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United States
Securities and Exchange Commission
Washington, D.C. 20549

FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________

Commission File No. 001-00123

Brown-Forman Corporation
(Exact name of Registrant as specified in its Charter)
Delaware61-0143150
(State or other jurisdiction of(IRS Employer
incorporation or organization)Identification No.)
 
850 Dixie Highway 
Louisville,Kentucky40210
(Address of principal executive offices)(Zip Code)
(502) 585-1100
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock (voting), $0.15 par valueBFANew York Stock Exchange
Class B Common Stock (nonvoting), $0.15 par valueBFBNew York Stock Exchange
1.200% Notes due 2026BF26New York Stock Exchange
2.600% Notes due 2028BF28New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ   No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes þ   No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes     No  
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: February 28, 2021
Class A Common Stock (voting), $0.15 par value169,109,992 
Class B Common Stock (nonvoting), $0.15 par value309,585,407 




BROWN-FORMAN CORPORATION
Index to Quarterly Report Form 10-Q
Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.


2


PART I - FINANCIAL INFORMATION
 
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 EndedNine Months Ended
January 31,January 31,
2020202120202021
Sales$1,178 $1,222 $3,404 $3,481 
Excise taxes279 311 750 832 
Net sales899 911 2,654 2,649 
Cost of sales342 361 980 1,053 
Gross profit557 550 1,674 1,596 
Advertising expenses104 121 308 278 
Selling, general, and administrative expenses153 157 475 460 
Gain on sale of business   (127)
Other expense (income), net(4)(9)(13)(13)
Operating income304 281 904 998 
Non-operating postretirement expense1 1 3 4 
Interest income(1) (4)(1)
Interest expense20 21 62 61 
Income before income taxes284 259 843 934 
Income taxes53 40 144 151 
Net income$231 $219 $699 $783 
Earnings per share:
Basic$0.48 $0.46 $1.46 $1.64 
Diluted$0.48 $0.45 $1.45 $1.63 
See notes to the condensed consolidated financial statements.
3


BROWN-FORMAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(Dollars in millions)
 
Three Months EndedNine Months Ended
January 31,January 31,
2020202120202021
Net income$231 $219 $699 $783 
Other comprehensive income (loss), net of tax:
Currency translation adjustments6 47 3 113 
Cash flow hedge adjustments(1)(33)1 (72)
Postretirement benefits adjustments3 5 10 17 
Net other comprehensive income (loss)8 19 14 58 
Comprehensive income$239 $238 $713 $841 
See notes to the condensed consolidated financial statements.
4


BROWN-FORMAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in millions)
April 30, 2020January 31,
2021
Assets
Cash and cash equivalents$675 $1,106 
Accounts receivable, less allowance for doubtful accounts of $11 at April 30 and $10 at January 31
570 820 
Inventories:
Barreled whiskey1,092 1,090 
Finished goods320 306 
Work in process172 200 
Raw materials and supplies101 127 
Total inventories1,685 1,723 
Other current assets335 265 
Total current assets3,265 3,914 
Property, plant and equipment, net848 826 
Goodwill756 774 
Other intangible assets635 676 
Deferred tax assets15 68 
Other assets247 237 
Total assets$5,766 $6,495 
Liabilities
Accounts payable and accrued expenses$517 $603 
Dividends payable 86 
Accrued income taxes30 43 
Short-term borrowings333 312 
Total current liabilities880 1,044 
Long-term debt2,269 2,347 
Deferred tax liabilities177 146 
Accrued pension and other postretirement benefits297 296 
Other liabilities168 194 
Total liabilities3,791 4,027 
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 earnings2,708 3,125 
Accumulated other comprehensive income (loss), net of tax(547)(489)
Treasury stock, at cost (6,323,000 and 5,880,000 shares at April 30 and January 31, respectively)
(258)(240)
Total stockholders’ equity1,975 2,468 
Total liabilities and stockholders’ equity$5,766 $6,495 
 See notes to the condensed consolidated financial statements.
5


