of business	—		(127)		—
Asset impairment charges	13		—		61
Depreciation and amortization	74		77		79
Stock-based compensation expense	11		12		15
Deferred income tax provision (benefit)	39		(53)		(11)

Other, net	15		(23)		31
Changes in assets and liabilities, net of business acquisitions and dispositions:
Accounts receivable	12		(150)		(77)
Inventories	(203)		(37)		(93)
Other current assets	(27)		31		15
Accounts payable and accrued expenses	(30)		137		37
Accrued income taxes	18		8		47
Other operating assets and liabilities	(25)		39		(6)
Cash provided by operating activities	724		817		936
Cash flows from investing activities:
Proceeds from sale of business	—		177		—
Acquisition of business, net of cash acquired	(22)		(14)		—
Additions to property, plant, and equipment	(113)		(62)		(138)





Other, net	(6)		(3)		11
Cash provided by (used for) investing activities	(141)		98		(127)
Cash flows from financing activities:
Proceeds from short-term borrowings, maturities greater than 90 days	—		344		—
Repayments of short-term borrowings, maturities greater than 90 days	—		(516)		—

Net change in short-term borrowings	178		46		(196)



Payments of withholding taxes related to stock-based awards	(43)		(21)		(11)

Acquisition of treasury stock	(1)		—		—
Dividends paid	(325)		(338)		(831)

Cash used for financing activities	(191)		(485)		(1,038)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(24)		45		(47)
Net increase (decrease) in cash, cash equivalents, and restricted cash	368		475		(276)
Cash, cash equivalents, and restricted cash at beginning of period	307		675		1,150
Cash, cash equivalents,and restricted cash at end of period	675		1,150		874
Less: Restricted cash (included in other current assets) at end of period	—		—		(6)
Cash and cash equivalents at end of period	$	675	$	1,150	$	868
Supplemental disclosure of cash paid for:
Interest	$	83	$	79	$	80
Income taxes	$	143	$	204	$	226

The accompanying notes are an integral part of the consolidated financial statements.

Brown-Forman Corporation and Subsidiaries

Consolidated Statements of Stockholders' Equity

(Dollars in millions, except per share amounts)


	Class A Common Stock		Class B Common Stock		Additional Paid-in Capital		Retained Earnings		AOCI		Treasury Stock		Total
Balance at April 30, 2019	$	25	$	47	$	—	$	2,238	$	(363)	$	(300)	$	1,647
Reclassification of tax effects1							43		(43)				—


Net income							827						827
Net other comprehensive income (loss)									(141)				(141)
Cash dividends ($0.6806 per share)							(325)						(325)
Acquisition of treasury stock											(1)		(1)
Stock-based compensation expense					11								11
Stock issued under compensation plans											43		43
Loss on issuance of treasury stock issued under compensation plans					(11)		(75)						(86)

Balance at April 30, 2020	25		47		—		2,708		(547)		(258)		1,975



Net income							903						903
Net other comprehensive income (loss)									125				125
Cash dividends ($0.7076 per share)							(338)						(338)
Acquisition of treasury stock											—		—
Stock-based compensation expense					12								12
Stock issued under compensation plans											21		21
Loss on issuance of treasury stock issued under compensation plans					(12)		(30)						(42)

Balance at April 30, 2021	25		47		—		3,243		(422)		(237)		2,656



Net income							838						838
Net other comprehensive income (loss)									70				70
Cash dividends ($1.7360 per share)							(831)						(831)
Acquisition of treasury stock											—		—
Stock-based compensation expense					15								15
Stock issued under compensation plans											12		12
Loss on issuance of treasury stock issued under compensation plans					(15)		(8)						(23)
Balance at April 30, 2022	$	25	$	47	$	—	$	3,242	$	(352)	$	(225)	$	2,737

1Reflects adoption of Accounting Standards Update No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (AOCI), effective May 1, 2019.

The accompanying notes are an integral part of the consolidated financial statements.

Brown-Forman Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars and other currency amounts in millions, except per share data)

1. Accounting Policies

We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States (GAAP). We also apply the following accounting policies when preparing our consolidated financial statements:

Principles of consolidation. Our consolidated financial statements include the accounts of all subsidiaries in which we have a controlling financial interest. We eliminate all intercompany transactions.

Estimates. To prepare financial statements that conform with GAAP, our management must make informed estimates that affect how we report revenues, expenses, assets, and liabilities, including contingent assets and liabilities. Actual results could differ from these estimates.

Cash equivalents. Cash equivalents include bank demand deposits and all highly liquid investments with original maturities of three months or less.

Accounts receivable. Accounts receivable are recorded net of an allowance for expected credit losses (allowance for doubtful accounts). We determine the allowance using information such as customer credit history and financial condition, historical loss experience, and macroeconomic factors. We write off account balances against the allowance when we have exhausted our collection efforts. The allowance for doubtful accounts was $7 and $13 at April 30, 2021 and 2022, respectively.

Inventories. Inventories are valued at the lower of cost or net realizable value. Approximately 52% of our consolidated inventories are valued using the last-in, first-out (LIFO) cost method, which we use for the majority of our U.S. inventories. We value the remainder of our inventories primarily using the first-in, first-out (FIFO) cost method. FIFO cost approximates current replacement cost. If we had used the FIFO method for all inventories, they would have been $353 and $385 higher than reported at April 30, 2021 and 2022, respectively.

Because we age most of our whiskeys in barrels for three years or more, we bottle and sell only a portion of our whiskey inventory each year. Following industry practice, we classify all barreled whiskey as a current asset. We include warehousing, insurance, ad valorem taxes, and other carrying charges applicable to barreled whiskey in inventory costs.

We classify agave inventories, bulk tequila, bulk wine, and liquid in bottling tanks as work in process.

Property, plant, and equipment. We state property, plant, and equipment at cost less accumulated depreciation. We calculate depreciation on a straight-line basis using our estimates of useful life, which are 20–40 years for buildings and improvements; 3–10 years for machinery, equipment, vehicles, furniture, and fixtures; and 3–7 years for capitalized software.

We assess our property, plant, and equipment for impairment whenever events or changes in circumstances indicate that the carrying value of those assets may not be recoverable. When we do not expect to recover the carrying value of an asset (or asset group) through undiscounted future cash flows, we write it down to its estimated fair value. We determine fair value using discounted estimated future cash flows, considering market values for similar assets when available.

When we retire or dispose of property, plant, and equipment, we remove its cost and accumulated depreciation from our balance sheet and reflect any gain or loss in operating income. We expense the costs of repairing and maintaining our property, plant, and equipment as we incur them.

Goodwill and other intangible assets. We have obtained most of our brands by acquiring other companies. When we acquire another company, we first allocate the purchase price to identifiable assets and liabilities, including intangible brand names and trademarks (“brand names”), based on estimated fair value. We then record any remaining purchase price as goodwill. We do not amortize goodwill or other intangible assets with indefinite lives. We consider all of our brand names to have indefinite lives.

