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
									July 31,
															2025						2026
Sales															$	1,191					$	1,181
Excise taxes															267						270
Net sales															924						911
Cost of sales															372						362
Gross profit															552						549
Advertising expenses															120						114
Selling, general, and administrative expenses															177						185
Restructuring and other charges															12						—
Other expense (income), net															(17)						(2)
Operating income															260						252
Non-operating postretirement expense															19						1
Interest income															(4)						(3)
Interest expense															25						25
Income before income taxes															220						229
Income taxes															50						53
Net income															$	170					$	176
Earnings per share:
Basic															$	0.36					$	0.38
Diluted															$	0.36					$	0.38

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
									July 31,
															2025						2026
Net income															$	170					$	176
Other comprehensive income (loss), net of tax:
Currency translation adjustments															25						(23)
Cash flow hedge adjustments															2						6
Postretirement benefits adjustments															9						1
Net other comprehensive income (loss)															36						(16)
Comprehensive income															$	206					$	160

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, 2026						July 31, 2026
Assets
Cash and cash equivalents			$	308					$	301
Accounts receivable, less allowance for doubtful accounts of $6 at April 30 and $8 at July 31			832						822
Inventories:
Barreled whiskey			1,562						1,539
Finished goods			482						516
Work in process			414						424
Raw materials and supplies			85						95
Total inventories			2,543						2,574
Other current assets			308						261
Total current assets			3,991						3,958
Property, plant and equipment, net			1,116						1,100
Goodwill			1,522						1,513
Other intangible assets			943						936
Deferred tax assets			35						35
Other assets			287						283
Total assets			$	7,894					$	7,825
Liabilities
Accounts payable and accrued expenses			$	795					$	700
Dividends payable			—						106
Accrued income taxes			18						49
Short-term borrowings			68						358
Current portion of long-term debt			351						—
Total current liabilities			1,232						1,213
Long-term debt			2,083						2,083
Deferred tax liabilities			207						200
Accrued pension and other postretirement benefits			172						171
Other liabilities			180						189
Total liabilities			3,874						3,856
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			62						57
Retained earnings			4,998						4,962
Accumulated other comprehensive income (loss), net of tax			(108)						(124)
Treasury stock, at cost (25,828,000 and 25,668,000 shares at April 30 and July 31, respectively)			(1,004)						(998)
Total stockholders’ equity			4,020						3,969
Total liabilities and stockholders’ equity			$	7,894					$	7,825

See notes to the condensed consolidated financial statements.

BROWN-FORMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in millions)

			Three Months Ended
			July 31,
			2025						2026
Cash flows from operating activities:
Net income			$	170					$	176
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization			22						23
Stock-based compensation expense			4						4
Deferred income tax benefit			(8)						(9)
Change in fair value of contingent consideration			—						4
Other, net			3						3
Changes in assets and liabilities:
Accounts receivable			(13)						7
Inventories			(61)						(39)
Other current assets			15						42
Accounts payable and accrued expenses			(46)						(82)
Accrued income taxes			51						31
Other operating assets and liabilities			23						13
Cash provided by operating activities			160						173
Cash flows from investing activities:
Additions to property, plant, and equipment			(31)						(12)
Proceeds from sale of cooperage assets			33						—
Other, net			—						(1)
Cash provided by (used for) investing activities			2						(13)
Cash flows from financing activities:
Net change in short term borrowings			(30)						289
Repayment of long-term debt			—						(343)
Payments of withholding taxes related to stock-based awards			(1)						(3)
Dividends paid			(107)						(106)
Other, net			—						(1)
Cash used for financing activities			(138)						(164)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash			3						(3)
Net increase (decrease) in cash, cash equivalents, and restricted cash			27						(7)
Cash, cash equivalents, and restricted cash at beginning of period			463						327
Cash, cash equivalents, and restricted cash at end of period			490						320
Less: Restricted cash (included in other current assets) at end of period			(19)						(19)
Cash and cash equivalents at end of period			$	471					$	301
Supplemental information:
Non-cash additions to property, plant and equipment			$	2					$	4
Right-of-use assets obtained in exchange for new lease obligations			$	14					$	5

See notes to the condensed consolidated financial statements.