BROWN-FORMAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in millions)
Nine Months Ended
January 31,
 20202021
Cash flows from operating activities:  
Net income$699 $783 
Adjustments to reconcile net income to net cash provided by operations: 
Gain on sale of business (127)
Depreciation and amortization55 58 
Stock-based compensation expense8 9 
Deferred income tax provision (benefit)30 (56)
Other, net6 (15)
Changes in assets and liabilities, net of business acquisitions and dispositions:
Accounts receivable(125)(219)
Inventories(142)(14)
Other current assets(33)30 
Accounts payable and accrued expenses(6)68 
Accrued income taxes10 16 
Other operating assets and liabilities7 39 
Cash provided by operating activities509 572 
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(84)(41)
Computer software expenditures(5)(2)
Cash provided by (used for) investing activities(111)120 
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 (342)
Net change in short-term borrowings, maturities of 90 days or less(150)(25)
Payments of withholding taxes related to stock-based awards(33)(18)
Acquisition of treasury stock(1) 
Dividends paid(242)(253)
Cash used for financing activities(426)(294)
Effect of exchange rate changes on cash and cash equivalents(3)33 
Net increase (decrease) in cash and cash equivalents(31)431 
Cash and cash equivalents, beginning of period307 675 
Cash and cash equivalents, end of period$276 $1,106 
See notes to the condensed consolidated financial statements.
6


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, 2020, as amended (2020 Form 10-K). We prepared the accompanying financial statements on a basis that is substantially consistent with the accounting principles applied in our 2020 Form 10-K.

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 EndedNine Months Ended
January 31,January 31,
(Dollars in millions, except per share amounts)2020202120202021
Net income available to common stockholders$231 $219 $699 $783 
Share data (in thousands):  
Basic average common shares outstanding477,898 478,599 477,643 478,471 
Dilutive effect of stock-based awards2,859 2,237 2,793 2,194 
Diluted average common shares outstanding480,757 480,836 480,436 480,665 
Basic earnings per share$0.48 $0.46 $1.46 $1.64 
Diluted earnings per share$0.48 $0.45 $1.45 $1.63 

We excluded common stock-based awards for approximately 0 shares and 298,000 shares from the calculation of diluted earnings per share for the three months ended January 31, 2020 and 2021, respectively. We excluded common stock-based awards for approximately 295,000 shares and 211,000 shares from the calculation of diluted earnings per share for the nine months ended January 31, 2020 and 2021, respectively. We excluded those awards because they were not dilutive for those periods under the treasury stock method.

3.    Inventories
Inventories are valued at the lower of cost or net realizable value. Some of our consolidated inventories are valued using the last-in, first-out (LIFO) method, which we use for the majority of our U.S. inventories. If the LIFO method had not been used, inventories at current cost would have been $311 million higher than reported as of April 30, 2020, and $342 million higher than reported as of January 31, 2021. 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.

7


4.    Goodwill and Other Intangible Assets
The following table shows the changes in goodwill (which includes no accumulated impairment losses) and other intangible assets during the nine months ended January 31, 2021:
(Dollars in millions)Goodwill
Other Intangible Assets
Balance at April 30, 2020
$756 $635 
Sale of business (Note 14)(4)(1)
Acquisition (Note 14)6 8 
Foreign currency translation adjustment16 34 
Balance at January 31, 2021
$774 $676 

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

5.    Commitments and 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 January 31, 2021.

We have guaranteed the repayment by a third-party importer of its obligation under a bank credit facility that it uses in connection with its importation of our products in Russia. If the importer were to default on that obligation, which we believe is unlikely, our maximum possible exposure under the existing terms of the guaranty would be approximately $9 million (subject to changes in foreign currency exchange rates). Both the fair value and carrying amount of the guaranty are insignificant. As of January 31, 2021, our actual exposure under the guaranty of the importer’s obligation was approximately $6 million. We also have accounts receivable from that importer of approximately $10 million at January 31, 2021, which we expect to collect in full. Based on the financial support we provide to the importer, we believe it meets the definition of a variable interest entity. However, because we do not control this entity, it is not included in our consolidated financial statements.

