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 25, 2005
Brown-Forman Corporation
(Exact name of registrant as specified in its charter)
Delaware 002-26821 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 2.02. Results of Operations and Financial Condition
Brown-Forman Corporation issued a press release today, May 25, 2005 reporting
results of its operations for the fiscal year and fiscal quarter ended April 30,
2005. A copy of this Brown-Forman Corporation press release is attached hereto
as Exhibit 99.1.
Item 9.01. Financial Statements and Exhibits
(a) Not applicable.
(b) Not applicable.
(c) Exhibits.
99.1 Press Release, dated May 25, 2005
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 25, 2005 By: /s/ Nelea A. Absher
Nelea A. Absher
Vice President and
Assistant Corporate Secretary
Exhibit Index
99.1 Press Release, dated May 25, 2005, issued by Brown-Forman Corporation,
reporting results of operations for fiscal year and fiscal quarter ended
April 30, 2005.
Exhibit 99.1
FOR IMMEDIATE RELEASE
BROWN-FORMAN REPORTS 21% EPS GROWTH FOR FISCAL 2005
Louisville, KY, May 25, 2005 - Led by its flagship brand, Jack Daniel's
Tennessee Whiskey, Brown-Forman Corporation reported earnings growth of 21% for
its fiscal year ended April 30, 2005. Reported earnings were $2.52 per share on
a diluted basis, up from $2.08 last year. Jack Daniel's annual worldwide
depletions(1) grew by over 680,000 cases to 7.9 million during fiscal 2005, the
highest annual case volume growth in the brand's long history.
Earnings were driven by exceptional performance from the company's premium
beverage portfolio (most notably Jack Daniel's, Southern Comfort and Finlandia
Vodka) and foreign currency benefits. These gains were partially offset by lower
global trade inventories for most of its beverage portfolio due in part to the
previously announced distribution changes in Continental Europe, and lower
profits from the Consumer Durables segment.
In April 2005, the company elected early adoption of FAS 123(R), which requires
the value of employee stock options to be recognized as expense. Results for
prior periods have been restated for comparability. Full year earnings include a
gain of $0.38 per share from the sale of the company's investment in
Glenmorangie plc and asset impairment charges of $0.32 per share recorded
earlier in the fiscal year associated primarily with the Lenox retail business.
--------
(1) Depletions are shipments from wholesale distributors to retailers and are
commonly used in the wine and spirits industry as an approximation of
consumer demand.
Adjusting reported earnings for the Glenmorangie gain, asset impairment charges,
favorable foreign currency, lower global trade inventories and the absence in
fiscal 2005 of litigation expenses incurred in the previous year, earnings per
share grew 10% for the year:
Reported Diluted EPS Growth 21%
Glenmorangie gain (18%)
Asset impairments 15%
Foreign currency benefits (9%)
Lower global trade inventories 4%
Absence of F04 litigation expenses (3%)
Adjusted Diluted EPS Growth 10%
Management believes that disclosure of this measure of earnings per share growth
is important because it more accurately reflects the underlying operations of
the company.
Fourth quarter diluted earnings per share were $0.49, up 7% compared to the
$0.46 earned in the prior year. A reduction in trade inventories for Jack
Daniel's and Southern Comfort in both Continental Europe and the United States,
higher Beverages operating expenses in the quarter, and a decline in profits in
Consumer Durables were more than offset by continued organic growth from the
company's Beverages segment, foreign exchange benefits, lower taxes, and lower
net interest expense.
Beverages
Consumer demand for premium spirits in the U.S. and in many international
markets remains very strong. Revenue and gross profit for the Beverages segment
were up 10% and 13%, respectively, in fiscal 2005. The strong revenue and gross
profit growth was driven by continued volume and price increases for most of the
company's premium brands and favorable foreign currency trends. The gross margin
percentage for the company's beverage portfolio improved to 52.7% from 51.4% as
a result of foreign currency benefits, price increases for Jack Daniel's and
Southern Comfort, and a favorable shift in brand mix.
Beverages segment advertising investments were up 11% in fiscal 2005 due to a
continuation of focused brand building efforts. SG&A expenses increased 13% for
the year, reflecting higher incentive compensation and pension expense, costs
associated with Sarbanes-Oxley compliance and the development of the company's
global distribution strategy, and advisory fees related to the exploration of
strategic alternatives for Lenox, Inc.
