Item 1. Financial Statements (Unaudited)

BROWN-FORMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars in millions, except per share amounts)

			Three Months Ended												Six Months Ended
			October 31,												October 31,
			2024						2025						2024						2025
Sales			$	1,376					$	1,336					$	2,587					$	2,527
Excise taxes			281						300						541						567
Net sales			1,095						1,036						2,046						1,960
Cost of sales			449						421						835						793
Gross profit			646						615						1,211						1,167
Advertising expenses			126						126						252						246
Selling, general, and administrative expenses			185						187						373						364
Restructuring and other charges			2						4						2						16
Other expense (income), net			(8)						(7)						(38)						(24)
Operating income			341						305						622						565
Non-operating postretirement expense			1						3						1						22
Interest income			(3)						(3)						(7)						(7)
Interest expense			32						26						64						51
Equity method investment income			(2)						—						(2)						—
Income before income taxes			313						279						566						499
Income taxes			55						55						113						105
Net income			$	258					$	224					$	453					$	394
Earnings per share:
Basic			$	0.55					$	0.47					$	0.96					$	0.83
Diluted			$	0.55					$	0.47					$	0.96					$	0.83

See notes to the condensed consolidated financial statements.

BROWN-FORMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in millions)

			Three Months Ended												Six Months Ended
			October 31,												October 31,
			2024						2025						2024						2025
Net income			$	258					$	224					$	453					$	394
Other comprehensive income (loss), net of tax:
Currency translation adjustments			(26)						9						(68)						34
Cash flow hedge adjustments			(1)						2						(3)						4
Postretirement benefits adjustments			—						3						1						12
Net other comprehensive income (loss)			(27)						14						(70)						50
Comprehensive income			$	231					$	238					$	383					$	444

See notes to the condensed consolidated financial statements.

BROWN-FORMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in millions, except per share amounts)

			April 30, 2025						October 31, 2025
Assets
Cash and cash equivalents			$	444					$	319
Accounts receivable, less allowance for doubtful accounts of $7 at April 30 and $5 at October 31			830						1,042
Inventories:
Barreled whiskey			1,567						1,572
Finished goods			476						501
Work in process			378						389
Raw materials and supplies			90						97
Total inventories			2,511						2,559
Assets held for sale			121						—
Other current assets			289						291
Total current assets			4,195						4,211
Property, plant and equipment, net			1,095						1,101
Goodwill			1,505						1,510
Other intangible assets			981						1,075
Deferred tax assets			47						48
Other assets			263						276
Total assets			$	8,086					$	8,221
Liabilities
Accounts payable and accrued expenses			$	741					$	802
Accrued income taxes			27						39
Short-term borrowings			312						228
Current portion of long-term debt			—						347
Total current liabilities			1,080						1,416
Long-term debt			2,421						2,072
Deferred tax liabilities			241						224
Accrued pension and other postretirement benefits			164						172
Other liabilities			187						203
Total liabilities			4,093						4,087
Commitments and contingencies
Stockholders’ Equity
Common stock:
Class A, voting, $0.15 par value (170,000,000 shares authorized; 170,000,000 shares issued)			25						25
Class B, nonvoting, $0.15 par value (400,000,000 shares authorized; 314,532,000 shares issued)			47						47
Additional paid-in capital			36						42
Retained earnings			4,710						4,890
Accumulated other comprehensive income (loss), net of tax			(220)						(170)
Treasury stock, at cost (11,863,000 and 15,299,000 shares at April 30 and October 31, respectively)			(605)						(700)
Total stockholders’ equity			3,993						4,134
Total liabilities and stockholders’ equity			$	8,086					$	8,221

See notes to the condensed consolidated financial statements.

BROWN-FORMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in millions)

			Six Months Ended
			October 31,
			2024						2025
Cash flows from operating activities:
Net income			$	453					$	394
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization			44						44
Stock-based compensation expense			13						12
Deferred income tax benefit			(12)						(27)
Change in fair value of contingent consideration			5						1
Equity method investment income			(2)						—
Other, net			(10)						4
Changes in assets and liabilities:
Accounts receivable			(194)						(204)
Inventories			(76)						(54)
Other current assets			(2)						(1)
Accounts payable and accrued expenses			(70)						63
Accrued income taxes			6						13
Other operating assets and liabilities			(26)						47
Cash provided by operating activities			129						292
Cash flows from investing activities:
Additions to property, plant, and equipment			(72)						(56)
Proceeds from sale of cooperage assets			51						33
Cash used for investing activities			(21)						(23)
Cash flows from financing activities:
Net change in short term borrowings			83						(84)
Payments of withholding taxes related to stock-based awards			(2)						(1)
Acquisition of treasury stock			—						(99)
Dividends paid			(206)						(214)
Other, net			(4)						(1)
Cash used for financing activities			(129)						(399)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash			(9)						5
Net decrease in cash, cash equivalents, and restricted cash			(30)						(125)
Cash, cash equivalents, and restricted cash at beginning of period			456						463
Cash, cash equivalents, and restricted cash at end of period			426						338
Less: Restricted cash (included in other current assets) at end of period			(10)						(19)
Cash and cash equivalents at end of period			$	416					$	319
Supplemental information:
Non-cash additions to property, plant and equipment			$	8					$	5
Right-of-use assets obtained in exchange for new lease obligations			$	20					$	20