We assess our goodwill and other indefinite-lived intangible assets for impairment at least annually, or more frequently if circumstances indicate the carrying amount may be impaired. Goodwill is impaired when the carrying amount of the related reporting unit exceeds its estimated fair value, in which case we write down the goodwill by the amount of the excess (limited to the carrying amount of the goodwill). We estimate the reporting unit's fair value using discounted estimated future cash flows or market information. Similarly, 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 the selection of assumptions about future cash flows, net sales, discount rates, and royalty rates.

We have the option, before quantifying the fair value of a reporting unit or brand name, to evaluate qualitative factors to assess whether it is more likely than not that our goodwill or brand names are impaired. If we determine that is not the case, then we are not required to quantify the fair value. That assessment also takes considerable management judgment.

Revenue recognition. Our net sales predominantly reflect global sales of beverage alcohol consumer products. We sell these products under contracts with different types of customers, depending on the market. The customer is most often a distributor, wholesaler, or retailer.

Each contract typically includes a single performance obligation to transfer control of the products to the customer. Depending on the contract, control is transferred when the products are either shipped or delivered to the customer, at which point we recognize the transaction price for those products as net sales. The transaction price recognized at that point reflects our estimate of the consideration to be received in exchange for the products. The actual amount may ultimately differ due to the effect of various customer incentives and trade promotion activities. In making our estimates, we consider our historical experience and current expectations, as applicable. Subsequent adjustments recognized for changes in estimated transaction prices are typically not material.

Net sales exclude taxes we collect from customers that are imposed by various governments on our sales, and are reduced by payments to customers unless made in exchange for distinct goods or services with fair values approximating the payments. Net sales include any amounts we bill customers for shipping and handling activities related to the products. We recognize the cost of those activities in cost of sales during the same period in which we recognize the related net sales. Sales returns, which are permitted only in limited situations, are not material. Customer payment terms generally range from 30 to 90 days. There are no significant amounts of contract assets or liabilities.

Cost of sales. Cost of sales includes the costs of receiving, producing, inspecting, warehousing, insuring, and shipping goods sold during the period.

Advertising costs. We expense the production costs of advertising when the advertisements first take place. We expense all other advertising costs during the year in which the costs are incurred.

Selling, general, and administrative expenses. Selling, general, and administrative expenses include the costs associated with our sales force, administrative staff and facilities, and other expenses related to our non-manufacturing functions.

Stock-based compensation. We use stock-based awards as part of our incentive compensation for eligible employees and directors. We recognize the grant-date fair value of an award as compensation expense on a straight-line basis over the requisite service period, which typically corresponds to the vesting period for the award. Upon forfeiture of an award prior to vesting, we reverse any previously-recognized compensation expense related to that award. We classify stock-based compensation expense within selling, general, and administrative expenses.

As we recognize compensation expense for a stock-based award, we concurrently recognize a related deferred tax asset. The subsequent vesting or exercise of the award will generally result in an actual tax benefit that differs from the deferred tax asset that had been recorded. The excess (deficiency) of the actual tax benefit over (under) the previously recorded tax asset is recognized as income tax benefit (expense) on the date of vesting or exercise.

Income taxes. We base our annual provision for income taxes on the pre-tax income reflected in our consolidated statement of operations. We establish deferred tax liabilities or assets for temporary differences between GAAP and tax reporting bases and later adjust them to reflect changes in tax rates expected to be in effect when the temporary differences reverse. We record a valuation allowance as necessary to reduce a deferred tax asset to the amount that we believe is more likely than not to be realized. We do not provide deferred income taxes on undistributed earnings of foreign subsidiaries that we expect to indefinitely reinvest. We record a deferred tax charge in prepaid taxes for the difference between GAAP and tax reporting bases with respect to the elimination of intercompany profit in ending inventory.

We assess our uncertain income tax positions in two steps. First, we evaluate whether the tax position will more likely than not, based on its technical merits, be sustained upon examination, including resolution of any related appeals or litigation. For a tax position that does not meet this first criterion, we recognize no tax benefit. For a tax position that does meet the first criterion, we recognize a tax benefit in an amount equal to the largest amount of benefit that we believe has more than a 50% likelihood of being realized upon ultimate resolution. We record interest and penalties on uncertain tax positions as income tax expense.

Foreign currency transactions and translation. We report all gains and losses from foreign currency transactions (those denominated in a currency other than the entity's functional currency) in current income. The U.S. dollar is the functional currency for most of our consolidated entities. The local currency is the functional currency for some of our consolidated foreign entities. We translate the financial statements of those foreign entities into U.S. dollars, using the exchange rate in effect at the balance sheet date to translate assets and liabilities, and using the average exchange rate for the reporting period to translate income and expenses. We record the resulting translation adjustments in other comprehensive income (loss).

2. Balance Sheet Information

Supplemental information on our year-end balance sheets is as follows:


April 30,	2021		2022
Other current assets:
Prepaid taxes	$	170	$	155
Other	93		122
	$	263	$	277
Property, plant, and equipment:
Land	$	82	$	86
Buildings	659		660
Equipment	833		849
Construction in process	50		129
	1,624		1,724
Less accumulated depreciation	792		849
	$	832	$	875
Accounts payable and accrued expenses:
Accounts payable, trade	$	172	$	218
Accrued expenses:
Advertising, promotion, and discounts	202		200
Compensation and commissions	96		99
Excise and other non-income taxes	70		74



Other	139		112
	507		485
	$	679	$	703





Accumulated other comprehensive income (loss), net of tax:
Currency translation adjustments	$	(179)	$	(239)
Cash flow hedge adjustments	(16)		37
Postretirement benefits adjustments	(227)		(150)
	$	(422)	$	(352)

3. 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:


	2020		2021		2022


Net income available to common stockholders	$	827	$	903	$	838

Share data (in thousands):
Basic average common shares outstanding	477,765		478,527		478,879
Dilutive effect of stock-based awards	2,644		2,150		1,686
Diluted average common shares outstanding	480,409		480,677		480,565

Basic earnings per share	$	1.73	$	1.89	$	1.75
Diluted earnings per share	$	1.72	$	1.88	$	1.74

We excluded common stock-based awards for approximately 301,000 shares, 234,000 shares, and 691,000 shares from the calculation of diluted earnings per share for 2020, 2021, and 2022, respectively, because they were not dilutive for those periods under the treasury stock method.