BROWN-FORMAN CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 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 2026 Form 10-K. We prepared the accompanying financial statements on a basis that is substantially consistent with the accounting principles applied in our 2026 Form 10-K.

Accounting standards not yet adopted. In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), 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 ASU 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
									July 31,
(Dollars in millions, except per share amounts)															2025						2026
Net income available to common stockholders															$	170					$	176
Share data (in thousands):
Basic average common shares outstanding															472,724						458,824
Dilutive effect of stock-based awards															239						694
Diluted average common shares outstanding															472,963						459,518
Basic earnings per share															$	0.36					$	0.38
Diluted earnings per share															$	0.36					$	0.38

We excluded common stock-based awards for approximately 4,108,000 shares and 4,308,000 shares from the calculation of diluted earnings per share for the three months ended July 31, 2025 and 2026, 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 LIFO method, or net realizable value. If the LIFO method had not been used, inventories at current cost would have been $702 million higher than reported as of April 30, 2026, and $727 million higher than reported as of July 31, 2026. 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 three months ended July 31, 2026:

(Dollars in millions)			Goodwill
Balance at April 30, 2026			$	1,522
Foreign currency translation adjustment			(9)
Balance at July 31, 2026			$	1,513

The following table presents details of our other intangible assets as of April 30, 2026 and July 31, 2026, respectively:

			April 30, 2026																		July 31, 2026
(Dollars in millions)			Gross Carrying Amount						Accumulated Amortization						Net Carrying Amount						Gross Carrying Amount						Accumulated Amortization						Net Carrying Amount
Definite-lived intangible assets:
Supply contract			$	88					$	(11)					$	77					$	88					$	(11)					$	77
Indefinite-lived intangible assets:
Trademarks and brand names			866												866						859												859
Total other intangible assets			$	954											$	943					$	947											$	936

Definite-lived intangible assets. The definite-lived supply contract intangible asset relates to a barrel supply agreement that we obtained as partial consideration for the sale of the Brown-Forman Cooperage facility and related assets on May 1, 2025 (refer to Note 5). Amortization related to the supply contract used in the purchase 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 seven years. There were no amounts of amortization capitalized into inventories during the three months ended July 31, 2025 and 2026.

Indefinite-lived intangible assets. The decrease in the indefinite-lived intangible assets from April 30, 2026 to July 31, 2026, was primarily driven by the impact of foreign exchange rates.

5. Restructuring and Other Charges

On January 13, 2025, our Board of Directors approved the restructuring initiative. The actions associated with the restructuring initiative were implemented in fiscal 2025 and substantially completed during fiscal 2026. We have now completed these actions and do not expect to incur any additional restructuring charges related to the restructuring initiative.

We incurred aggregate restructuring and other charges of $67 million in connection with these actions, consisting of $31 million in severance and other employee-related costs, $34 million in other restructuring charges primarily related to the Brown-Forman Cooperage facility closure and consulting services associated with the restructuring actions, and $2 million in other charges for cooperage asset impairments. In fiscal 2025, we also recorded $12 million in other charges associated with a special, one-time early retirement benefit and $3 million in charges to adjust the carrying amount 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 July 31, 2026, $56 million of the restructuring charges to be settled in cash have been paid.

The following table summarizes the restructuring and other charges recognized during the three months ended July 31, 2025 and 2026, respectively.

									Three Months Ended
									July 31,
(Dollars in millions)															2025						2026
Restructuring charges:
Severance and other employee-related costs															$	1					$	—
Other restructuring charges1															11						—
Total restructuring and other charges															$	12					$	—

1Primarily represents one-time costs related to the Brown-Forman Cooperage facility closure.