See notes to the condensed consolidated financial statements.

BROWN-FORMAN CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In these notes, “we,” “us,” “our,” “Brown-Forman,” and the “Company” refer to Brown-Forman Corporation and its consolidated subsidiaries, collectively.

1. Condensed Consolidated Financial Statements

We prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the U.S. Securities and Exchange Commission for interim financial information. In accordance with those rules and regulations, we condensed or omitted certain information and disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP). In our opinion, the accompanying financial statements include all adjustments, consisting only of normal recurring adjustments (unless otherwise indicated), necessary for a fair statement of our financial results for the periods presented in these financial statements. The results for interim periods are not necessarily indicative of future or annual results.

We suggest that you read these condensed financial statements together with the financial statements and footnotes included in our Annual Report on Form 10-K for the fiscal year ended April 30, 2025 (2025 Form 10-K). We prepared the accompanying financial statements on a basis that is substantially consistent with the accounting principles applied in our 2025 Form 10-K.

Accounting standards not yet adopted. In December 2023, the Financial Accounting Standards Board (FASB) issued an updated accounting standard requiring additional annual disclosures about income taxes, primarily related to the rate reconciliation and information about income taxes paid. We are required to adopt the new guidance for the annual period ending April 30, 2026. The update can be applied either prospectively or retrospectively. We are still finalizing our assessment of the additional disclosure requirements and do not expect the adoption to have a material impact on our financial position or results of operations.

In November 2024, the FASB issued an updated accounting standard requiring disaggregation, in the notes to the financial statements, of expense line items in the income statement that include certain categories of expenses. We are required to adopt the updated standard for annual disclosures for the period ending April 30, 2028, and for interim disclosures within fiscal 2029, with earlier adoption permitted. The update can be applied either prospectively or retrospectively. We are currently evaluating the impact that adopting this accounting standards update will have on our disclosures.

2. Earnings Per Share

We calculate basic earnings per share by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share further includes the dilutive effect of stock-based compensation awards. We calculate that dilutive effect using the “treasury stock method” (as defined by GAAP).

The following table presents information concerning basic and diluted earnings per share:

			Three Months Ended												Six Months Ended
			October 31,												October 31,
(Dollars in millions, except per share amounts)			2024						2025						2024						2025
Net income available to common stockholders			$	258					$	224					$	453					$	394
Share data (in thousands):
Basic average common shares outstanding			472,660						471,873						472,647						472,233
Dilutive effect of stock-based awards			397						734						350						487
Diluted average common shares outstanding			473,057						472,607						472,997						472,720
Basic earnings per share			$	0.55					$	0.47					$	0.96					$	0.83
Diluted earnings per share			$	0.55					$	0.47					$	0.96					$	0.83

We excluded common stock-based awards for approximately 3,018,000 shares and 4,866,000 shares from the calculation of diluted earnings per share for the three months ended October 31, 2024 and 2025, respectively. We excluded common stock-based awards for approximately 2,800,000 shares and 4,487,000 shares from the calculation of diluted earnings per share for the

six months ended October 31, 2024 and 2025, respectively. We excluded those awards because they were not dilutive for those periods under the treasury stock method.

3. Inventories

We value some of our consolidated inventories, including most of our U.S. inventories, at the lower of cost, using the last-in, first-out (LIFO) method, or market value. If the LIFO method had not been used, inventories at current cost would have been $600 million higher than reported as of April 30, 2025, and $655 million higher than reported as of October 31, 2025. Changes in the LIFO valuation reserve for interim periods are based on an allocation of the projected change for the entire fiscal year, recognized proportionately over the remainder of the fiscal year.

