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): February 24, 2004
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 February 24, 2004
Item 12. Results of Operations and Financial Condition
Brown-Forman Corporation issued a press release on February 24, 2004 reporting
results of its operations for the quarter ended January 31, 2004. 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: February 25, 2004 By: /s/ Nelea A. Absher
Nelea A. Absher
Vice President, Senior Counsel
and Assistant Secretary
Exhibit Index
99.1 Press Release, dated February 24, 2004, issued by Brown-Forman Corporation
Exhibit 99.1
FOR IMMEDIATE RELEASE
BROWN-FORMAN CORPORATION REPORTS RECORD THIRD QUARTER EARNINGS
Louisville, KY, February 24, 2004 - Brown-Forman Corporation reported earnings
per share of $0.66 for its third quarter ended January 31, 2004, up 29% from the
same period last year. (All earnings per share amounts have been adjusted to
reflect a 2-for-1 stock split, effective January 12, 2004.) Higher quarterly
earnings per share were driven by solid profit growth for Jack Daniel's
Tennessee Whiskey, the effects of the March 2003 share repurchase, improved
results from the company's wine brands, and benefits from a weaker U.S. dollar.
These increases were partially offset by higher SG&A expenses and lower profits
from the Consumer Durables segment.
For the first nine months of the fiscal year, diluted earnings per share were
$1.64, up 20% over last year. Year-to-date results benefited from favorable
foreign exchange trends, the share repurchase ($0.12 per share), strong earnings
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 $0.06 per share to settle a lawsuit with
Diageo Great Britain Limited involving the distribution of Jack Daniel's in the
U.K., lower profits from the Consumer Durables segment, and the impact of lower
trade inventory levels for the company's global beverage brands.
Beverages
In the third quarter, revenues and gross profit for Beverages were up 12% and
16%, respectively. The strong revenue growth was driven by the benefits of a
weaker U.S. dollar, the addition of new markets to Brown-Forman's distribution
arrangement for Finlandia Vodka Worldwide, and continued volume and pricing
growth for the company's spirits brands. These revenue gains were partially
offset by the discontinuation of a few of the company's wine brands. Advertising
expenses were essentially flat during the quarter, as higher levels of
investment for the company's spirits brands were offset by a decline for wines.
SG&A expenses were up approximately $9 million for the quarter, reflecting the
consolidation of costs from both Finlandia Vodka Worldwide and Distillerie Tuoni
e Canepa (Tuaca), companies which were acquired last fiscal year. In addition,
increased pension costs, reorganization expenses related to the company's
California wine operations, and the impact of the weaker U.S. dollar contributed
to the higher SG&A expenses for the quarter. Segment operating income was up a
solid 26% in the third quarter.
Global shipment and depletion trends were strong for Jack Daniel's Tennessee
Whiskey during the quarter, particularly in the United States where volume
trends have continued to accelerate in recent months. (Depletions are shipments
from wholesale distributors to retailers, and are commonly used in the wine and
spirits industry as an approximation of consumer demand.) Global depletion
trends for Southern Comfort were positive; however, shipments were down as
wholesaler inventory levels were reduced in the U.S. and Continental Europe.
Results for Finlandia in the U.S. were mixed, as solid volume growth was largely
offset by higher product costs, including the impact of the stronger Euro.
Volumes for Finlandia in Europe continued to grow, reflecting the addition of
new markets since the company's acquisition on December 31, 2002.
The wine industry in the United States remains very competitive. Although
domestic pricing for both Fetzer and Bolla is up this year, volumes are down. In
addition, higher grape costs for Bolla, coupled with the stronger Euro, reduced
the brand's gross margin. Despite an improvement in operating profit from the
company's wine brands during the quarter, the environment has not meaningfully
improved and expected full year profit growth is modest.
Consumer Durables
Net sales for Consumer Durables were up 2% in the quarter as results in the
direct-to-consumer channel and the company's retail outlet stores improved
slightly. However, sales to department stores during the quarter were
disappointing. Although profits from the direct-to-consumer channel improved
somewhat during the quarter, consumer response rates remain sluggish, and as a
result, advertising expenses have been reduced. Segment operating income dropped
$4 million during the quarter, as the reduced advertising investment was not
enough to offset higher pension expenses and a reorganization charge.
Outlook
In the fourth quarter of this fiscal year, we expect the environment to remain
difficult for wine and Consumer Durables. However, the company is encouraged by
the opportunities and trends for its spirits brands. As a result, the company
will be significantly increasing its advertising investments behind its spirits
brands in the fourth quarter. This increased level of advertising investment,
coupled with higher pension expenses and the company's ongoing focus on lowering
wholesale and retail inventories on a global basis, is expected to temper
earnings growth in the fourth quarter. Brown-Forman is narrowing its guidance
for fiscal 2004 earnings to a range of $2.09 to $2.13 per share, or EPS growth
in a range of 15-17% for the current fiscal year.
Conference Call
The company will host a conference call to discuss third 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 5613557. 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. The replay will be available
for at least 30 days following the conference call.
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. These risks include, but
are not limited to:
- changes in general economic conditions, political and social trends;
- impact on profits earned overseas by a strengthening U.S. dollar against
foreign currencies, especially the British Pound;
- reduced bar, restaurant, hotel and travel business in wake of another
terrorist attach, such as occurred on 9/11;
- developments in the three class action lawsuits filed against Brown-Forman
and other spirits, beer and wine manufacturers alleging that our advertising
causes illegal consumption of alcohol by those under the legal drinking age,
or other attempts to limit alcohol marketing, through either litigation or
regulation;
- tax increases, whether at the federal or state level;
- increases in the price of grain and grapes;
- continued depressed retail prices and margins in our wine business because
of existing grape contract obligations and a world-wide oversupply of
grapes; and
- the effects on our consumer durables business of the general economy,
department store business, response rates in our direct marketing business,
and profitability of mall outlet operations.