Consumer demand for Jack Daniel's was very strong during the year. Depletions
grew in the upper-single digits domestically and at a double-digit rate outside
of the U.S., led by expanded consumer demand in the United Kingdom, Continental
Europe, South Africa, and China. Volumes for Southern Comfort grew in the
mid-single digits globally, with notable strength in the U.S., U.K., South
Africa and Australia. Worldwide depletions for Finlandia were up in the
high-single digits led by double-digit increases in Poland and continued solid
growth in the U.S.
Depletions for mid-priced brands in the company's beverage portfolio (Canadian
Mist, Bolla and Fetzer) posted declines for the year, though the rates of
decline slowed when compared to the prior year. However, the company's
developing brands such as Tuaca, Sonoma-Cutrer and Woodford Reserve posted
strong double-digit increases.
The following chart summarizes the fiscal 2005 worldwide depletions for
Brown-Forman's major beverage brands.
Brand Cases (000's) % Change
Jack Daniel's 7,880 9%
Total RTD's(2) 2,845 12%
Southern Comfort 2,285 5%
Fetzer 2,210 (13%)
Canadian Mist 2,115 (2%)
Finlandia 1,845 7%
Bolla 1,300 (10%)
Korbel 1,165 2%
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(2) RTD (ready to drink) volumes include Jack Daniel's, Southern Comfort and
Finlandia RTD products but exclude Jack Daniel's Original Hard Cola which
was discontinued during fiscal 2005.
Consumer Durables
Excluding the effect of the $37 million write-down of Lenox goodwill related to
the retail business, Consumer Durables operating profit of $9 million for the
year was down sharply compared to last year. While lower net sales in all three
Lenox channels of distribution were only partially offset by significant
reductions in advertising spending and aggressive management of SG&A expenses,
the segment contributed an incremental $50 million to the company's net cash
flow.
As previously announced, the company is exploring strategic alternatives,
including a possible sale, for Lenox, Inc., which represents the vast majority
of the Consumer Durables segment.
Outlook
Owsley Brown II, Chairman and Chief Executive Officer said, "We are very pleased
with our fiscal 2005 results and remain optimistic about the favorable
environment for premium spirits within the United States and in many markets
around the world. Our portfolio of outstanding beverage brands, led by some of
the best brand builders in the industry, gives me great confidence in our
ability to continue to deliver superior returns to our shareholders while making
the appropriate amount of investment for the future." The company currently
anticipates fiscal 2006 earnings will be in the range of $2.70 to $2.80 per
share. Excluding the net impact of the Glenmorangie gain and the asset
impairment charges from fiscal 2005 earnings, this represents growth in the
range of 10% to 14%.
Conference Call
Brown-Forman will host a conference call to discuss its fiscal 2005 results
today at 10:00 a.m. EST. 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. 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 by accessing Brown-Forman's Internet Web
site, www.brown-forman.com, and then clicking on the "Investor Information"
icon.
For those unable to participate in the live call, a replay will be available two
hours after completion of the conference by calling 800-642-1687 (U.S.) or
706-645-9291 (international). The identification code is 6425332. A recording of
the conference call will also be available on the Web site approximately one
hour after the conclusion of the conference call. The replays will be available
for at least thirty days after the conference call.
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 news release 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,"
"anticipate," 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.
We believe that the expectations and assumptions with respect to our
forward-looking statements are reasonable. But by their nature, forward-looking
statements involve known and unknown risks, uncertainties and other factors that
in some cases are out of our control. These factors could cause our actual
results to differ materially from Brown-Forman's historical experience or our
present expectations or projections. Here is a non-exclusive list of such risks
and uncertainties:
- changes in general economic conditions, particularly in the United States
where we earn the majority of our profits;
- 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;
- a dramatic change in consumer preferences, social trends or cultural trends
that results in the reduced consumption of our premium spirits brands;
- 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.