4. Goodwill and Other Intangible Assets

The following table shows the changes in goodwill (which includes no accumulated impairment losses) during the six months ended October 31, 2025:

(Dollars in millions)			Goodwill
Balance at April 30, 2025			$	1,505
Foreign currency translation adjustment			5
Balance at October 31, 2025			$	1,510

The following table presents details of our other intangible assets as of April 30, 2025 and October 31, 2025, respectively:

			April 30, 2025												October 31, 2025
(Dollars in millions)			Gross Carrying Amount												Net Carrying Amount						Gross Carrying Amount												Net Carrying Amount
Definite-lived intangible assets:
Supply contract			$	—											$	—					$	88											$	88
Indefinite-lived intangible assets:
Trademarks and brand names			981												981						987												987
Total other intangible assets			$	981											$	981					$	1,075											$	1,075

Net carrying amount represents the gross carrying amount net of accumulated amortization. During the first quarter of fiscal 2026, we recognized a definite-lived supply contract intangible asset of $88 million. This amount relates to a barrel supply agreement and was obtained as partial consideration for the sale of the Brown-Forman Cooperage facility and related assets on May 1, 2025 (refer to Note 6). We determined the estimated fair value of the supply contract using a discounted cash flow model. This method requires the use of assumptions, such as projected future market prices and discount rates (refer to Note 14). Amortization related to the supply contract used in the production of barrels will be capitalized into inventories. The supply contract will be amortized based on the actual realization of the benefit over the term of the contract. We expect to realize the benefit over six years. There were no amounts of amortization recorded for the three months and six months ended October 31, 2025.

The increase in the indefinite-lived intangible assets from April 30, 2025 to October 31, 2025, was primarily driven by the impact of foreign exchange rates.

5. Equity Method Investments

On April 30, 2024, as partial consideration for the sale of the Sonoma-Cutrer wine business to The Duckhorn Portfolio, Inc. (Duckhorn), we obtained a 21.4% ownership interest in the common stock of Duckhorn. During the three months and six months ended October 31, 2024, we recognized $2 million of equity method investment income for our share of Duckhorn’s earnings.

Also, effective April 30, 2024, we entered into a transition services agreement (TSA) with Duckhorn related to the sale of the Sonoma-Cutrer wine business. Our cost of sales for the three months and six months ended October 31, 2024, included $2 million and $24 million, respectively, for Sonoma-Cuter products purchased from Duckhorn under the TSA. Fees earned for

transition services provided to Duckhorn under the TSA were immaterial. Services related to the TSA ended on or about August 31, 2024.

On October 6, 2024, Duckhorn entered into a definitive agreement pursuant to which Duckhorn would be acquired by private equity funds managed by Butterfly Equity. The transaction was completed on December 24, 2024. Upon completion of the transaction, we received cash of $350 million in exchange for our 21.4% ownership interest in Duckhorn. As a result of the transaction, we recognized a $78 million gain on sale of our investment in Duckhorn during the three months ended January 31, 2025.

Our other equity method investments, which are included in other assets in the accompanying condensed consolidated balance sheets, are immaterial.

6. Restructuring and Other Charges

On January 13, 2025, our Board of Directors approved a plan to reduce our structural cost base and realign resources toward future sources of growth (Restructuring Initiative). This included reducing our worldwide headcount by approximately 12% and closing our Louisville-based Brown-Forman Cooperage. These actions were substantially implemented in fiscal 2025, with the remainder to be completed by the end of fiscal 2026.

We expect to incur aggregate restructuring charges of approximately $64 to $70 million in connection with these actions, consisting primarily of approximately $28 to $30 million in severance and other employee-related costs and approximately $36 to $40 million in other restructuring costs, including costs related to the Louisville-based Brown-Forman Cooperage facility closure and consulting services associated with the restructuring actions. Through October 31, 2025, we recognized $64 million of restructuring and other charges associated with these actions, comprising $62 million in restructuring charges and $2 million in other charges for asset impairments. We also recorded $3 million in charges in fiscal 2025 to adjust the carrying value of certain Brown-Forman Cooperage inventory to the amount we expected to realize upon disposal (included in cost of sales in our consolidated statement of operations). As of October 31, 2025, $48 million of the charges to be settled in cash have been paid.

The following table summarizes the restructuring and other charges recognized during the three months and six months ended October 31, 2024, and 2025, respectively.

			Three Months Ended												Six Months Ended
			October 31,												October 31,
(Dollars in millions)			2024						2025						2024						2025
Restructuring charges:
Severance and other employee-related costs			$	—					$	3					$	—					$	4
Other restructuring charges1			2						1						2						12
Total restructuring and other charges			$	2					$	4					$	2					$	16

1Primarily represents one-time costs related to the cooperage facility closure, consulting services, and other miscellaneous exit costs.

