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): May 27, 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 May 27, 2004
Item 12. Results of Operations and Financial Condition
Brown-Forman Corporation issued a press release on May 27, 2004 reporting
results of its operations for the fiscal quarter and fiscal year ended April 30,
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: May 27, 2004 By: /s/ Michael B. Crutcher
Michael B. Crutcher
Vice Chairman, General Counsel
and Corporate Secretary
Exhibit Index
99.1 Press Release, dated May 27, 2004, issued by Brown-Forman Corporation
Exhibit 99.1
FOR IMMEDIATE RELEASE
BROWN-FORMAN REPORTS 16% EPS GROWTH FOR FISCAL 2004
Louisville, KY, May 27, 2004 - Brown-Forman Corporation reported earnings per
share for the year ended April 30, 2004 of $2.11, up 16% over the prior year.
(All earnings per share amounts have been adjusted to reflect the January 2004
two-for-one stock split.) The strong earnings performance was due to solid
profit growth for both Jack Daniel's and Southern Comfort, benefits from a
weaker U.S. dollar, the effects of the March 2003 share repurchase, and a modest
increase in profits from the company's wine brands. Partially offsetting these
factors was a significant drop in profits from the Consumer Durables segment.
Fiscal 2004 earnings were also reduced by $0.06 per share due to the settlement
of a lawsuit with Diageo involving the distribution of Jack Daniel's in the
United Kingdom.
Fourth quarter earnings per share were $0.47, up 5% from the $0.45 earned in the
previous year. Sales and gross profit growth for the Beverage segment remained
strong in the fourth quarter. However, as previously communicated, fourth
quarter earnings growth was suppressed by a significant increase in advertising
and promotional investments designed to accelerate the future growth of the
spirits brands. In addition, fourth quarter results were moderated by a
reduction in global trade inventories for Beverages and lower operating income
from Consumer Durables. These factors, combined with continued higher pension
costs, tempered earnings growth for the quarter.
Beverages
Demand for premium spirits brands has accelerated over the past year,
particularly in the United States, the company's largest market. Revenue and
gross profit for the Beverage segment were up 11% and 14%, respectively, in
fiscal 2004. The strong revenue and gross profit growth was driven by favorable
currency trends, continued volume growth and price increases for the company's
premium spirits brands, the addition of new markets to Brown-Forman's
distribution arrangement for Finlandia Vodka, and the increased profitability of
the company's new distribution arrangement in the U.K. Gross profit from the
company's wine brands declined due to a drop in volumes for both Fetzer and
Bolla. However, the gross margin percentage for the company's wine brands
increased slightly this year, caused by selected price increases and a favorable
shift in mix.
Due in part to the robust environment for spirits in the U.S., beverage
advertising investments were up over 15% in fiscal 2004, as the company
significantly increased brand building efforts behind its premium spirits
brands. SG&A expenses increased 11%, reflecting the consolidation of the
operations of Finlandia Vodka Worldwide and Tuoni e Canepa, both of which were
acquired late in the prior fiscal year; $7 million of incremental pension and
post-retirement expense; $4 million of wine reorganization costs; and
incremental sales and marketing personnel in the U.K. to support the new, more
profitable distribution arrangement.
Jack Daniel's and Southern Comfort both achieved record profit levels last year.
Favorable currency trends, the new distribution arrangement in the U.K., and
higher volumes and pricing contributed to double-digit profit growth for the
brands. Consumer demand for Jack Daniel's Tennessee Whiskey accelerated this
year, particularly in the United States, where volumes were up in the mid-single
digits. Volume growth was also strong in the U.K., Canada, South Africa and
China. Volumes in Korea, Japan and most of Continental Europe were sluggish,
however, as mixed economic conditions and unfavorable trends for premium spirits
moderated volume growth. Volumes for Southern Comfort were positive in the U.S.,
U.K. and South Africa, but weak in most of the brand's other major markets.
Brown-Forman volumes for Finlandia were also up, reflecting the new markets of
distribution added late last fiscal year. Sales for Finlandia in the U.S.
improved in the second half of the fiscal year, as the introduction of a new
package and increased promotional investments stimulated demand for the brand.
