UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of
earliest event reported): November 25, 2003
Brown-Forman Corporation
(Exact name of registrant as specified in its charter)
Delaware 1-123 61-0143150
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
850 Dixie Highway, Louisville, Kentucky 40210
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (502) 585-1100
Item 7. Financial Statements and Exhibits
(a) Not applicable.
(b) Not applicable.
(c) Exhibits.
99.1 Press Release, dated November 25, 2003
Item 12. Results of Operations and Financial Condition
Brown-Forman Corporation issued a press release today reporting results of its
operations for the quarter ended October 31, 2003. A copy of this Brown-Forman
Corporation press release is attached hereto as Exhibit 99.1.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Brown-Forman Corporation
(Registrant)
Date: November 25, 2003 By: /s/ Nelea A. Absher
Nelea A. Absher
Vice President, Senior Counsel
and Assistant Secretary
Exhibit Index
99.1 Press Release, dated November 25, 2003, issued by Brown-Forman Corporation
Exhibit 99.1
FOR IMMEDIATE RELEASE
BROWN-FORMAN REPORTS RECORD SECOND QUARTER EARNINGS
Louisville, KY, November 25, 2003 - Brown-Forman Corporation reported earnings
per share for its second quarter ended October 31, 2003 of $1.45, up 23% from
the same period last year. Higher quarterly earnings were driven by the
company's March 2003 share repurchase, benefits from a weaker U.S. dollar, and
solid profit growth for both Jack Daniel's and Southern Comfort. These increases
were partially offset by lower profits from several of the company's wine
brands, increased advertising investments for our spirits brands, and higher
pension expenses. Second quarter operating profit for the Consumer Durables
segment was even with last year.
The March 2003 share repurchase accounted for $0.12 of the quarter's increased
earnings. Excluding this benefit, earnings increased $0.15 per share, or 13%.
Management believes that disclosure of the increase in earnings per share
excluding the benefit from the share repurchase is informative because it
reflects the underlying operations of the company.
For the first six months of the fiscal year, earnings per share on a diluted
basis were $1.96, up 15% from the same period last year. Year-to-date results
benefited from the share repurchase ($0.14 per share), favorable foreign
exchange trends, solid growth for both Jack Daniel's and Southern Comfort, and
increased profits from the company's new distribution arrangement in the United
Kingdom. These gains were partially offset by a charge of $0.11 per share to
settle a lawsuit with Diageo Great Britain Limited involving the distribution of
Jack Daniel's in the U.K., as well as lower profits from several of the
company's wine brands and the Consumer Durables segment.
Beverages
In the second quarter, Beverage revenue increased 5% and gross profit increased
10%. Advertising expenses were up 16% in the quarter, as the company
substantially increased investments behind its spirits brands. SG&A expenses
were also up significantly in the quarter, as the segment recognized higher
pension expenses and consolidated the financial results from both Finlandia
Vodka Worldwide and Distillerie Tuoni e Canepa following these acquisitions in
the second half of last fiscal year. Quarterly results were boosted by the
absence of an operating loss recorded in the prior year's second quarter related
to upfront advertising on Jack Daniel's Original Hard Cola, but were negatively
impacted by significant increases in advertising on Finlandia Vodka, primarily
related to the brand's re-launch in the U.S. As a result of these factors and
the benefits from foreign exchange, segment operating income was up 14% for the
quarter.
Global shipments for Jack Daniel's Tennessee Whiskey were down slightly for the
quarter, but depletions were up in the mid-single digits, led by robust growth
in both the United States and U.K. These gains were partially offset by weaker
results in Japan and several countries in Continental Europe. (Depletions are
shipments from wholesale distributors to retailers, and are commonly regarded in
the wine and spirits industry as a better proxy for consumer demand.)
Worldwide shipments for Southern Comfort were also very strong, reflecting solid
underlying growth in the U.K. and U.S., and domestic wholesalers adjusting
inventories in advance of the holiday season. In addition to higher shipments,
price increases in the U.S. boosted the brand's gross profit and operating
income significantly. Global depletions were up in the low single digits for the
quarter.