On May 30, 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) whereby Bacardi provided certain services (e.g., warehousing and logistics, sales, reporting, treasury, tax, and other services) and Brown-Forman and Bacardi split the associated overhead for those services. For purposes of conducting business, Brown-Forman and Bacardi established a U.K. trade name, “Bacardi Brown-Forman Brands,” through which our products and Bacardi’s products were sold in the U.K. On a monthly basis, Bacardi would remit to us the cash representing revenues from sales of our products, net of our agreed contributions for overhead costs under the Agreement. On April 30, 2020, the Agreement expired according to its terms.

Following delivery of our notice and upon expiration of the Agreement, Bacardi alleged that it was entitled to approximately £49 million 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. From monthly settlements following the expiration of the Agreement, Bacardi withheld over £50 million owed to us, effectively bypassing the dispute resolution process under the Agreement.

In response to Bacardi’s actions, we initiated a lawsuit on August 20, 2020, in the Commercial Court in the U.K. seeking reimbursement of the amounts wrongfully withheld. Shortly thereafter, Bacardi filed a demand for arbitration seeking a determination that it was entitled to compensation as a commercial agent and for additional compensation for the work completed following the expiration of the Agreement.

Since it was raised, we have disputed Bacardi’s claim of commercial agency compensation and issued demands that Bacardi adhere to the dispute resolution process mandated by the Agreement and return the over £50 million that Bacardi has wrongfully withheld from us. Given the early stages of the litigation and arbitration process, we are unable to estimate the range of reasonably possible loss, if any. The withheld amount is included in accounts receivable in the accompanying condensed consolidated balance sheet as of January 31, 2021.
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6.    Debt
Our long-term debt (net of unamortized discount and issuance costs) consists of:
(Principal and carrying amounts in millions)April 30, 2020January 31,
2021
2.250% senior notes, $250 principal amount, due January 15, 2023
$249 $249 
3.500% senior notes, $300 principal amount, due April 15, 2025
297 298 
1.200% senior notes, €300 principal amount, due July 7, 2026
324 362 
2.600% senior notes, £300 principal amount, due July 7, 2028
369 408 
4.000% senior notes, $300 principal amount, due April 15, 2038
294 294 
3.750% senior notes, $250 principal amount, due January 15, 2043
248 248 
4.500% senior notes, $500 principal amount, due July 15, 2045
488 488 
$2,269 $2,347 
Our short-term borrowings of $333 million as of April 30, 2020, and $312 million as of January 31, 2021, consisted primarily of borrowings under our commercial paper program.
(Dollars in millions)April 30,
2020
January 31,
2021
Commercial paper$333$290
Average interest rate1.29%0.27%
Average remaining days to maturity7333


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7.    Stockholders’ Equity
The following table shows the changes in stockholders’ equity by quarter during the nine months ended January 31, 2020:
(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, 2019$25 $47 $ $2,238 $(363)$(300)$1,647 
Adoption of ASU 2018-02
43 (43)— 
Net income186 186 
Net other comprehensive income (loss)(1)(1)
Declaration of cash dividends (158)(158)
Acquisition of treasury stock(1)(1)
Stock-based compensation expense3 3 
Stock issued under compensation plans16 16 
Loss on issuance of treasury stock issued under compensation plans
(2)(27)(29)
Balance at July 31, 201925 47 1 2,282 (407)(285)1,663 
Net income282 282 
Net other comprehensive income (loss)7 7 
Stock-based compensation expense3 3 
Stock issued under compensation plans11 11 
Loss on issuance of treasury stock issued under compensation plans
(4)(20)(24)
Balance at October 31, 201925 47  2,544 (400)(274)1,942 
Net income231 231 
Net other comprehensive income (loss)8 8 
Declaration of cash dividends(167)(167)
Stock-based compensation expense2 2 
Stock issued under compensation plans11 11 
Loss on issuance of treasury stock issued under compensation plans
(2)(20)(22)
Balance at January 31, 2020$25 $47 $ $2,588 $(392)$(263)$2,005 