The charges we currently expect to incur in connection with the Restructuring Initiative are subject to a number of assumptions and risks, and actual results may differ materially. We may also incur other material charges not currently contemplated due to events that may occur as a result of, or in connection with, the Restructuring Initiative.

The following table summarizes the activity in our accrued restructuring costs:

(Dollars in millions)			Severance and Other Employee-Related Costs						Other Restructuring Charges						Total
Balance at April 30, 2025			$	13					$	6					$	19
Costs incurred and charged to expense			4						12						16
Costs paid or otherwise settled			(14)						(7)						(21)
Balance at October 31, 2025			$	3					$	11					$	14

Additionally, on May 1, 2025, we completed the sale of the Brown-Forman Cooperage facility and related assets for $33 million in cash and $88 million in non-cash consideration related to a supply contract with the sellers (refer to Note 4). The carrying amount of the assets included in the sale was $121 million, consisting of $33 million in property, plant, and equipment, net, and $88 million in inventories. As a result of the sale, we recognized an immaterial pre-tax gain during the first quarter of fiscal 2026.

7. Contingencies

We operate in a litigious environment, and we are sued in the normal course of business. Sometimes plaintiffs seek substantial damages. Significant judgment is required in predicting the outcome of these suits and claims, many of which take years to adjudicate. We accrue estimated costs for a contingency when we believe that a loss is probable and we can make a reasonable estimate of the loss, and then adjust the accrual as appropriate to reflect changes in facts and circumstances. We do not believe it is reasonably possible that these existing loss contingencies, individually or in the aggregate, would have a material adverse effect on our financial position, results of operations, or liquidity. No material accrued loss contingencies were recorded as of October 31, 2025.

8. Debt

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

(Principal and carrying amounts in millions)			April 30, 2025						October 31, 2025
1.20% senior notes, €300 principal amount, due July 7, 2026			342						347
2.60% senior notes, £300 principal amount, due July 7, 2028			401						393
4.75% senior notes, $650 principal amount, due April 15, 2033			644						644
4.00% senior notes, $300 principal amount, due April 15, 2038			296						296
3.75% senior notes, $250 principal amount, due January 15, 2043			248						249
4.50% senior notes, $500 principal amount, due July 15, 2045			490						490
			2,421						2,419
Less current portion			—						347
			$	2,421					$	2,072

Our short-term borrowings consisted of borrowings under our commercial paper program, as follows:

(Dollars in millions)			April 30, 2025						October 31, 2025
Commercial paper (par amount)			$313						$228
Average interest rate			4.64%						4.18%
Average remaining days to maturity			12						9

9. Stockholders’ Equity

The following table shows the changes in stockholders’ equity by quarter during the six months ended October 31, 2024:

(Dollars in millions)			Class A Common Stock						Class B Common Stock						Additional Paid-in Capital						Retained Earnings						AOCI						Treasury Stock						Total
Balance at April 30, 2024			$	25					$	47					$	13					$	4,261					$	(221)					$	(608)					$	3,517
Net income																					195																		195
Net other comprehensive income (loss)																											(43)												(43)
Declaration of cash dividends																					(206)																		(206)
Stock-based compensation expense															4																								4
Stock issued under compensation plans																																	3						3
Loss on issuance of treasury stock issued under compensation plans															(5)																								(5)
Balance at July 31, 2024			25						47						12						4,250						(264)						(605)						3,465
Net income																					258																		258
Net other comprehensive income (loss)																											(27)												(27)
Stock-based compensation expense															9																								9
Balance at October 31, 2024			$	25					$	47					$	21					$	4,508					$	(291)					$	(605)					$	3,705

The following table shows the changes in stockholders’ equity by quarter during the six months ended October 31, 2025:

(Dollars in millions)			Class A Common Stock						Class B Common Stock						Additional Paid-in Capital						Retained Earnings						AOCI						Treasury Stock						Total
Balance at April 30, 2025			$	25					$	47					$	36					$	4,710					$	(220)					$	(605)					$	3,993
Net income																					170																		170
Net other comprehensive income (loss)																											36												36
Declaration of cash dividends																					(214)																		(214)
Stock-based compensation expense															4																								4
Stock issued under compensation plans																																	5						5
Loss on issuance of treasury stock issued under compensation plans															(6)																								(6)
Balance at July 31, 2025			25						47						34						4,666						(184)						(600)						3,988
Net income																					224																		224
Net other comprehensive income (loss)																											14												14
Acquisition of treasury stock																																	(100)						(100)
Stock-based compensation expense															8																								8
Balance at October 31, 2025			$	25					$	47					$	42					$	4,890					$	(170)					$	(700)					$	4,134