There was no significant activity in our accrued restructuring costs relating to costs paid during the three months ended July 31, 2026. As of July 31, 2026, our accrued restructuring costs consisted of $1 million of severance and other employee-related costs and $8 million of other restructuring charges.

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 counterparty (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.

6. 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 July 31, 2026.

7. Debt

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

(Principal and carrying amounts in millions)			April 30, 2026						July 31, 2026
1.20% senior notes, €300 principal amount, due July 7, 2026			$	351					$	—
2.60% senior notes, £300 principal amount, due July 7, 2028			404						403
4.75% senior notes, $650 principal amount, due April 15, 2033			645						645
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						248
4.50% senior notes, $500 principal amount, due July 15, 2045			490						491
Total long-term debt (including current portion)			2,434						2,083
Less: current portion			351						—
Total long-term debt			$	2,083					$	2,083

We repaid the €300 million principal amount of the 1.20% senior notes on their maturity date of July 7, 2026.

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

(Dollars in millions)			April 30, 2026						July 31, 2026
Commercial paper (par amount)			$68						$359
Average interest rate			3.96%						4.03%
Average remaining days to maturity			7						37

8. Stockholders’ Equity

The following table shows the changes in stockholders’ equity during the three months ended July 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

The following table shows the changes in stockholders’ equity during the three months ended July 31, 2026:

(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, 2026			$	25					$	47					$	62					$	4,998					$	(108)					$	(1,004)					$	4,020
Net income																					176																		176
Net other comprehensive income (loss)																											(16)												(16)
Declaration of cash dividends																					(212)																		(212)
Stock-based compensation expense															4																								4
Stock issued under compensation plans																																	6						6
Loss on issuance of treasury stock issued under compensation plans															(9)																								(9)
Balance at July 31, 2026			$	25					$	47					$	57					$	4,962					$	(124)					$	(998)					$	3,969

The following table shows the change in each component of AOCI, net of tax, during the three months ended July 31, 2026:

(Dollars in millions)			Currency Translation Adjustments						Cash Flow Hedge Adjustments						Postretirement Benefits Adjustments						Total AOCI
Balance at April 30, 2026			$	(1)					$	(5)					$	(102)					$	(108)
Net other comprehensive income (loss)			(23)						6						1						(16)
Balance at July 31, 2026			$	(24)					$	1					$	(101)					$	(124)

The following table shows the cash dividends declared per share on our Class A and Class B common stock during the three months ended July 31, 2026:

Declaration Date						Record Date						Payable Date						Amount per Share
May 28, 2026						June 10, 2026						July 1, 2026						$0.2310
July 23, 2026						September 3, 2026						October 1, 2026						$0.2310

9. Net Sales

The following table shows our net sales by geography1:

									Three Months Ended
									July 31,
(Dollars in millions)															2025						2026
United States															$	385					$	374
Emerging															224						247
Developed International															257						240
Travel Retail															44						44
Non-branded and bulk															14						6
Total															$	924					$	911

The following table shows our net sales by product category1:

									Three Months Ended
									July 31,
(Dollars in millions)															2025						2026
Whiskey															$	659					$	658
Ready-to-Drink															128						154
Tequila															62						54
Rest of portfolio															61						39
Non-branded and bulk															14						6
Total															$	924					$	911

1See “Definitions” for definitions of geographic and brand aggregations for items presented here.

10. 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 our other defined benefit plans is not presented due to immateriality.

									Three Months Ended
									July 31,
(Dollars in millions)															2025						2026
Service cost															$	3					$	3
Interest cost															8						8
Expected return on plan assets															(9)						(8)
Amortization of net actuarial loss															1						1
Settlement charge															19						—
Net cost															$	22					$	4

During the three months ended July 31, 2025, we recognized pension settlement charges of $19 million, triggered by fiscal year-to-date lump-sum payments under certain pension plans surpassing total annual service and interest cost for those plans.