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The following table shows the changes in stockholders’ equity by quarter during the nine months ended January 31, 2021:
(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, 2020$25 $47 $ $2,708 $(547)$(258)$1,975 
Net income324 324 
Net other comprehensive income (loss)24 24 
Declaration of cash dividends(167)(167)
Stock-based compensation expense3 3 
Stock issued under compensation plans10 10 
Loss on issuance of treasury stock issued under compensation plans
(3)(16)(19)
Balance at July 31, 202025 47  2,849 (523)(248)2,150 
Net income240 240 
Net other comprehensive income (loss)15 15 
Stock-based compensation expense3 3 
Stock issued under compensation plans5 5 
Loss on issuance of treasury stock issued under compensation plans
(3)(7)(10)
Balance at October 31, 202025 47  3,082 (508)(243)2,403 
Net income219 219 
Net other comprehensive income (loss)19 19 
Declaration of cash dividends(172)(172)
Stock-based compensation expense3 3 
Stock issued under compensation plans3 3 
Loss on issuance of treasury stock issued under compensation plans(3)(4)(7)
Balance at January 31, 2021$25 $47 $ $3,125 $(489)$(240)$2,468 

The following table shows the change in each component of accumulated other comprehensive income (AOCI), net of tax, during the nine months ended January 31, 2021:
(Dollars in millions)
Currency Translation Adjustments
Cash Flow Hedge Adjustments
Postretirement Benefits Adjustments
Total AOCI
Balance at April 30, 2020
$(302)$60 $(305)$(547)
Net other comprehensive income (loss)113 (72)17 58 
Balance at January 31, 2021
$(189)$(12)$(288)$(489)

The following table shows the cash dividends declared per share on our Class A and Class B common stock during the nine months ended January 31, 2021:
Declaration DateRecord DatePayable DateAmount per Share
May 21, 2020June 8, 2020July 1, 2020$0.1743
July 23, 2020September 4, 2020October 1, 2020$0.1743
November 19, 2020December 4, 2020January 4, 2021$0.1795
January 27, 2021March 8, 2021April 1, 2021$0.1795
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8.    Net Sales 
The following table shows our net sales by geography:
Three Months EndedNine Months Ended
January 31,January 31,
(Dollars in millions)2020202120202021
United States$416 $425 $1,296 $1,334 
Developed International1
263 292 716 789 
Emerging2
171 171 477 438 
Travel Retail3
34 12 104 47 
Non-branded and bulk4
15 11 61 41 
Total$899 $911 $2,654 $2,649 
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 are the United Kingdom, Germany, Australia, and France.
2Represents net sales of branded products to “emerging and developing economies” as defined by the IMF. Our largest emerging markets are Mexico, Poland, and Russia.
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, bulk whiskey and wine, and contract bottling regardless of customer location.

The following table shows our net sales by product category:
Three Months EndedNine Months Ended
January 31,January 31,
(Dollars in millions)2020202120202021
Whiskey1
$701 $731 $2,086 $2,101 
Tequila2
74 72 219 224 
Wine3
62 50 159 162 
Vodka4
32 26 89 71 
Rest of portfolio15 21 40 50 
Non-branded and bulk5
15 11 61 41 
Total$899 $911 $2,654 $2,649 
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. Also includes the Early Times, Canadian Mist, and Collingwood brands, which we divested on July 31, 2020 (Note 14).
2Includes el Jimador, the Herradura family of brands, New Mix, Pepe Lopez, and Antiguo.
3Includes Korbel Champagnes and Sonoma-Cutrer wines.
4Includes Finlandia.
5Includes net sales of used barrels, bulk whiskey and wine, and contract bottling regardless of customer location.
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9.    Pension and Other Postretirement Benefits
The following table shows the components of the net cost of pension and other postretirement benefits recognized for our U.S. benefit plans. Information about similar international plans is not presented due to immateriality.
Three Months EndedNine Months Ended
January 31,January 31,
(Dollars in millions)2020202120202021
Pension Benefits:
  