The following table shows the change in each component of accumulated other comprehensive income (AOCI), net of tax, during the six months ended October 31, 2025:

(Dollars in millions)			Currency Translation Adjustments						Cash Flow Hedge Adjustments						Postretirement Benefits Adjustments						Total AOCI
Balance at April 30, 2025			$	(92)					$	(5)					$	(123)					$	(220)
Net other comprehensive income (loss)			34						4						12						50
Balance at October 31, 2025			$	(58)					$	(1)					$	(111)					$	(170)

The following table shows the cash dividends declared per share on our Class A and Class B common stock during the six months ended October 31, 2025:

Declaration Date						Record Date						Payable Date						Amount per Share
May 22, 2025						June 9, 2025						July 1, 2025						$0.2265
July 24, 2025						September 3, 2025						October 1, 2025						$0.2265

On November 19, 2025, our Board of Directors increased the quarterly cash dividend on our Class A and Class B common stock from $0.2265 to $0.2310 per share. The quarterly cash dividend is payable on January 2, 2026, to stockholders of record on December 5, 2025.

10. Net Sales

The following table shows our net sales by geography:

			Three Months Ended												Six Months Ended
			October 31,												October 31,
(Dollars in millions)			2024						2025						2024						2025
United States			$	489					$	445					$	908					$	830
Developed International1			289						287						569						544
Emerging2			242						248						427						472
Travel Retail3			45						48						86						92
Non-branded and bulk4			30						8						56						22
Total			$	1,095					$	1,036					$	2,046					$	1,960

1Represents net sales of branded products to “advanced economies” as defined by the International Monetary Fund (IMF), excluding the United States. Our top developed international markets are Germany, Australia, the United Kingdom, France, and Canada.

2Represents net sales of branded products to “emerging and developing economies” as defined by the IMF. Our top emerging markets are Mexico, Poland, Brazil, and Türkiye.

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 services, and non-branded bulk whiskey, regardless of customer location.

The following table shows our net sales by product category:

			Three Months Ended												Six Months Ended
			October 31,												October 31,
(Dollars in millions)			2024						2025						2024						2025
Whiskey1			$	769					$	771					$	1,428					$	1,430
Ready-to-Drink2			133						138						254						266
Tequila3			72						67						134						129
Non-branded and bulk4			30						8						56						22
Rest of portfolio5			91						52						174						113
Total			$	1,095					$	1,036					$	2,046					$	1,960

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

2Includes the Jack Daniel’s ready-to-drink (RTD) and ready-to-pour (RTP) products, New Mix, and other RTD/RTP products.

3Includes el Jimador, the Herradura family of brands, and other tequilas.

4Includes net sales of used barrels, contract bottling services, and non-branded bulk whiskey.

5Includes Korbel California Champagnes and Korbel Brandy (the sales, marketing, and distribution relationship ended on June 30, 2025), Diplomático, Chambord, Gin Mare, Sonoma-Cutrer (which was divested on April 30, 2024), Finlandia Vodka (which was divested on November 1, 2023), Fords Gin, and other agency brands (brands we do not own, but sell in certain markets).

11. Pension and Other Postretirement Benefits

The following table shows the components of the net cost recognized for our U.S. pension plans. Similar information for other defined benefit plans is not presented due to immateriality.

			Three Months Ended												Six Months Ended
			October 31,												October 31,
(Dollars in millions)			2024						2025						2024						2025
Service cost			$	4					$	4					$	8					$	7
Interest cost			9						7						18						15
Expected return on plan assets			(10)						(8)						(19)						(17)
Amortization of:
Prior service cost			—						1						—						1
Net actuarial loss			1						1						1						2
Settlement charge			—						2						—						21
Net cost			$	4					$	7					$	8					$	29

During the three months and six months ended October 31, 2025, we recognized pension settlement charges of $2 million and $21 million, respectively, triggered by fiscal year-to-date lump-sum payments under certain pension plans surpassing total annual service and interest cost for those plans.

12. Income Taxes

Our consolidated interim effective tax rate is based on our expected annual operating income, statutory tax rates, and income tax laws in the various jurisdictions where we operate. Significant or unusual items, including adjustments to accruals for tax uncertainties, are recognized in the fiscal quarter in which the related event or a change in judgment occurs. The effective tax rate on ordinary income for the full fiscal year is expected to be 21.1%, which is greater than the U.S. federal statutory rate of 21.0%, due to the impact of state taxes and the tax effects of foreign operations, mostly offset by the beneficial impact of the foreign-derived intangible income deduction.