11. 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 22.2%, which is greater than the U.S. federal statutory rate of 21.0% due to the tax effects of foreign operations and state taxes, offset by the beneficial impact of the foreign-derived deduction eligible income and tax credits.

The effective tax rate of 23.0% for the three months ended July 31, 2026, was higher than the expected tax rate of 22.2% on ordinary income for the full fiscal year ending April 30, 2027, primarily due to the impact of prior fiscal year true-ups in the current period. The effective tax rate of 23.0% for the three months ended July 31, 2026, was higher than the effective tax rate of 22.5% for the same period last year. The increase in our effective tax rate was driven primarily by the increased tax impact of foreign operations and higher state taxes, partially offset by the favorable year-over-year impact of prior fiscal year true-ups.

The OECD 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 three months ended July 31, 2026. 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 January 5, 2026, the OECD Inclusive Framework members approved changes to the model rules for the global minimum tax. We are monitoring the implementation of these rules into local laws; however, no material impact to the financial statements is expected for the fiscal year ending April 30, 2027.

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, 2027.

12. 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.

Cash flow hedges. We use currency derivative contracts, primarily forward 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 three 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. These currency derivatives related primarily to the euro, British pound, and Australian dollar and had a maximum term of 24 months at both April 30, 2026 and July 31, 2026.

At inception, we expect each currency derivative 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 currency derivative designated as a hedge is no longer highly effective, we discontinue hedge accounting for that derivative.

Net investment hedges. We also use foreign currency-denominated debt instruments and cross-currency swaps (entered into in the first quarter of fiscal 2027) to help manage our foreign currency exchange rate risk. We designate a portion of the debt instruments and cross-currency swaps 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 are also recorded in AOCI. The changes in value will be subsequently reclassified into earnings when the hedged net investment is either sold, liquidated, or substantially liquidated. We assess the effectiveness of our cross-currency swaps using the spot method. Under this method, the periodic interest settlements are recorded directly in earnings through interest expense, net. Accordingly, we recorded a negligible amount of interest income for the three months ended July 31, 2026.

Undesignated hedges. Some of our currency derivatives, including a portion of our cross-currency swaps and forward contracts, 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. The forward contracts had a maximum term of two months at both April 30, 2026 and July 31, 2026.

The following table presents the contractual amounts of our outstanding instruments:

(Dollars in millions)			Designation			April 30, 2026						July 31, 2026
Currency derivatives			Cash flow hedges			$	517					$	520
Foreign currency-denominated debt1			Net investment hedges			538						403
Currency derivatives2			Net investment hedges			—						131
Currency derivatives			Undesignated			69						291

1At April 30, 2026, includes £299 million, or approximately $404 million, of outstanding British pound-denominated debt and €115 million, or approximately $134 million, of outstanding euro-denominated debt designated as a net investment hedge. The euro-denominated debt matured in the first quarter of fiscal 2027 (refer to Note 7). At July 31, 2026, includes £299 million, or approximately $403 million, of outstanding British pound-denominated debt designated as a net investment hedge. This debt matures in fiscal 2029.

2At July 31, 2026, we had outstanding cross-currency swaps with a total notional value of €300 million, or approximately $341 million, of which $131 million is designated as a hedge of a portion of our net investment in certain European operations. These derivative contracts mature in fiscal 2033.

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
						July 31,
(Dollars in millions)			Classification			2025						2026
Derivative Instruments
Currency derivatives designated as cash flow hedges:
Net gain (loss) recognized in AOCI			n/a			$	—					$	4
Net gain (loss) reclassified from AOCI into earnings			Sales			(3)						(4)
Currency derivatives designated as net investment hedge:
Net gain (loss) recognized in AOCI			n/a			$	—					$	(2)
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			2						(4)
Non-Derivative Hedging Instruments
Foreign currency-denominated debt designated as net investment hedge:
Net gain (loss) recognized in AOCI			n/a			$	5					$	4
Total amounts presented in the accompanying condensed consolidated statements of operations for line items affected by the net gains (losses) shown above:
Sales						$	1,191					$	1,181
Other income (expense), net						17						2