Service cost$6 $7 $18 $20 
Interest cost8 6 24 19 
Expected return on plan assets(12)(12)(35)(35)
Amortization of:    
Prior service cost (credit)  1 1 
Net actuarial loss5 7 14 20 
Net cost$7 $8 $22 $25 
Other Postretirement Benefits:
  
Service cost$ $ $1 $1 
Interest cost1 1 1 1 
Amortization of prior service cost (credit)(1)(1)(2)(2)
Net cost$ $ $ $ 

10.    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 for the three months ended January 31, 2021, was 15.7% compared to 18.6% for the same period last year. The decrease in our effective tax rate for the three months ended January 31, 2021, was driven primarily by a deferred tax benefit related to a statutory rate change and an increase in the foreign derived intangible income deduction. The effective tax rate for the nine months ended January 31, 2021, was 16.2% compared to 17.1% for the same period last year. The decrease in our effective tax rate for the nine months ended January 31, 2021, was driven primarily by a deferred tax benefit related to an intercompany transfer of assets partially offset by (a) less stock-based compensation deduction, (b) a decreased benefit in the foreign derived intangible income deduction, and (c) a lower prior-year true-up benefit.

We have asserted that the undistributed earnings of the majority of our foreign subsidiaries are reinvested indefinitely outside the United States. Therefore, no income taxes have been provided for any outside basis differences inherent in these subsidiaries other than those subject to the one-time repatriation tax. We have a limited number of subsidiaries that are not permanently reinvested and therefore we have recorded the deferred tax liability related to the undistributed earnings (but not for their outside basis differences).

11.    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 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 into earnings.

13


We do not designate some of our currency derivatives 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 $1,026 million at April 30, 2020, and $1,092 million at January 31, 2021. The maximum term of outstanding derivative contracts was 36 months at both April 30, 2020, and January 31, 2021.

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 $613 million at April 30, 2020, and $673 million at January 31, 2021.

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 the effectiveness on an ongoing basis. If determined to no longer be highly effective, designation and accounting for the instrument as a hedge would be discontinued.

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 tables present 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
January 31,
(Dollars in millions)Classification20202021
Currency derivatives designated as cash flow hedges:   
Net gain (loss) recognized in AOCIn/a$4 $(39)
Net gain (loss) reclassified from AOCI into earningsSales5 4 
Currency derivatives not designated as hedging instruments:   
Net gain (loss) recognized in earningsSales$(1)$(6)
Net gain (loss) recognized in earningsOther income (expense), net4 4 
Foreign currency-denominated debt designated as net investment hedge:
Net gain (loss) recognized in AOCIn/a$(5)$(33)
Total amounts presented in the accompanying condensed consolidated statements of operations for line items affected by the net gains (losses) shown above:
Sales$1,178 $1,222 
Other income (expense), net4 9 
14


Nine Months Ended
January 31,
(Dollars in millions)Classification20202021
Currency derivatives designated as cash flow hedges:   
Net gain (loss) recognized in AOCIn/a$17 $(73)
Net gain (loss) reclassified from AOCI into earningsSales16 21 
Currency derivatives not designated as hedging instruments:   
Net gain (loss) recognized in earningsSales$(2)$(11)
Net gain (loss) recognized in earningsOther income (expense), net6 15 
Foreign currency-denominated debt designated as net investment hedge:
Net gain (loss) recognized in AOCIn/a$(2)$(66)
Total amounts presented in the accompanying condensed consolidated statements of operations for line items affected by the net gains (losses) shown above:
Sales$3,404 $3,481 
Other income (expense), net13 13 
We expect to reclassify $9 million of deferred net losses on cash flow hedges recorded in AOCI as of January 31, 2021, 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, 2020January 31, 2021
(Dollars in millions)

Classification
Derivative Assets
Derivative Liabilities
Derivative Assets
Derivative Liabilities
Designated as cash flow hedges:
Currency derivativesOther current assets$49 $(1)$7 $(2)
Currency derivativesOther assets30  1  
Currency derivativesAccrued expenses