The effective tax rate of 21.2% for the six months ended October 31, 2025, was higher than the expected tax rate of 21.1% on ordinary income for the full fiscal year ending April 30, 2026, primarily due to the unfavorable impact of prior fiscal year true-ups, partially offset by the beneficial impact of tax rate changes in the current period. The effective tax rate of 21.2% for the six months ended October 31, 2025, was higher than the effective tax rate of 20.1% for the same period last year. The increase in our effective tax rate was driven primarily by the unfavorable year-over-year impact of prior fiscal year true-ups, which was partially offset by lower state taxes and the absence of valuation allowance increases in the current period compared to the prior period.

The OECD (Organization for Economic Co-operation and Development) 15% global minimum tax under the Pillar Two Model Rules, which is now effective in countries with enacted legislation, did not materially impact our financial results in the six months ended October 31, 2025. We will continue to evaluate the impact in future periods as previously-enacting countries issue related guidance and additional countries consider adoption of the global minimum tax rules.

On July 4, 2025, the One Big Beautiful Bill Act was signed into law in the United States, which encompasses a broad range of tax reform provisions. We do not expect this to have a material impact on our estimated annual effective tax rate for the fiscal year ending April 30, 2026.

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 rate risk that we cannot mitigate internally by using netting strategies. We designate most of these contracts as cash flow hedges of forecasted transactions (expected to occur within two years). We record all changes in the fair value of cash flow hedges in AOCI until the underlying hedged transaction occurs, at which time we reclassify that amount to earnings.

Some of our currency derivatives are not designated as hedges because we use them to partially offset the immediate earnings impact of changes in foreign currency exchange rates on existing assets or liabilities. We immediately recognize the change in fair value of these contracts in earnings.

We had outstanding currency derivatives, related primarily to our euro, British pound, Australian dollar, and Mexican peso exposures, with notional amounts for all hedged currencies totaling $463 million at April 30, 2025, and $623 million at October 31, 2025. The maximum term of outstanding derivative contracts was 24 months at both April 30, 2025 and October 31, 2025.

We also use foreign currency-denominated debt instruments to help manage our foreign currency exchange rate risk. We designate a portion of those debt instruments as net investment hedges, which are intended to mitigate foreign currency exposure related to non-U.S. dollar net investments in certain foreign subsidiaries. Any change in value of the designated portion of the hedging instruments is recorded in AOCI, offsetting the foreign currency translation adjustment of the related net investments that is also recorded in AOCI. The amount of foreign currency-denominated debt instruments designated as net investment hedges was $531 million at April 30, 2025, and $526 million at October 31, 2025.

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 assess the effectiveness of our hedges continually. If we determine that any financial instruments designated as hedges are no longer highly effective, we discontinue hedge accounting for those instruments.

We use forward purchase contracts with suppliers to protect against corn price volatility. We expect to take physical delivery of the corn underlying each contract and use it for production over a reasonable period of time. Accordingly, we account for these contracts as normal purchases rather than as derivative instruments.

The following table presents the pre-tax impact that changes in the fair value of our derivative instruments and non-derivative hedging instruments had on AOCI and earnings:

						Three Months Ended
						October 31,
(Dollars in millions)			Classification			2024						2025
Derivative Instruments
Currency derivatives designated as cash flow hedges:
Net gain (loss) recognized in AOCI			n/a			$	(2)					$	(1)
Net gain (loss) reclassified from AOCI into earnings			Sales			(1)						(4)
Currency derivatives not designated as hedging instruments:
Net gain (loss) recognized in earnings			Sales			$	1					$	(1)
Net gain (loss) recognized in earnings			Other income (expense), net			(2)						1
Non-Derivative Hedging Instruments
Foreign currency-denominated debt designated as net investment hedge:
Net gain (loss) recognized in AOCI			n/a			$	(6)					$	3
Total amounts presented in the accompanying condensed consolidated statements of operations for line items affected by the net gains (losses) shown above:
Sales						$	1,376					$	1,336
Other income (expense), net						8						7