4. Goodwill and Other Intangible Assets

The following table shows the changes in goodwill (which include no accumulated impairment losses) and other intangible assets over the past two years:


	Goodwill		Other Intangible Assets
Balance as of April 30, 2020	$	756	$	635
Sale of business (Note 12)	(4)		(1)
Acquisition of business (Note 12)	8		8
Foreign currency translation adjustment	19		34

Balance as of April 30, 2021	779		676


Foreign currency translation adjustment	(18)		(38)
Impairment	—		(52)
Balance as of April 30, 2022	$	761	$	586

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

During the fourth quarter of fiscal 2022, we recognized a non-cash impairment charge for our Finlandia brand name. The impairment reflects a decline in our long-term outlook for Finlandia due to our suspension of operations in Russia, a key market for the brand. The impairment charge of $52 is included in “other expense (income), net” in the accompanying consolidated statement of operations. As of April 30, 2022, the remaining carrying amount of the Finlandia brand name was $181.

5. 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 are recorded as of April 30, 2022.

In May 2019, we notified Bacardi Martini Ltd. (Bacardi) of our intention not to renew the terms of our United Kingdom (U.K.) Cost Sharing Agreement (the Agreement), which then expired according to its terms on April 30, 2020. Following delivery of our notice and upon expiration of the Agreement, Bacardi claimed that it was entitled to compensation under the principle of commercial agency in the U.K., as well as additional compensation for the winding up of business conducted under the Agreement and for remitting the associated funds owed to us. Based on that claim, which we disputed, Bacardi withheld over £50 owed to us (included in accounts receivable in the accompanying consolidated balance sheet as of April 30, 2021). The dispute was resolved in December 2021, with Bacardi remitting over £47 related to this matter.

6. Debt and Credit Facilities

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


April 30,	2021		2022
2.25% senior notes, $250 principal amount, due January 15, 2023	$	249	$	250
3.50% senior notes, $300 principal amount, due April 15, 2025	298		298
1.20% senior notes, €300 principal amount, due July 7, 2026	362		315
2.60% senior notes, £300 principal amount, due July 7, 2028	415		374
4.00% senior notes, $300 principal amount, due April 15, 2038	294		295
3.75% senior notes, $250 principal amount, due January 15, 2043	248		248
4.50% senior notes, $500 principal amount, due July 15, 2045	488		489

	2,354		2,269
Less current portion	—		250
	$	2,354	$	2,019

Debt payments required over the next five fiscal years consist of $250 in 2023, $0 in 2024, $300 in 2025, $0 in 2026, $316 in 2027, and $1,427 after 2027.

The senior notes contain terms, events of default, and covenants customary of these types of unsecured securities, including limitations on the amount of secured debt we can issue.

Our short-term borrowings of $205 as of April 30, 2021, included $195 of borrowings under our commercial paper program. There were no borrowings under that program as of April 30, 2022.


April 30,	2021	2022
Commercial paper	$195	$—
Average interest rate	0.16%	—%
Average remaining days to maturity	24	0

We have a committed revolving credit agreement with various U.S. and international banks for $800 that expires in November 2024. At April 30, 2022, there were no borrowings outstanding under this facility.

7. Common Stock

The following table shows the change in outstanding common shares during each of the last three years:



(Shares in thousands)	Class A	Class B	Total
Balance at April 30, 2019	168,999	308,173	477,172
Acquisition of treasury stock	(13)	(3)	(16)
Stock issued under compensation plans	54	999	1,053
Balance at April 30, 2020	169,040	309,169	478,209
Acquisition of treasury stock	—	—	—
Stock issued under compensation plans	70	450	520
Balance at April 30, 2021	169,110	309,619	478,729
Acquisition of treasury stock	—	—	—
Stock issued under compensation plans	65	226	291
Balance at April 30, 2022	169,175	309,845	479,020

8. Net Sales

The following table shows our net sales by geography:


	2020		2021		2022
United States	$	1,690	$	1,748	$	1,917
Developed International1	901		1,014		1,137
Emerging2	572		578		714
Travel Retail3	125		63		104
Non-branded and bulk4	75		58		61
	$	3,363	$	3,461	$	3,933

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 in fiscal 2022 were Germany, Australia, the United Kingdom, and France.

2Represents net sales of branded products to “emerging and developing economies” as defined by the IMF. Our largest emerging markets in fiscal 2022 were Mexico, Poland, Brazil, Russia, 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:


	2020		2021		2022
Whiskey1	$	2,671	$	2,744	$	3,110
Tequila2	275		299		364
Wine3	186		206		219
Vodka4	109		90		109
Non-branded and bulk5	75		58		61
Rest of portfolio	47		64		70
	$	3,363	$	3,461	$	3,933

1Includes all whiskey spirits and whiskey-based flavored liqueurs, ready-to-drink, and ready-to-pour products. The brands included in this category are the Jack Daniel’s family of brands, the Woodford Reserve family of brands, the Old Forester family of brands, GlenDronach, Benriach, Glenglassaugh, Slane Irish Whiskey, and Coopers’ Craft.

2Includes the Herradura family of brands, el Jimador, New Mix, and other tequilas.

3Includes Korbel Champagne and Sonoma-Cutrer wines.

4Includes Finlandia.

5Includes net sales of used barrels, contract bottling, and bulk whiskey and wine.

9. Pension and Other Postretirement Benefits

We sponsor various defined benefit pension plans as well as postretirement plans providing retiree health care and retiree life insurance benefits. Below, we discuss our obligations related to these plans, the assets dedicated to meeting the obligations, and the amounts we recognized in our financial statements as a result of sponsoring these plans.

Obligations. We provide eligible employees with pension and other postretirement benefits based on factors such as years of service and compensation level during employment. The pension obligation shown below (“projected benefit obligation”) consists of: (a) benefits earned by employees to date based on current salary levels (“accumulated benefit obligation”); and (b) benefits to be received by employees as a result of expected future salary increases. (The obligation for medical and life insurance benefits is not affected by future salary increases.) The following table shows how the present value of our projected benefit obligations changed during each of the last two years.


	Pension Benefits				Medical and Life Insurance Benefits
	2021		2022		2021		2022
Obligation at beginning of year	$	1,005	$	1,012	$	51	$	49
Service cost	26		26		1		1
Interest cost	25		22		1		1
Net actuarial loss (gain)1	9		(132)		(1)		(5)

Retiree contributions	—		—		1		1
Benefits paid	(53)		(82)		(4)		(4)

Obligation at end of year	$	1,012	$	846	$	49	$	43

1 The net actuarial loss (gain) during each year was primarily attributable to changes in discount rates.

Service cost represents the present value of the benefits attributed to service rendered by employees during the year. Interest cost is the increase in the present value of the obligation due to the passage of time. Net actuarial loss (gain) is the change in value of the obligation resulting from experience different from that assumed or from a change in an actuarial assumption. (We discuss actuarial assumptions used at the end of this note.) Plan amendments may also change the value of the obligation.