Shipments and depletions for Finlandia Vodka were also up in the quarter, as the
company expanded its geographic distribution of the brand following last year's
acquisition of a majority interest in Finlandia Vodka Worldwide.
The wine industry continues to face challenging times. Profitability for several
of the company's wine brands declined for the quarter, reflecting lower volumes.
These volume declines were somewhat offset by an improved gross profit margin
and lower SG&A expenses. The company has expectations for a modest improvement
in profitability from its wine brands this fiscal year, driven by slight
improvement in the gross margin and lower operating expenses.
Consumer Durables
Net sales for Consumer Durables were up 4% for the quarter, with improved sales
to department stores and through the segment's retail outlet stores. However,
sales through the direct-to-consumer channel were down. Quarterly operating
profit was flat compared with last year, as reductions in advertising and
selling expenses were largely offset by higher pension costs. Although Consumer
Durables full year performance is generally dependent upon the results of the
holiday season, the company expects that overall segment earnings this fiscal
year will be down due to continued softness in the direct-to-consumer channel.
Outlook
The company's full year 2004 earnings guidance of $4.10 to $4.30 per share
remains unchanged. This projection includes the $0.11 per share charge incurred
in the first quarter for the litigation settlement with Diageo Great Britain
Limited. The company expects that higher earnings from its core spirits brands
and the benefits from foreign exchange will continue to offset higher pension
costs and weakness from the company's Consumer Durables segment.
Subsequent Events
On November 20, 2003, Directors of Brown-Forman Corporation approved a 2-for-1
stock split for all shares of Class A and Class B common stock, to be paid in
the form of a stock dividend. Assuming that the company's stockholders authorize
the additional shares of both classes of stock, the distribution of additional
shares would be made to stockholders of record on or about January 8, 2004.
Simultaneously, the Board of Directors approved a 13.3% increase in its regular
quarterly cash dividend, from 37.5 cents to 42.5 cents per share. If the
stockholders approve the 2-for-1 stock split, subsequent quarterly cash dividend
payments and earnings per share amounts will be divided in half to reflect the
stock split.
Conference Call
The company will host a conference call to discuss second quarter results at
10:00 a.m. (EST) this morning. All interested parties in the U.S. are invited to
join the conference by dialing 888-624-9285 and asking for the Brown-Forman
call. International callers should dial 706-679-3410 and ask for the
Brown-Forman call. No password is required. The company suggests that
participants dial in approximately ten minutes in advance of the 10:00 a.m.
start of the conference call.
A live audio broadcast of the conference call will also be available via
Brown-Forman's Internet Web site, www.brown-forman.com, through a link to
"Investor Information." For those unable to participate in the live call, a
replay will be available by calling 800-642-1687 (U.S.) or 706-645-9291
(international). The identification code is 3882688. A digital audio recording
of the conference call will also be available on the Web site approximately one
hour after the conclusion of the conference call. Both replays will be available
for 30 days after the conference call.
Strategic Update Meeting
Brown-Forman will be hosting a Strategic Update Meeting in Lynchburg, Tennessee
on December 3, 2003, beginning at 10:00 a.m. (EST). Securities analysts and
representatives from major institutional investor funds will meet senior
Brown-Forman executives and hear them speak about recent strategic initiatives
implemented by the company's business units. The morning session will conclude
about noon and the afternoon session will begin at 2:00 p.m. (EST). A live Web
cast of the meeting will be available via Brown-Forman's Internet Web site,
www.brown-forman.com, through a link to "Investor Information." A digital audio
recording and copies of the slides from the presentations will also be available
on the Web site about four hours after the conclusion of the meeting. The replay
will be available for 30 days.
Interested parties may also listen to the meeting by telephone. For the morning
session (10:00 a.m. to noon, EST), those calling from the U.S. should dial
800-901-5213 and when prompted, key in identification code 86202034.