These statements are also subject to the factors mentioned in Part 1, Item 2 of
the Company's Form 10-K for the year ended April 30, 2003, which we incorporate
herein by reference.
Brown-Forman Corporation
Consolidated Statements of Income
(Dollars in millions, except per share amounts)
Three Months Ended
January 31,
2003 2004 Change
Net Sales $635.6 $697.0 10%
Beverages 472.8 531.0 12%
Consumer Durables 162.8 166.0 2%
Gross Profit $308.5 $344.9 12%
Beverages 230.0 266.2 16%
Consumer Durables 78.5 78.7 0%
Advertising Expenses $88.1 $87.5 (1%)
Beverages 63.2 63.6 1%
Consumer Durables 24.9 23.9 (4%)
Selling, General, and
Administrative Expenses $119.8 $133.0 11%
Beverages 80.8 89.5 11%
Consumer Durables 39.0 43.5 12%
Other Expense (Income), net $(6.2) $(2.5)
Beverages (7.2) (4.3)
Consumer Durables 1.0 1.8
Operating Income $106.8 $126.9 19%
Beverages 93.2 117.4 26%
Consumer Durables 13.6 9.5 (30%)
Interest Expense, net 0.8 4.9
Income Before Income Taxes $106.0 $122.0 15%
Taxes on Income 36.0 41.5
Net Income $70.0 $80.5 15%
Earnings Per Share
- Basic $0.51 $0.66 29%
- Diluted $0.51 $0.66 29%
Note: Earnings per share have been restated to reflect the 2-for-1 stock split
effective in January 2004.
Brown-Forman Corporation
Consolidated Statements of Income
(Dollars in millions, except per share amounts)
Nine Months Ended
January 31,
2003 2004 Change
Net Sales $1,806.7 $1,954.8 8%
Beverages 1,350.8 1,499.3 11%
Consumer Durables 455.9 455.5 0%
Gross Profit $894.7 $982.1 10%
Beverages 675.2 768.2 14%
Consumer Durables 219.5 213.9 (3%)
Advertising Expenses $252.8 $260.0 3%
Beverages 183.1 192.4 5%
Consumer Durables 69.7 67.6 (3%)
Selling, General, and
Administrative Expenses $357.4 $395.5 11%
Beverages 238.3 270.4 13%
Consumer Durables 119.1 125.1 5%
Other Expense (Income), net $(2.9) $8.8
Beverages (6.6) 4.1
Consumer Durables 3.7 4.7
Operating Income $287.4 $317.8 11%
Beverages 260.4 301.3 16%
Consumer Durables 27.0 16.5 (39%)
Interest Expense, net 2.6 15.0
Income Before Income Taxes $284.8 $302.8 6%
Taxes on Income 97.7 102.9
Net Income $187.1 $199.9 7%
Earnings Per Share
- Basic $1.37 $1.65 20%
- Diluted $1.36 $1.64 20%
Note: Earnings per share have been restated to reflect the 2-for-1 stock split
effective in January 2004.
Brown-Forman Corporation
Condensed Consolidated Balance Sheets
(Dollars in millions)
April 30, January 31,
2003 2004
Assets:
Cash and cash equivalents $ 72.0 $ 110.1
Accounts receivable, net 324.6 313.5
Inventories 584.6 590.3
Other current assets 85.9 94.0
Total current assets 1,067.1 1,107.9
Property, plant, and equipment, net 506.1 512.8
Trademarks and brand names 235.0 247.8
Goodwill 311.0 315.0
Other assets 144.4 148.4
Total assets $2,263.6 $2,331.9
Liabilities:
Commercial paper $ 167.1 $ 74.5
Accounts payable and accrued expenses 297.2 284.9
Accrued taxes on income 43.4 62.5
Dividends payable -- 25.8
Current portion of long-term debt 40.1 37.9
Total current liabilities 547.8 485.6
Long-term debt 628.7 629.8
Deferred income taxes 77.8 70.8
Accrued postretirement benefits 142.7 143.0
Other liabilities 26.4 29.1
Total liabilities 1,423.4 1,358.3
Stockholders' equity 840.2 973.6
Total liabilities and stockholders' equity $2,263.6 $2,331.9
Brown-Forman Corporation
Supplemental Information
(Dollars in millions)
Three Months Ended
January 31,
2003 2004
Depreciation and amortization $13.8 $14.3
Excise taxes $91.7 $103.1
Additions to property, plant, and equipment $18.5 $13.7
Effective tax rate 34.0% 34.0%
Shares (in thousands) used in the
calculation of earnings per share
- Basic 136,840 121,385
- Diluted 137,137 122,114
Nine Months Ended
January 31,
2003 2004
Depreciation and amortization $41.5 $41.7
Excise taxes $237.6 $272.9
Additions to property, plant, and equipment $54.7 $42.8
Effective tax rate 34.3% 34.0%
Shares (in thousands) used in the
calculation of earnings per share
- Basic 136,799 121,305
- Diluted 137,167 121,886
These figures have been prepared in accordance with the company's customary
accounting practices. Share data has been restated to reflect the 2-for-1 stock
split effective in January 2004.