As shown in the previous table, the change in the value of our pension and other postretirement benefit obligations also includes the effect of benefit payments and retiree contributions. Expected benefit payments (net of retiree contributions) over the next 10 years are as follows:


	Pension Benefits		Medical and Life Insurance Benefits
2023	$	64	$	3
2024	61		3
2025	60		3
2026	61		3
2027	62		3
2028 – 2032	312		16

Assets. We invest in specific assets to fund our pension benefit obligations. Our investment goal is to earn a total return that, over time, will grow assets sufficiently to fund our plans' liabilities, after providing appropriate levels of contributions and accepting prudent levels of investment risk. To achieve this goal, plan assets are invested primarily in funds or portfolios of funds managed by outside managers. Investment risk is managed by company policies that require diversification of asset classes, manager styles, and individual holdings. We measure and monitor investment risk through quarterly and annual performance reviews, and through periodic asset/liability studies.

Asset allocation is the most important method for achieving our investment goals and is based on our assessment of the plans' long-term return objectives and the appropriate balances needed for liquidity, stability, and diversification. As of April 30, 2022, our target asset allocation is a mix of 40% public equity investments, 47% fixed income investments, and 13% alternative investments.

The following table shows the fair value of pension plan assets by category as of the end of the last two years. (Fair value levels are defined in Note 14.)


	Level 1		Level 2		Level 3		Total
April 30, 2021
Equity securities	$	103	$	—	$	—	$	103

Limited partnership interest1	—		—		2		2
	$	103	$	—	$	2	105
Investments measured at net asset value:
Commingled trust funds2:
Equity funds							266
Fixed income funds							357
Real estate funds							65
Short-term investments							8
Limited partnership interests3							35


Total							$	836

April 30, 2022
Equity securities	$	78	$	—	$	—	$	78

Limited partnership interest1	—		—		2		2
	$	78	$	—	$	2	80
Investments measured at net asset value:
Commingled trust funds2:
Equity funds							218
Fixed income funds							318
Real estate funds							78
Short-term investments							6
Limited partnership interests3							41


Total							$	741

1 This limited partnership interest was initially valued at cost and has been adjusted to fair value as determined in good faith by management of the partnership using various factors, and does not meet the requirements for reporting at the net asset value (NAV). The valuation requires significant judgment due to the absence of quoted market prices and the inherent lack of liquidity. This limited partnership has a term expiring in September 2022, although this period may be extended.

2 Commingled trust fund valuations are based on the NAV of the funds as determined by the fund administrators and reviewed by us. NAV represents the underlying assets owned by the fund, minus liabilities and divided by the number of shares or units outstanding. Generally, for commingled trust funds other than real estate, redemptions are permitted daily with no notice period. The real estate fund is redeemable quarterly with 110 days' notice.

3 These limited partnership interests were initially valued at cost and have been adjusted using NAV per audited financial statements. Investments are generally not eligible for immediate redemption and have original terms averaging 10 to 13 years, although those periods may be extended.

The following table shows how the fair value of the Level 3 assets changed during each of the last two years. There were no transfers of assets between Level 3 and either of the other two levels.


	Level 3
Balance as of April 30, 2020	$	2
Return on assets held at end of year	1


Sales and settlements	(1)
Balance as of April 30, 2021	2
Return on assets held at end of year	—


Sales and settlements	—
Balance as of April 30, 2022	$	2

The following table shows how the total fair value of all pension plan assets changed during each of the last two years. (We do not have assets set aside for postretirement medical or life insurance benefits.)


	Pension Benefits				Medical and Life Insurance Benefits
	2021		2022		2021		2022
Assets at beginning of year	$	749	$	836	$	—	$	—
Actual return on assets	124		(25)		—		—
Retiree contributions	—		—		1		1
Company contributions	16		12		3		3
Benefits paid	(53)		(82)		(4)		(4)
Assets at end of year	$	836	$	741	$	—	$	—

We currently expect to contribute $13 to our pension plans and $3 to our postretirement medical and life insurance benefit plans during 2023.

Funded status. The funded status of a plan refers to the difference between its assets and its obligations. The following table shows the funded status of our plans.


	Pension Benefits				Medical and Life Insurance Benefits
April 30,	2021		2022		2021		2022
Assets	$	836	$	741	$	—	$	—
Obligations	(1,012)		(846)		(49)		(43)
Funded status	$	(176)	$	(105)	$	(49)	$	(43)

The funded status is recorded on the accompanying consolidated balance sheets as follows:


	Pension Benefits				Medical and Life Insurance Benefits
April 30,	2021		2022		2021		2022
Other assets	$	4	$	46	$	—	$	—
Accounts payable and accrued expenses	(7)		(8)		(3)		(3)
Accrued pension and other postretirement benefits	(173)		(143)		(46)		(40)
Net liability	$	(176)	$	(105)	$	(49)	$	(43)
Accumulated other comprehensive income (loss), before tax:
Net actuarial gain (loss)	$	(298)	$	(201)	$	(9)	$	(3)
Prior service credit (cost)	(5)		(4)		4		2
	$	(303)	$	(205)	$	(5)	$	(1)

The following table compares our pension plans whose accumulated benefit obligations exceed their assets with our pension plans whose assets exceed their accumulated benefit obligations.


	Accumulated Benefit Obligation				Plan Assets
April 30,	2021		2022			2021		2022
Plans with accumulated benefit obligation in excess of assets	$	(155)	$	(135)		$	—	$	—
Plans with assets in excess of accumulated benefit obligation	(748)		(623)			836		741
Total	$	(903)	$	(758)		$	836	$	741

The following table compares our pension plans whose projected benefit obligations exceed their assets with our pension plans whose assets exceed their projected benefit obligations.


	Projected Benefit Obligation				Plan Assets
April 30,	2021		2022			2021		2022
Plans with projected benefit obligation in excess of assets	$	(941)	$	(150)		$	761	$	—
Plans with assets in excess of projected benefit obligation	(71)		(696)			75		741
Total	$	(1,012)	$	(846)		$	836	$	741

As noted above, we have no assets set aside for the postretirement medical or life insurance benefit plans.

Pension cost. The following table shows the components of the pension cost recognized during each of the last three years. The amount for each year includes amortization of the prior service cost/credit and net actuarial loss/gain included in accumulated other comprehensive loss as of the beginning of the year.


	Pension Benefits
	2020		2021		2022
Service cost	$	24	$	26	$	26
Interest cost	31		25		22

Expected return on assets	(46)		(46)		(45)
Amortization of:
Prior service cost (credit)	1		1		1
Net actuarial loss (gain)	19		27		23
Settlement charge	1		—		12
Net cost	$	30	$	33	$	39

We determine the expected return on plan assets by applying our long-term rate of return assumption to the market-related value of plan assets, adjusted by earnings on contributions and benefit payments expected to be made during the year. We calculate the market-related value of plan assets by amortizing actual versus expected returns over five years.