International callers should dial 617-786-2962 and use the same code (86202034).
For the afternoon session, which begins at 2:00 p.m. (EST), U.S. callers should
dial 800-901-5241 and use identification code 57688700 to access the
Brown-Forman Strategic Update Meeting. International callers should dial
617-786-2963 and use the same code (57688700).
For those unable to participate in the live call, a replay will be available by
calling 888-286-8010 (U.S.) or 617-801-6888. The identification code for the
replay of the morning session is 69967379 and the code for the replay of the
afternoon session is 23540922.
Brown-Forman Corporation is a diversified producer and marketer of fine quality
consumer products, including Jack Daniel's, Southern Comfort, Finlandia Vodka,
Canadian Mist, Fetzer and Bolla Wines, Korbel California Champagnes, Lenox,
Dansk, and Gorham tableware and giftware and Hartmann Luggage.
IMPORTANT NOTE ON FORWARD-LOOKING STATEMENTS:
This report contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Words like "believe,"
"expect," "anticipate," and "project" identify a forward-looking statement,
which speaks only as of the date the statement is made. Except as required by
law, we do not intend to update or revise any forward-looking statements,
whether as a result of new information, future events, or otherwise. These
statements are subject to a number of important risks and uncertainties that
could cause our actual results and experience to differ materially from the
anticipated results or other expectations expressed. Such risks and
uncertainties include changes in general economic conditions, political and
social trends, and the uncertainties of litigation.
Our projections for our domestic beverage business assume that U.S. economic
activity will continue at about the same pace as currently, and our earnings
will be hurt if the economy weakens. Federal or state excise tax increases on
spirits and wine would also depress our domestic beverage business. Profits from
our international beverage business may be adversely affected if the U.S. dollar
strengthens against other currencies or if economic conditions deteriorate in
our principal export markets. As a leading exporter of American spirits brands,
our foreign sales could be hurt as a result of anti-Americanism in response to
the Iraq war or other international developments.
The long-term outlook for our beverage business is based in part on favorable
demographic trends in the U.S. and many international markets for the sale of
spirits and wine. We may not meet current expectations for our global beverage
business if these demographic trends do not translate into corresponding sales
increases. Profits could also be hurt by increases in the price of grain,
grapes, or energy. Margins for our wine business are likely to stay low so long
as the current oversupply of grapes continues. Attacks by anti-alcohol activists
or legal or regulatory measures against beverage alcohol (including its
advertising and promotion) could adversely affect sales.
Earnings from our consumer durables segment depend heavily on the state of the
U.S. economy, as purchases of fine china and luggage are discretionary. The
performance of our fine china dinnerware business depends on the health of major
department stores, the primary distribution channel for these products, as well
as further department store consolidation, a soft retail environment at outlet
malls, and consumer response to direct mail. The Hartmann luggage business
continues to be adversely affected by reduced travel in the U.S.
Brown-Forman Corporation
Consolidated Statements of Income
(Dollars in millions, except per share amounts)
Three Months Ended
October 31,
2002 2003 Change
Net Sales $691.6 $725.2 5%
Beverages 517.9 544.6 5%
Consumer Durables 173.7 180.6 4%
Gross Profit $338.8 $364.8 8%
Beverages 253.7 279.7 10%
Consumer Durables 85.1 85.1 0%
Advertising Expenses $86.4 $95.0 10%
Beverages 62.2 72.1 16%
Consumer Durables 24.2 22.9 (5%)
Selling, General, and
Administrative Expenses $123.4 $132.4 7%
Beverages 82.2 90.8 10%
Consumer Durables 41.2 41.6 1%
Other Expense (Income), net $4.5 $(1.4)
Beverages 3.8 (3.1)
Consumer Durables 0.7 1.7
Operating Income $124.5 $138.8 11%
Beverages 105.5 119.8 14%
Consumer Durables 19.0 19.0 0%
Interest Expense, net 0.7 5.1
Income Before Income Taxes $123.8 $133.7 8%
Taxes on Income 42.7 45.5
Net Income $81.1 $88.2 9%
Earnings Per Share
- Basic $1.18 $1.45 23%
- Diluted $1.18 $1.45 23%
Note: Other Expense (Income), net, includes results for joint ventures and
unconsolidated affiliates, bad debt expense, and miscellaneous income and
expense items not included in other captions.