						Six Months Ended
						October 31,
(Dollars in millions)			Classification			2024						2025
Derivative Instruments
Currency derivatives designated as cash flow hedges:
Net gain (loss) recognized in AOCI			n/a			$	(1)					$	(1)
Net gain (loss) reclassified from AOCI into earnings			Sales			3						(7)
Currency derivatives not designated as hedging instruments:
Net gain (loss) recognized in earnings			Sales			$	—					$	(1)
Net gain (loss) recognized in earnings			Other income (expense), net			(6)						3
Non-Derivative Hedging Instruments
Foreign currency-denominated debt designated as net investment hedge:
Net gain (loss) recognized in AOCI			n/a			$	(15)					$	8
Total amounts presented in the accompanying condensed consolidated statements of operations for line items affected by the net gains (losses) shown above:
Sales						$	2,587					$	2,527
Other income (expense), net						38						24

We expect to reclassify $5 million of deferred net losses on cash flow hedges recorded in AOCI as of October 31, 2025 to earnings during the next 12 months. This reclassification would offset the anticipated earnings impact of the underlying hedged exposures. The actual amounts that we ultimately reclassify to earnings will depend on the exchange rates in effect when the underlying hedged transactions occur.

The following table presents the fair values of our derivative instruments:

									April 30, 2025												October 31, 2025
(Dollars in millions)			Classification						Derivative Assets						Derivative Liabilities						Derivative Assets						Derivative Liabilities
Designated as cash flow hedges:
Currency derivatives			Other current assets						$	—					$	—					$	2					$	(1)
Currency derivatives			Other assets						—						—						1						—
Currency derivatives			Accrued expenses						2						(11)						1						(9)
Currency derivatives			Other liabilities						—						(3)						—						(1)
Not designated as hedges:
Currency derivatives			Other current assets						2						—						—						—

The fair values reflected in the above table are presented on a gross basis. However, as discussed further below, the fair values of those instruments subject to net settlement agreements are presented on a net basis in our balance sheets.

In our statements of cash flows, we classify cash flows related to cash flow hedges in the same category as the cash flows from the hedged items.

Credit risk. We are exposed to credit-related losses if the counterparties to our derivative contracts default. This credit risk is limited to the fair value of the contracts. To manage this risk, we contract only with major financial institutions that have investment-grade credit ratings and with whom we have standard International Swaps and Derivatives Association (ISDA) agreements that allow for net settlement of the derivative contracts. Also, we have established counterparty credit guidelines that we monitor regularly, and we monetize contracts when we believe it is warranted. Because of these safeguards, we believe we have no derivative positions that warrant credit valuation adjustments.

Our derivative instruments require us to maintain a specific level of creditworthiness, which we have maintained. If our creditworthiness were to fall below that level, then the counterparties to our derivative instruments could request immediate payment or collateralization for derivative instruments in net liability positions. The aggregate fair value of our derivatives with

creditworthiness requirements that were in a net liability position was $12 million at April 30, 2025, and $9 million at October 31, 2025.

Offsetting. As noted above, our derivative contracts are governed by ISDA agreements that allow for net settlement of derivative contracts with the same counterparty. It is our policy to present the fair values of current derivatives (that is, those with a remaining term of 12 months or less) with the same counterparty on a net basis in our balance sheets. Similarly, we present the fair values of noncurrent derivatives with the same counterparty on a net basis. We do not net current derivatives with noncurrent derivatives in our balance sheets.

The following table summarizes the gross and net amounts of our derivative contracts:

(Dollars in millions)			Gross Amounts of Recognized Assets (Liabilities)						Gross Amounts Offset in Balance Sheet						Net Amounts Presented in Balance Sheet						Gross Amounts Not Offset in Balance Sheet						Net Amounts
April 30, 2025
Derivative assets			$	4					$	(2)					$	2					$	—					$	2
Derivative liabilities			(14)						2						(12)						—						(12)
October 31, 2025
Derivative assets			4						(2)						2						—						2
Derivative liabilities			(11)						2						(9)						—						(9)

No cash collateral was received or pledged related to our derivative contracts as of April 30, 2025, or October 31, 2025.

14. Fair Value Measurements

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

			April 30, 2025												October 31, 2025
			Carrying						Fair						Carrying						Fair
(Dollars in millions)			Amount						Value						Amount						Value
Assets
Cash and cash equivalents			$	444					$	444					$	319					$	319
Currency derivatives, net			2						2						2						2
Liabilities
Currency derivatives, net			12						12						9						9
Contingent consideration			31						31						32						32
Short-term borrowings			312						312						228						228
Long-term debt (including current portion)			2,421						2,255						2,419						2,305

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.