We amortize prior service costs and net actuarial gains or losses on straight-line basis over the average remaining service period of the employees expected to receive benefits under the plan. However, for net actuarial gains or losses, we use a corridor approach that amortizes them only to the extent the gain or loss exceeds 10% of the greater of the projected benefit obligation or market-related value of plan assets.

Other postretirement benefits cost. The following table shows the components of the postretirement medical and life insurance benefits cost that we recognized during each of the last three years.


	Medical and Life Insurance Benefits
	2020		2021		2022
Service cost	$	1	$	1	$	1
Interest cost	1		1		1
Amortization of:
Prior service cost (credit)	(3)		(3)		(2)
Net actuarial loss (gain)	1		1		1
Net cost	$	—	$	—	$	1

We amortize prior service costs and net actuarial gains or losses on straight-line basis over the average remaining service period of the employees expected to receive benefits under the plan.

Other comprehensive income (loss). Prior service cost/credit and net actuarial loss/gain are recognized in other comprehensive income or loss (OCI) during the period in which they arise. These amounts are later amortized from accumulated OCI into pension and other postretirement benefit cost over future periods as described above. The following table shows the pre-tax effect of these amounts on OCI during each of the last three years.


	Pension Benefits						Medical and Life Insurance Benefits
	2020		2021		2022		2020		2021		2022

Net actuarial gain (loss)	$	(115)	$	69	$	62	$	(2)	$	1	$	5
Amortization reclassified to earnings:
Prior service cost (credit)	1		1		1		(3)		(3)		(2)
Net actuarial loss (gain)	20		27		35		1		1		1
Net amount recognized in OCI	$	(94)	$	97	$	98	$	(4)	$	(1)	$	4

Assumptions and sensitivity. We use various assumptions to determine the obligations and cost related to our pension and other postretirement benefit plans. The weighted-average assumptions used in computing benefit plan obligations as of the end of the last two years were as follows:


	Pension Benefits			Medical and Life Insurance Benefits
	2021	2022		2021	2022
Discount rate	3.16 %	4.36	%	3.08 %	4.33	%
Rate of salary increase	4.00 %	4.00	%	n/a	n/a
Interest crediting rate	3.06 %	3.06	%	n/a	n/a

The weighted-average assumptions used in computing benefit plan cost during each of the last three years were as follows:


	Pension Benefits					Medical and Life Insurance Benefits
	2020		2021	2022		2020	2021	2022
Discount rate for service cost	4.17 %		3.49 %	3.36	%	4.24 %	3.59 %	3.49	%
Discount rate for interest cost	3.57 %		2.56 %	2.34	%	3.53 %	2.47 %	2.27	%
Rate of salary increase	4.00 %		4.00 %	4.00	%	n/a	n/a	n/a
Interest crediting rate	3.07	%	3.07 %	3.06	%	n/a	n/a	n/a
Expected return on plan assets	6.50 %		6.50 %	6.25	%	n/a	n/a	n/a

The assumed discount rates are determined using a yield curve based on the interest rates of high-quality debt securities with maturities corresponding to the expected timing of our benefit payments. The service cost and interest cost components are measured by applying the specific spot rates along the yield curve used to measure the benefit obligation at the beginning of the period.

The assumed rate of salary increase reflects the expected average annual increase in salaries as a result of inflation, merit increases, and promotions over the service period of the plan participants.

The assumed interest crediting is based on the greater of the average yield on 30-year Treasury bonds or the minimum rate specified in the applicable pension plan.

The expected return on plan assets represents the long-term rate of return that we assume will be earned over the life of the pension assets. The assumption reflects expected capital market returns for each asset class, which are based on historical returns, adjusted for the expected effects of diversification.

The assumed health care cost trend rates as of the end of the last two years were as follows:


	Medical and Life Insurance Benefits
	2021	2022
Health care cost trend rate assumed for next year	6.60 %	6.10	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	4.50 %	4.50	%
Year that the rate reaches the ultimate trend rate	2030	2030

Savings plans. We also sponsor various defined contribution benefit plans that together cover substantially all U.S. employees. Employees can make voluntary contributions in accordance with their respective plans, which include a 401(k) tax deferral option. We match a percentage of each employee's contributions in accordance with plan terms. We expensed $12, $12, and $13 for matching contributions during 2020, 2021, and 2022, respectively.

International plans. The information presented above for defined benefit plans and defined contribution benefit plans reflects amounts for U.S. plans only. Information about similar international plans is not presented due to immateriality.

10. Stock-Based Compensation

The Brown-Forman 2013 Omnibus Compensation Plan (Plan) is our incentive compensation plan, designed to reward participants (including eligible officers, employees, and non-employee directors) for company performance. Under the Plan, we can grant stock-based incentive awards for up to 20,750,000 shares of common stock to eligible participants until July 28, 2023. As of April 30, 2022, awards for approximately 12,412,000 shares remain available for issuance under the Plan. We try to limit the source of shares delivered to participants under the Plan to treasury shares that we purchase from time to time on the open market (in connection with a publicly announced share repurchase program), in private transactions, or otherwise.

Awards granted under the Plan include stock-settled stock appreciation rights (SSARs), performance-based restricted stock units (PBRSUs), and deferred stock units (DSUs).

SSARs. We grant SSARs at an exercise price equal to the closing market price of the underlying stock on the grant date. SSARs become exercisable after three years from the first day of the fiscal year of grant and generally are exercisable for seven years after that date. The following table presents information about SSARs outstanding as of April 30, 2022, and for the year then ended.


	Number of SSARs (in thousands)	Weighted- Average Exercise Price per SSAR		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
Outstanding at April 30, 2021	4,311	$	43.54
Granted	451	71.24
Exercised	(565)	29.67
Forfeited or expired	(29)	63.82
Other	64
Outstanding at April 30, 2022	4,232	$	47.54	4.9	$	86
Exercisable at April 30, 2022	2,829	$	39.55	3.5	$	79

We use the Black-Scholes pricing model to calculate the grant-date fair value of a SSAR. The weighted-average grant-date fair values and related valuation assumptions for the SSARS granted during each of the last three years were as follows:


	2020		2021		2022

Grant-date fair value	$	11.13	$	14.61	$	16.61
Valuation assumptions:
Expected term (years)	7.0		7.0		7.0
Risk-free interest rate	1.9 %		0.4 %		1.0		%
Expected volatility	19.3 %		23.3 %		24.1		%
Expected dividend yield	1.2 %		1.0 %		1.0		%

The expected term is based on past exercise experience for similar awards. The risk-free interest rate is based on zero-coupon U.S. Treasury rates as of the date of grant. Expected volatility and dividend yield are based on historical data, with consideration of other factors when applicable.