Brown-Forman Corporation
Consolidated Statements of Income
(Dollars in millions, except per share amounts)
Six Months Ended
October 31,
2002 2003 Change
Net Sales $1,171.1 $1,257.8 7%
Beverages 878.0 968.3 10%
Consumer Durables 293.1 289.5 (1%)
Gross Profit $586.2 $637.1 9%
Beverages 445.2 501.9 13%
Consumer Durables 141.0 135.2 (4%)
Advertising Expenses $164.7 $172.5 5%
Beverages 119.9 128.7 7%
Consumer Durables 44.8 43.8 (2%)
Selling, General, and
Administrative Expenses $237.6 $262.5 10%
Beverages 157.5 181.0 15%
Consumer Durables 80.1 81.5 2%
Other Expense (Income), net $3.3 $11.2
Beverages 0.6 8.3
Consumer Durables 2.7 2.9
Operating Income $180.6 $190.9 6%
Beverages 167.2 183.9 10%
Consumer Durables 13.4 7.0 (47%)
Interest Expense, net 1.8 10.0
Income Before Income Taxes $178.8 $180.9 1%
Taxes on Income 61.7 61.5
Net Income $117.1 $119.4 2%
Earnings Per Share
- Basic $1.71 $1.97 15%
- Diluted $1.71 $1.96 15%
Note: Other Expense (Income), net, includes results for joint ventures and
unconsolidated affiliates, bad debt expense, and miscellaneous income and
expense items not included in other captions. The 2003 amount includes the
impact of settling a lawsuit with Diageo.
Brown-Forman Corporation
Condensed Consolidated Balance Sheets
(Dollars in millions, except per share amounts)
April 30, October 31,
2003 2003
Assets:
Cash and cash equivalents $ 72.0 $ 74.5
Accounts receivable, net 324.6 431.2
Inventories 584.6 625.8
Other current assets 85.9 85.5
Total current assets 1,067.1 1,217.0
Property, plant, and equipment, net 506.1 511.1
Trademarks and brand names 235.0 237.9
Goodwill 311.0 315.5
Other assets 144.4 148.2
Total assets $2,263.6 $2,429.7
Liabilities:
Commercial paper $ 167.1 $ 193.8
Accounts payable and accrued expenses 297.2 334.0
Accrued taxes on income 43.4 58.2
Current portion of long-term debt 40.1 35.7
Total current liabilities 547.8 621.7
Long-term debt 628.7 629.2
Deferred income taxes 77.8 73.7
Accrued postretirement benefits 142.7 147.7
Other liabilities 26.4 28.5
Total liabilities 1,423.4 1,500.8
Stockholders' equity 840.2 928.9
Total liabilities and stockholders' equity $2,263.6 $2,429.7
Brown-Forman Corporation
Supplemental Information
(Dollars in millions)
Three Months Ended
October 31,
2002 2003
Depreciation and amortization $13.9 $14.3
Excise taxes $90.8 $98.1
Additions to property, plant, and equipment $21.2 $14.6
Effective tax rate 34.5% 34.0%
Shares (in thousands) used in the
calculation of earnings per share
- Basic 68,406 60,658
- Diluted 68,592 60,921
Six Months Ended
October 31,
2002 2003
Depreciation and amortization $27.7 $27.4
Excise taxes $145.9 $169.9
Additions to property, plant, and equipment $36.2 $29.1
Effective tax rate 34.5% 34.0%
Shares (in thousands) used in the
calculation of earnings per share
- Basic 68,391 60,633
- Diluted 68,592 60,887
These figures have been prepared in accordance with the company's customary
accounting practices.