Although both Canadian Mist and Early Times struggled in the highly competitive
mid-priced spirits market in the U.S., the company's developing brands (such as
Woodford Reserve and Tuaca Liqueur) continue to show very strong volume growth.
Profits for the company's wine brands improved slightly in fiscal 2004 as volume
declines for Fetzer and Bolla were more than offset by lower brand and SG&A
spending. Continued competitive pressure from both imported and domestic wine
brands, lower industry pricing, and above-market contract grape costs created a
difficult environment for the company's California wines. Partially as a result
of these challenges, the company reorganized its wine operations (incurring
approximately $4 million in severance and related costs), which should benefit
future results. In contrast to the oversupply situation in California, a
shortage of certain Italian grape varietals and the weaker U.S. dollar increased
costs for Bolla. In response to these cost pressures, Bolla increased pricing
more aggressively than its competitors, which contributed to the brand's volume
decline. Volumes and profits for Korbel Champagnes were higher, as the brand
continued to increase its market share in the United States.
The following chart summarizes the fiscal 2004 worldwide depletions for
Brown-Forman's major beverage brands. Depletions are defined as nine-liter case
movements from wholesale distributors to retailers, and are generally used in
the wine and spirits industry as the most accurate approximation of consumer
demand.
Brand Cases (000's) % Change
Jack Daniel's 7,205 6%
Total RTDs (1) 2,540 14%
Southern Comfort 2,185 1%
Canadian Mist 2,150 (7%)
Finlandia (2) 1,725 35%
Fetzer 2,550 (14%)
Bolla 1,440 (13%)
Korbel 1,145 2%
(1) RTD (ready-to-drink) volumes include Jack Daniel's, Southern Comfort
and Finlandia RTD products with the exception of Jack Daniel's
Original Hard Cola, which was marketed and sold by SABMiller during
fiscal 2004.
(2) Depletions for Finlandia benefited from the addition of new markets
to Brown-Forman's distribution agreement. Excluding these new
markets, comparable depletions for Finlandia were up 2%.
Consumer Durables
The environment for the fine china, tableware, giftware, and luggage categories
has not improved. Sales at Lenox were essentially flat this year as modest
increases in sales to wholesale customers were offset by declines in sales in
both the company's retail outlet stores and the direct-to-consumer division. The
segment experienced a slight drop in gross profit, primarily from a shift in
product mix and aggressive discounting designed to lower retail outlet
inventories.
The new management team at Lenox has taken steps to reduce fixed costs, increase
production efficiencies, close unprofitable retail outlet locations, and develop
relevant new products. As a result, the company incurred several charges,
including severance, a write-down for impaired real estate associated with
previous plant closures, and start-up costs related to a new distribution
center. The company expects that these actions, combined with lower capital
expenditures and lower inventory requirements, will result in an increase in
cash flow and earnings for the segment next year.
Outlook
Owsley Brown II, Chairman and Chief Executive Officer said, "Brown-Forman is
optimistic about its earnings outlook for fiscal 2005, due to expected growth
for Jack Daniel's and Southern Comfort, improved profitability for the wine
brands, and benefits from the recent initiatives in the Consumer Durables
segment." As a result, the company currently expects fiscal 2005 earnings to
grow approximately 10-15%, to a range of $2.32 to $2.42 per share.
Conference Call
The company will host a conference call to discuss fiscal 2004 financial results
at 4:30 p.m. this afternoon. 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 4:30 p.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 7503042. 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 and will remain on the Web site
for at least 30 days.
Brown-Forman Corporation is a diversified producer and marketer of fine quality
consumer products, including Jack Daniel's, Canadian Mist, Southern Comfort,
Finlandia Vodka, 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 statements, estimates or projections that constitute
"forward looking statements" as defined under U.S. federal securities laws.