PBRSUs. The PBRSUs vest at the end of a three-year performance period that begins on the first day of the fiscal year of grant. Performance is measured by comparing the three-year cumulative total shareholder return of our Class B common stock to the three-year cumulative total shareholder return of the companies in the Standard & Poor's Consumer Staples Index, with specific payout levels ranging from 50% to 150%. At the end of the performance period, the number of PBRSUs is adjusted for performance, and then adjusted upward to account for dividends paid during the second and third years of the performance period. The resulting PBRSUs are then converted to common shares.

The following table presents information about PBRSUs outstanding as of April 30, 2022, and for the year then ended.



	Number of PBRSUs (in thousands)	Weighted- Average Fair Value at Grant Date



























Outstanding at April 30, 2021	254	$	61.76
Granted	108	$	70.11
Adjusted for performance and dividends	(10)	$	55.28
Converted to common shares	(77)	$	55.28
Forfeited	(5)	$	69.19
Outstanding at April 30, 2022	270	$	67.02

We calculate the grant-date fair value of a PBRSU using a Monte Carlo simulation technique. The weighted average grant-date fair values and related valuation assumptions for these awards granted during each of the last three years were as follows:


	2020			2021			2022
Grant-date fair value	$	56.99		$	73.68		$	70.11
Valuation assumptions:
Risk-free interest rate	1.8		%	0.1		%	0.3		%
Expected volatility	21.8		%	29.9		%	29.1		%
Expected dividend yield	1.2		%	1.1		%	1.0		%
Remaining performance period (years) as of grant date	2.8			2.8			2.8

DSUs. DSUs are granted to our non-employee directors. Each DSU represents the right to receive one share of common stock based on the closing price of the shares on the date of grant. Outstanding DSUs are credited with dividend-equivalent DSUs when dividends are paid on our common stock. Each annual grant vests after one year. DSUs are paid out in shares after the completion of a director's tenure on the board plus a six-month waiting period. The director may elect to receive the distribution either in a single lump sum or in ten equal annual installments. As of April 30, 2022, there were approximately 225,000 outstanding DSUs, of which approximately 201,000 were vested.

The grant-date fair value of a DSU is the closing market price of the underlying stock on the grant date. The weighted average grant-date fair values for these awards granted during each of the last three years were as follows:


	2020		2021		2022

Grant-date fair value	$	53.34	$	63.01	$	67.35

Additional information. The pre-tax stock-based compensation expense and related deferred income tax benefits recognized during the last three fiscal years were as follows:


	2020		2021		2022
Pre-tax compensation expense	$	11	$	12	$	15
Deferred tax benefit	2		2		2

As of April 30, 2022, there was $9 of total unrecognized compensation cost related to non-vested stock-based awards. That cost is expected to be recognized over a weighted-average period of 1.5 years. Further information related to our stock-based awards for the last three years is as follows:


	2020		2021		2022






Intrinsic value of SSARs exercised	$	89	$	47	$	23



Fair value of shares vested	14		13		7
Excess tax benefit from exercise / vesting of awards	20		10		6

11. Income Taxes

We incur income taxes on the earnings of our U.S. and foreign operations. The following table, based on the locations of the taxable entities from which sales were derived (rather than the location of customers), presents the U.S. and foreign components of our income before income taxes:


	2020		2021		2022
United States	$	849	$	832	$	954
Foreign	160		249		160
	$	1,009	$	1,081	$	1,114

The income shown above was determined according to GAAP. Because those standards sometimes differ from the tax rules used to calculate taxable income, there are differences between: (a) the amount of taxable income and pretax financial income for a year and (b) the tax bases of assets or liabilities and their amounts as recorded in our financial statements. As a result, we recognize a current tax liability for the estimated income tax payable on the current tax return, and deferred tax liabilities (tax on income that will be recognized on future tax returns) and deferred tax assets (tax from deductions that will be recognized on future tax returns) for the estimated effects of the differences mentioned above.

Total income tax expense for a year includes the tax associated with the current tax return (current tax expense) and the change in the net deferred tax asset or liability (deferred tax expense). Our total income tax expense for each of the last three years was as follows:


	2020		2021		2022
Current:
U.S. federal	$	95	$	146	$	205
Foreign	29		50		64
State and local	19		35		18
	143		231		287
Deferred:
U.S. federal	34		(4)		1
Foreign	7		(47)		(9)
State and local	(2)		(2)		(3)
	39		(53)		(11)
	$	182	$	178	$	276

Our consolidated effective tax rate usually differs from current statutory rates due to the recognition of amounts for events or transactions with no tax consequences. The following table reconciles our effective tax rate to the federal statutory tax rate in the United States:


	Percent of Income Before Taxes
	2020		2021		2022
U.S. federal statutory rate	21.0	%	21.0	%	21.0	%
State taxes, net of U.S. federal tax benefit	1.7	%	2.4	%	1.0	%
Income taxed at other than U.S. federal statutory rate	—	%	0.3	%	1.3	%
Prior intercompany sales taxed at higher than current U.S. federal statutory rate	—	%	0.2	%	2.0	%
Tax benefit from foreign-derived sales	(2.0	%)	(1.7	%)	(1.8)	%

Adjustments related to prior years	(1.1	%)	(0.2	%)	0.7	%




Excess tax benefits from stock-based awards	(2.0	%)	(1.0	%)	(0.5)	%
Tax rate changes	—	%	—	%	0.4	%
Intercompany transfer of assets	—	%	(4.0	%)	—	%

Other, net	0.4	%	(0.5	%)	0.7	%
Effective rate	18.0	%	16.5	%	24.8	%

Deferred tax assets and liabilities as of the end of each of the last two years were as follows:


April 30,	2021		2022
Deferred tax assets:
Postretirement and other benefits	$	90	$	69
Accrued liabilities and other	47		36
Inventories	30		40
Lease liabilities	17		20
Derivative instruments	5		—
Loss and credit carryforwards	63		69
Total deferred tax assets	252		234
Valuation allowance	(20)		(27)
Total deferred tax assets, net of valuation allowance	232		207
Deferred tax liabilities:
Intangible assets	(214)		(219)
Property, plant, and equipment	(89)		(87)
Right-of-use assets	(17)		(20)
Derivative instruments	—		(11)
Other	(11)		(15)
Total deferred tax liabilities	(331)		(352)
Net deferred tax liability	$	(99)	$	(145)

Details of the loss and credit carryforwards and related valuation allowances as of the end of each of the last two years are as follows:


	April 30, 2021						April 30, 2022
	Gross Amount		Deferred Tax Asset		Valuation Allowance		Gross Amount		Deferred Tax Asset		Valuation Allowance		Expiration (as of April 30, 2022)
U.S.	$	99	$	15	$	(5)	$	53	$	19	$	(8)	Various1
Foreign	228		48		(15)		241		50		(19)		Various2
	$	327	$	63	$	(20)	$	294	$	69	$	(27)

1As of April 30, 2022, the deferred tax asset amount includes credit carryforwards of $8 that do not expire and loss and credit carryforwards of $11 that expire in varying amounts from 2023 to 2039.