We expect to reclassify $4 million of deferred net losses on cash flow hedges recorded in AOCI as of July 31, 2026, 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, 2026												July 31, 2026
(Dollars in millions)			Classification						Derivative Assets						Derivative Liabilities						Derivative Assets						Derivative Liabilities
Designated as cash flow hedges:
Currency derivatives			Accrued expenses						$	2					$	(15)					$	4					$	(11)
Currency derivatives			Other liabilities						1						(2)						1						(1)
Designated as net investment hedge:
Currency derivatives			Other liabilities						—						—						—						(2)
Not designated as hedges:
Currency derivatives			Other current assets						1						—						—						—
Currency derivatives			Other liabilities						—						—						—						(4)

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.

Cash flows from the settlement of our derivatives, including both undesignated hedges and those designated in hedge accounting relationships, appear on our statements of cash flows in the same categories 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 ISDA agreements that allow for net settlement of the derivative contracts. Also, we have established counterparty credit guidelines that we monitor regularly. Based on our most recent assessment, we consider our counterparty credit risk to be low.

Our derivative instruments are not subject to credit rating contingencies and no collateral is required or posted under these agreements. The aggregate fair value of our derivatives in a net liability position due to counterparties was $14 million at April 30, 2026, and $13 million at July 31, 2026. If we were required to settle the net liability position under these derivative instruments on July 31, 2026, we would have sufficient available liquidity on hand to satisfy this obligation.

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, 2026
Derivative assets			$	4					$	(3)					$	1					$	—					$	1
Derivative liabilities			(17)						3						(14)						—						(14)
July 31, 2026
Derivative assets			$	5					$	(5)					$	—					$	—					$	—
Derivative liabilities			(18)						5						(13)						—						(13)

Forward purchase contracts. 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.

13. Fair Value Measurements

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

			April 30, 2026												July 31, 2026
			Carrying						Fair						Carrying						Fair
(Dollars in millions)			Amount						Value						Amount						Value
Assets
Cash and cash equivalents			$	308					$	308					$	301					$	301
Currency derivatives, net			1						1						—						—
Liabilities
Currency derivatives, net			14						14						13						13
Contingent consideration			16						16						20						20
Short-term borrowings			68						68						358						358
Long-term debt (including current portion)			2,434						2,246						2,083						1,882

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, including forward contracts and cross-currency swaps, 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 net sales projections, 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 three months ended July 31, 2026:

(Dollars in millions)
Balance at April 30, 2026									$	16
Change in fair value1									4
Balance at July 31, 2026									$	20

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 5). We used the discounted cash flow model to determine the fair value of the supply contract as of the transaction date. This method required the use of assumptions, such as projected future market prices and discount rates. 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.

14. Other Comprehensive Income

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

			Three Months Ended																		Three Months Ended
			July 31, 2025																		July 31, 2026
(Dollars in millions)			Pre-Tax						Tax						Net						Pre-Tax						Tax						Net
Currency translation adjustments:
Net gain (loss) on currency translation			$	28					$	(3)					$	25					$	(23)					$	—					$	(23)
Reclassification to earnings			—						—						—						—						—						—
Other comprehensive income (loss), net			28						(3)						25						(23)						—						(23)
Cash flow hedge adjustments:
Net gain (loss) on hedging instruments			—						—						—						4						(1)						3
Reclassification to earnings1			3						(1)						2						4						(1)						3
Other comprehensive income (loss), net			3						(1)						2						8						(2)						6
Postretirement benefits adjustments:
Net actuarial gain (loss) and prior service cost			(8)						2						(6)						—						—						—
Reclassification to earnings2			20						(5)						15						1						—						1
Other comprehensive income (loss), net			12						(3)						9						1						—						1
Total other comprehensive income (loss), net			$	43					$	(7)					$	36					$	(14)					$	(2)					$	(16)

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.

15. Segment Information

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

Our CEO 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; 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.