Generally, the words "expect", "believe", "intend", "estimate", "will", and
"project" and similar expressions 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 also 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 other terrorist
attacks, such as occurred on 9/11;
- developments in the 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 our excess wine inventories, 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
April 30,
2003 2004 Change
Net Sales $570.8 $625.0 9%
Beverages 445.5 495.8 11%
Consumer Durables 125.3 129.2 3%
Gross Profit $286.7 $319.2 11%
Beverages 226.0 259.0 15%
Consumer Durables 60.7 60.2 (1%)
Advertising Expenses $68.5 $93.8 37%
Beverages 46.9 72.6 55%
Consumer Durables 21.6 21.2 (2%)
Selling, General, and
Administrative Expenses $128.8 $134.5 4%
Beverages 92.3 98.4 7%
Consumer Durables 36.5 36.1 (1%)
Other Expense (Income), net $(1.6) $ 2.0
Beverages (0.7) (0.5)
Consumer Durables (0.9) 2.5
Operating Income $ 91.0 $ 88.9 (2%)
Beverages 87.5 88.5 1%
Consumer Durables 3.5 0.4 (89%)
Interest Expense, net 3.0 4.3
Income Before Income Taxes $ 88.0 $ 84.6 (4%)
Taxes on Income 29.8 26.8
Net Income $58.2 $57.8 (1%)
Earnings Per Share
- Basic $0.45 $0.48 5%
- Diluted $0.45 $0.47 5%
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)
Year Ended
April 30,
2003 2004 Change
Net Sales $2,376.3 $2,576.8 8%
Beverages 1,795.1 1,992.1 11%
Consumer Durables 581.2 584.7 1%
Gross Profit $1,180.3 $1,298.3 10%
Beverages 900.2 1,024.2 14%
Consumer Durables 280.1 274.1 (2%)
Advertising Expenses $321.3 $353.8 10%
Beverages 230.0 265.0 15%
Consumer Durables 91.3 88.8 (3%)
Selling, General, and
Administrative Expenses $485.1 $526.9 9%
Beverages 329.5 365.7 11%
Consumer Durables 155.6 161.2 4%
Other Expense (Income), net $(4.5) $10.8
Beverages (7.3) 3.6
Consumer Durables 2.8 7.2
Operating Income $378.4 $406.8 8%
Beverages 348.0 389.9 12%
Consumer Durables 30.4 16.9 (45%)
Interest Expense, net 5.6 19.3
Income Before Income Taxes $372.8 $387.5 4%
Taxes on Income 127.5 129.8
Net Income $245.3 $257.7 5%
Earnings Per Share
- Basic $1.82 $2.12 17%
- Diluted $1.82 $2.11 16%
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, April 30,
2003 2004
Assets:
Cash and cash equivalents $ 72.0 $ 67.7
Accounts receivable, net 324.6 348.6
Inventories 584.6 557.2
Other current assets 85.9 110.0
Total current assets 1,067.1 1,083.5
Property, plant, and equipment, net 506.1 515.2
Trademarks and brand names 235.0 246.6
Goodwill 311.0 314.6
Other assets 144.4 216.1
Total assets $2,263.6 $2,376.0
Liabilities:
Commercial paper $ 167.1 $ 49.5
Accounts payable and accrued expenses 297.2 271.5
Accrued taxes on income 43.4 48.0
Current portion of long-term debt 40.1 0.1
Total current liabilities 547.8 369.1
Long-term debt 628.7 629.9
Deferred income taxes 77.8 122.2
Accrued postretirement benefits 142.7 136.7
Other liabilities 26.4 33.0
Total liabilities 1,423.4 1,290.9
Stockholders' equity 840.2 1,085.1
Total liabilities and stockholders' equity $2,263.6 $2,376.0
Brown-Forman Corporation
Supplemental Information
(Dollars in millions)
Three Months Ended
April 30,
2003 2004
Depreciation and amortization $13.5 $14.3
Excise taxes $79.9 $90.7
Additions to property, plant, and equipment $63.9 $12.8
Effective tax rate 33.8% 31.7%
Shares (in thousands) used in the
calculation of earnings per share
- Basic 128,373 121,512
- Diluted 128,781 122,275
Year Ended
April 30,
2003 2004
Depreciation and amortization $55.0 $56.0
Excise taxes $317.5 $363.7
Additions to property, plant, and equipment $118.6 $55.6
Effective tax rate 34.2% 33.5%
Shares (in thousands) used in the
calculation of earnings per share
- Basic 134,748 121,359
- Diluted 135,126 121,986
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.