2As of April 30, 2022, the deferred tax asset includes loss carryforwards of $19 that do not expire and $31 that expire in varying amounts over the next 9 years.

As of April 30, 2022, we had approximately $1,446 of undistributed earnings from our foreign subsidiaries ($1,542 at April 30, 2021). Most of these earnings have been previously subject to tax, primarily as a result of the one-time repatriation tax on foreign earnings required by the 2017 Tax Cuts and Jobs Act. Historically, we have asserted that the undistributed earnings of our foreign subsidiaries are reinvested indefinitely outside the United States. We continue to maintain indefinite reinvestment assertions for most undistributed earnings of our foreign subsidiaries, and no deferred taxes have been provided on the earnings. For undistributed earnings not considered permanently reinvested, deferred tax liabilities have been provided for any applicable income taxes and withholding taxes payable in various countries, which are not significant. We have also asserted that other outside basis differences related to our foreign subsidiaries are reinvested indefinitely and that the determination of any unrecognized deferred tax liabilities is not practicable due to the complexities in the calculations. The other outside basis differences relate primarily to differences between U.S. GAAP and tax basis that arose through purchase accounting. These basis differences could reverse through sales of foreign subsidiaries or other transactions, none of which are considered probable as of April 30, 2022.

At April 30, 2022, we had $14 of gross unrecognized tax benefits, $11 of which would reduce our effective income tax rate if recognized. A reconciliation of the beginning and ending unrecognized tax benefits follows:


	2020		2021		2022
Unrecognized tax benefits at beginning of year	$	11	$	11	$	12
Additions for tax positions provided in prior periods	2		1		2
Additions for tax positions provided in current period	—		2		2
Decreases for tax positions provided in prior years	(1)		—		—
Settlements of tax positions in the current period	(1)		(1)		—
Lapse of statutes of limitations	—		(1)		(2)
Unrecognized tax benefits at end of year	$	11	$	12	$	14

We file income tax returns in the United States, including several state and local jurisdictions, as well as in several other countries where we conduct business. The major jurisdictions and their earliest fiscal years that are currently open for tax examinations are 2016 through 2021 in the United States, inclusive of federal and states; 2020 in the United Kingdom; 2018 in Australia; 2017 in Finland, Germany, Hungary, Korea, and Poland; 2016 in the Netherlands and Brazil; and 2013 in Mexico. In addition, we are participating in the Internal Revenue Service's Compliance Assurance Program for our fiscal 2022 tax year.

We believe there will be no material change in our gross unrecognized tax benefits in the next 12 months.

12. Acquisitions and Divestitures

Acquisitions. On July 3, 2019, we acquired 100% of the voting interests in The 86 Company, which owns Fords Gin, for $22 in cash. The purchase price was allocated largely to the intangible assets that were acquired, including goodwill of $11 and other indefinite-lived intangibles of $12, net of deferred tax liabilities of $1. The goodwill is primarily attributable to the value of leveraging our distribution network and brand-building expertise to grow global sales of the Fords Gin brand and to the knowledge and expertise of the organized workforce employed by the acquired business. We do not expect the goodwill to be deductible for tax purposes.

On December 1, 2020, we acquired 100% of the voting interests in Part Time Rangers Holdings Limited (Part Time Rangers) for $14 in cash (including repayment of debt). Part Time Rangers, which is based in New Zealand, produces spirits-based ready-to-drink products with all-natural fruit flavoring. The purchase price was allocated largely to the intangible assets of the acquired business, including goodwill of $8 and other intangible assets of $8, net of deferred tax liabilities of $2. The goodwill is primarily attributable to the value of leveraging our distribution network and brand-building expertise to grow sales of the Part Time Rangers brand. We do not expect the goodwill to be deductible for tax purposes.

The 86 Company and Part Time Rangers have been included in our consolidated financial statements since their respective acquisition dates. Actual and pro forma results are not presented due to immateriality.

Divestiture. On July 31, 2020, we sold the Early Times, Canadian Mist, and Collingwood brands for $177 in cash. The sale reflects the continued evolution of our portfolio strategy to focus on premium spirits brands. The total book value of the related business assets included in the sale was $50, consisting largely of inventories, the Canadian Mist production assets, and intellectual property. As a result of the sale, we recognized a pre-tax gain of $127 during fiscal 2021.

13. 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 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 accumulated other comprehensive income (AOCI) until the underlying hedged transaction occurs, at which time we reclassify that amount into 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 $1,218 and $801 at April 30, 2021 and 2022, respectively. The maximum term of outstanding derivative contracts was approximately 36 months at both April 30, 2021 and 2022.

We also use foreign currency-denominated debt to help manage our foreign currency exchange 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 designated as net investment hedges was $680 and $636 as of April 30, 2021 and 2022, respectively.

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 stop 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 during each of the last three years:


	Classification in Statement of Operations	2020		2021		2022

Currency derivatives designated as cash flow hedges:
Net gain (loss) recognized in AOCI	n/a	$	61	$	(78)	$	76
Net gain (loss) reclassified from AOCI into earnings	Sales	23		21		5
Net gain (loss) reclassified from AOCI into earnings	Other income (expense), net	—		—		2








Currency derivatives not designated as hedging instruments:
Net gain (loss) recognized in earnings	Sales	4		(13)		12
Net gain (loss) recognized in earnings	Other income (expense), net	(14)		17		5


Foreign currency-denominated debt designated as net investment hedge:
Net gain (loss) recognized in AOCI	n/a	22		(73)		78



Total amounts presented in the accompanying consolidated statements of operations for line items affected by the net gains (losses) shown above:
Sales		4,306		4,526		5,081
Other income (expense), net		(11)		15		(59)

We expect to reclassify $26 of deferred net gains on cash flow hedges recorded in AOCI as of April 30, 2022, to earnings during fiscal 2023. 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 as of April 30, 2021 and 2022:


	Balance Sheet Classification	Derivative Assets		Derivative Liabilities
April 30, 2021
Designated as cash flow hedges:
Currency derivatives	Other current assets	$	4	$	(2)
Currency derivatives	Other assets	—		—
Currency derivatives	Accrued expenses	4		(18)
Currency derivatives	Other liabilities	1		(18)



Not designated as hedges:

Currency derivatives	Other current assets	1		—

Currency derivatives	Accrued expenses	—		—

April 30, 2022
Designated as cash flow hedges:
Currency derivatives	Other current assets	32		(3)
Currency derivatives	Other assets	20		(1)
Currency derivatives	Accrued expenses	—		—
Currency derivatives	Other liabilities	—		—



Not designated as hedges:

Currency derivatives	Other current assets	—		—

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 earned 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 require 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. The aggregate fair value of all derivatives with creditworthiness requirements that were in a net liability position was $30 and $0 at April 30, 2021 and 2022, respectively.