The contingent consideration liability reflects the estimated fair value of the contingent future cash payments of up to €90 million to the sellers of the Gin Mare brand under an “earn-out” provision of the acquisition agreement (Gin Mare was acquired on November 3, 2022). Any contingent consideration earned by the sellers will become payable in cash upon exercise by the sellers of the right to receive the payment, which can occur no later than July 2027. The amount payable will depend on the achievement of net sales targets for Gin Mare for the latest fiscal year completed prior to the date of exercise by the sellers. The possible payments range from zero to €90 million.

We determine the fair value of our contingent consideration liability using a Monte Carlo simulation model, which requires the use of Level 3 inputs, such as projected future net sales, discount rates, and volatility rates. Changes in any of these Level 3 inputs could result in material changes to the fair value of the contingent consideration and could materially impact the amount of noncash expense (or income) recorded each reporting period.

The following table shows the changes in our contingent consideration liability during the six months ended October 31, 2025:

(Dollars in millions)
Balance at April 30, 2025									$	31
Change in fair value1									1
Balance at October 31, 2025									$	32

1Classified as “other expense (income), net” in the accompanying condensed consolidated statement of operations.

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 the first quarter of fiscal 2026, we recognized a supply contract intangible asset of $88 million, obtained as partial consideration for the sale of the Brown-Forman Cooperage facility and related assets on May 1, 2025 (refer to Note 6). We used the discounted cash flow model to determine the fair value of the supply contract as of the transaction date. The fair value measurement determined using this model 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. Other Comprehensive Income

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

			Three Months Ended																		Three Months Ended
			October 31, 2024																		October 31, 2025
(Dollars in millions)			Pre-Tax						Tax						Net						Pre-Tax						Tax						Net
Currency translation adjustments:
Net gain (loss) on currency translation			$	(27)					$	1					$	(26)					$	9					$	—					$	9
Reclassification to earnings			—						—						—						—						—						—
Other comprehensive income (loss), net			(27)						1						(26)						9						—						9
Cash flow hedge adjustments:
Net gain (loss) on hedging instruments			(2)						—						(2)						(1)						—						(1)
Reclassification to earnings1			1						—						1						4						(1)						3
Other comprehensive income (loss), net			(1)						—						(1)						3						(1)						2
Postretirement benefits adjustments:
Net actuarial gain (loss) and prior service cost			—						—						—						(1)						—						(1)
Reclassification to earnings2			—						—						—						4						—						4
Other comprehensive income (loss), net			—						—						—						3						—						3
Total other comprehensive income (loss), net			$	(28)					$	1					$	(27)					$	15					$	(1)					$	14
			Six Months Ended																		Six Months Ended
			October 31, 2024																		October 31, 2025
(Dollars in millions)			Pre-Tax						Tax						Net						Pre-Tax						Tax						Net
Currency translation adjustments:
Net gain (loss) on currency translation			$	(71)					$	3					$	(68)					$	37					$	(3)					$	34
Reclassification to earnings			—						—						—						—						—						—
Other comprehensive income (loss), net			(71)						3						(68)						37						(3)						34
Cash flow hedge adjustments:
Net gain (loss) on hedging instruments			(1)						—						(1)						(1)						—						(1)
Reclassification to earnings1			(3)						1						(2)						7						(2)						5
Other comprehensive income (loss), net			(4)						1						(3)						6						(2)						4
Postretirement benefits adjustments:
Net actuarial gain (loss) and prior service cost			—						—						—						(9)						2						(7)
Reclassification to earnings2			1						—						1						24						(5)						19
Other comprehensive income (loss), net			1						—						1						15						(3)						12
Total other comprehensive income (loss), net			$	(74)					$	4					$	(70)					$	58					$	(8)					$	50

1Pre-tax amount for each period is classified as sales in the accompanying condensed consolidated statements of operations.

2Pre-tax amount for each period is classified as non-operating postretirement expense in the accompanying condensed consolidated statements of operations.

16. Segment Information

Our business constitutes a single operating segment, which derives its revenues predominantly from global sales of beverage alcohol consumer products.

Our Chief Executive Officer is our chief operating decision maker, who manages business operations, evaluates performance, and allocates resources based on segment metrics such as net sales, gross profit, operating income, and net income. Significant segment expenses include cost of sales, advertising expenses, and selling, general, and administrative expenses. Other segment items include (when applicable): restructuring and other charges; other expense (income), net; non-operating postretirement expense; interest income; interest expense; equity method investment income; and income taxes. The amount of each of these segment measures is the same as the consolidated amount presented in the accompanying condensed consolidated statements of operations.

The segment’s assets, expenditures for additions to long-lived assets, and depreciation and amortization are the same as the consolidated amounts presented in the accompanying condensed consolidated balance sheets and condensed consolidated statements of cash flows.