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:


	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, 2021
Derivative assets	$	10	$	(7)	$	3	$	(1)	$	2
Derivative liabilities	(38)		7		(31)		1		(30)
April 30, 2022
Derivative assets	52		(4)		48		(1)		47
Derivative liabilities	(5)		4		(1)		1		—

No cash collateral was received or pledged related to our derivative contracts as of April 30, 2021 or 2022.

14. Fair Value Measurements

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


	2021				2022
April 30,	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets:
Cash and cash equivalents	$	1,150	$	1,150	$	868	$	868

Currency derivatives	3		3		48		48

Liabilities:

Currency derivatives	31		31		1		1
Short-term borrowings	205		205		—		—
Long-term debt (including current portion)	2,354		2,663		2,269		2,239

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). During fiscal 2022, we recognized non-cash impairment charges of $9 on certain fixed assets. The impairment charges, which were based on our measurements of the estimated fair values of those assets, are categorized as Level 2 within the valuation hierarchy. The remaining carrying amount of those fixed assets is not significant. Additionally, as discussed in Note 4, we recognized a non-cash impairment charge of $52 during fiscal 2022 related to our 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, and which is 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.

15. Leases

We enter into lease arrangements, which we use primarily for office space, vehicles, and land. Substantially all of our leases are operating leases. Our finance leases are not material.

We record lease liabilities and right-of-use (ROU) assets on our balance sheet for leases with terms exceeding 12 months. We do not record lease liabilities or ROU assets for short-term leases. The amounts recorded for lease liabilities and ROU assets are based on the estimated present value, as of the lease commencement date, of the future payments to be made over the lease term. We calculate the present value using our incremental borrowing rate that corresponds to the term of the lease. We include the effect of an option to renew or terminate a lease in the lease term when it is reasonably certain that we will exercise the option.

Some of our leases contain non-lease components (e.g., maintenance or other services) in addition to lease components. We have elected the practical expedient not to separate the non-lease components from the lease components.

The following table shows information about our leases as of the end of the last two years:


	Balance Sheet Classification	April 30, 2021		April 30, 2022
Right-of-use assets	Other assets	$	67	$	74

Lease liabilities:
Current	Accounts payable and accrued expenses	$	20	$	21
Non-current	Other liabilities	49		54
Total		$	69	$	75

Weighted-average discount rate		1.9%		1.8%
Weighted-average remaining term		5.3 years		5.0 years

The following table shows information about the effects of leases during each of the last three years:


	2020		2021		2022
Total lease cost1	$	29	$	41	$	38
Cash paid for amounts included in the measurement of lease liabilities2	21		26		25
Right-of-use assets obtained in exchange for new lease liabilities	35		25		35

1Consists primarily of operating lease cost. Other components of lease cost were not material.

2Classified within operating activities in the accompanying consolidated statements of cash flows.

The following table includes a maturity analysis of future (undiscounted) lease payments and a reconciliation of those payments to the lease liabilities recorded on our balance sheet as of April 30, 2022:


	April 30, 2022
2023	$	22
2024	18
2025	13
2026	9
2027	7
Thereafter	10
Total lease payments	79
Less: Present value discount	(4)
Lease liabilities	$	75

16. Other Comprehensive Income

The following table presents the components of net other comprehensive income (loss) during each of the last three years:


	Pre-Tax		Tax		Net
Year Ended April 30, 2020
Currency translation adjustments:
Net gain (loss) on currency translation	$	(88)	$	(6)	$	(94)
Reclassification to earnings	—		—		—
Other comprehensive income (loss), net	(88)		(6)		(94)
Cash flow hedge adjustments:
Net gain (loss) on hedging instruments	61		(14)		47
Reclassification to earnings1	(23)		6		(17)
Other comprehensive income (loss), net	38		(8)		30
Postretirement benefits adjustments:
Net actuarial gain (loss) and prior service cost	(119)		28		(91)
Reclassification to earnings2	18		(4)		14
Other comprehensive income (loss), net	(101)		24		(77)

Total other comprehensive income (loss), net	$	(151)	$	10	$	(141)

Year Ended April 30, 2021
Currency translation adjustments:
Net gain (loss) on currency translation	$	106	$	17	$	123
Reclassification to earnings	—		—		—
Other comprehensive income (loss), net	106		17		123
Cash flow hedge adjustments:
Net gain (loss) on hedging instruments	(78)		17		(61)
Reclassification to earnings1	(21)		6		(15)
Other comprehensive income (loss), net	(99)		23		(76)
Postretirement benefits adjustments:
Net actuarial gain (loss) and prior service cost	71		(16)		55
Reclassification to earnings2	30		(7)		23
Other comprehensive income (loss), net	101		(23)		78

Total other comprehensive income (loss), net	$	108	$	17	$	125

Year Ended April 30, 2022
Currency translation adjustments:
Net gain (loss) on currency translation	$	(42)	$	(18)	$	(60)
Reclassification to earnings	—		—		—
Other comprehensive income (loss), net	(42)		(18)		(60)
Cash flow hedge adjustments:
Net gain (loss) on hedging instruments	76		(17)		59
Reclassification to earnings1	(7)		1		(6)
Other comprehensive income (loss), net	69		(16)		53
Postretirement benefits adjustments:
Net actuarial gain (loss) and prior service cost	67		(16)		51
Reclassification to earnings2	34		(8)		26
Other comprehensive income (loss), net	101		(24)		77

Total other comprehensive income (loss), net	$	128	$	(58)	$	70

1For 2022, $(2) of the pre-tax amount of $(7) is classified in other income in the accompanying consolidated statements of operations. Otherwise, the pre-tax amount for each year is classified as sales.

2For 2021, $4 of the pre-tax amount of $30 is classified in gain on sale of business in the accompanying consolidated statements of operations. Otherwise, the pre-tax amount for each year is classified as non-operating postretirement expense.

17. Supplemental Information

The following table presents net sales by geography:


	2020		2021		2022
Net sales:
United States	$	1,690	$	1,748	$	1,917
Germany	171		206		228
Australia	155		209		219
United Kingdom	180		205		218
Mexico	155		150		178
Other	1,012		943		1,173
	$	3,363	$	3,461	$	3,933

Net sales are attributed to countries based on where customers are located. See Note 8 for additional information about net sales, including net sales by product category.

Our two largest customers accounted for 18% and 13% of consolidated net sales in 2020; 19% and 13% of consolidated net sales in 2021; and 14% and 12% of consolidated net sales in 2022.

The net book value of property, plant, and equipment located outside the United States was $107 and $116 as of April 30, 2021 and 2022, respectively. Other long-lived assets located outside the United States are not significant.

We have concluded that our business constitutes a single operating segment.

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