Brown-Forman Corporation
Consolidated Statements of Income
(Dollars in millions, except per share amounts)
Three Months Ended
April 30,
2004 2005 Change
------ ------ ------
Net Sales $625.0 $612.8 (2%)
Beverages 495.8 502.3 1%
Consumer Durables 129.2 110.5 (14%)
Gross Profit $319.2 $326.1 2%
Beverages 259.0 277.5 7%
Consumer Durables 60.2 48.6 (19%)
Advertising Expenses $93.8 $ 92.0 (2%)
Beverages 72.6 74.5 2%
Consumer Durables 21.2 17.5 (17%)
Selling, General, and
Administrative Expenses $136.1 $149.8 10%
Beverages 100.0 116.5 16%
Consumer Durables 36.1 33.3 (8%)
Other Expense (Income), net $ 2.0 $(0.8)
Beverages (0.5) (1.1)
Consumer Durables 2.5 0.3
Operating Income (Loss) $ 87.3 $ 85.1 (2%)
Beverages 86.9 87.6 1%
Consumer Durables 0.4 (2.5) N/M
Interest Expense, net 4.3 2.3
Income Before Income Taxes $ 83.0 $ 82.8 0%
Taxes on Income 26.2 22.1
Net Income $56.8 $ 60.7 7%
Earnings Per Share
- Basic $0.47 $0.50 7%
- Diluted $0.46 $0.49 7%
Brown-Forman Corporation
Consolidated Statements of Income
(Dollars in millions, except per share amounts)
Year Ended
April 30,
2004 2005 Change
------- ------- ------
Net Sales $2,576.8 $2,728.8 6%
Beverages 1,992.1 2,194.6 10%
Consumer Durables 584.7 534.2 (9%)
Gross Profit $1,298.3 $1,399.8 8%
Beverages 1,024.2 1,156.1 13%
Consumer Durables 274.1 243.7 (11%)
Advertising Expenses $353.8 $370.8 5%
Beverages 265.0 292.9 11%
Consumer Durables 88.8 77.9 (12%)
Selling, General, and
Administrative Expenses $533.0 $573.6 8%
Beverages 371.8 419.2 13%
Consumer Durables 161.2 154.4 (4%)
Goodwill Impairment
Consumer Durables -- 37.0
Other Expense (Income), net $10.8 $ 0.4
Beverages 3.6 (1.9)
Consumer Durables 7.2 2.3
Operating Income (Loss) $400.7 $418.0 4%
Beverages 383.8 445.9 16%
Consumer Durables 16.9 (27.9) N/M
Gain on Sale of Investment
in Affiliate -- 72.3
Interest Expense, net 19.3 13.9
Income Before Income Taxes $381.4 $476.4 25%
Taxes on Income 127.4 168.1
Net Income $254.0 $308.3 21%
Earnings Per Share
- Basic $2.09 $2.53 21%
- Diluted $2.08 $2.52 21%
Brown-Forman Corporation
Condensed Consolidated Balance Sheets
(Dollars in millions)
April 30, April 30,
2004 2005
-------- --------
Assets:
Cash and cash equivalents $ 68 $ 295
Accounts receivable, net 348 344
Inventories 557 574
Other current assets 110 104
------ ------
Total current assets 1,083 1,317
Property, plant, and equipment, net 515 501
Trademarks and brand names 247 334
Goodwill 315 282
Other assets 216 190
------ ------
Total assets $2,376 $2,624
====== ======
Liabilities:
Accounts payable and accrued expenses $ 271 $ 311
Short-term borrowings 50 279
Accrued taxes on income 48 48
------ ------
Total current liabilities 369 638
Long-term debt 630 352
Deferred income taxes 112 132
Accrued postretirement benefits 137 156
Other liabilities 33 36
------ ------
Total liabilities 1,281 1,314
Stockholders' equity 1,095 1,310
------ ------
Total liabilities and stockholders' equity $2,376 $2,624
====== ======
Brown-Forman Corporation
Condensed Consolidated Statements of Cash Flows
(Dollars in millions)
Year Ended
April 30,
2004 2005
------ ------
Cash provided by operating activities $304 $396
Cash flows from investing activities:
Proceeds from sale of investment in affiliate -- 93
Acquisition of minority interest of subsidiary -- (64)
Additions to property, plant, and equipment (56) (49)
Other (7) 4
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Cash used for investing activities (63) (16)
Cash flows from financing activities:
Net decrease in debt (162) (50)
Dividends paid (97) (111)
Other 14 8
------- -------
Cash used for financing activities (245) (153)
------- -------
Net increase (decrease) in cash and cash equivalents (4) 227
Cash and cash equivalents, beginning of period 72 68
------- -------
Cash and cash equivalents, end of period $68 $295
======= =======
Brown-Forman Corporation
Supplemental Information
(Dollars in millions, except per share amounts)
Three Months Ended
April 30,
2004 2005
------ ------
Depreciation and amortization $14 $14
Excise taxes $91 $97
Effective tax rate 31.7% 26.7%
Cash dividends paid per common share $0.2125 $0.245
Shares (in thousands) used in the
calculation of earnings per share
- Basic 121,512 121,807
- Diluted 122,275 122,724
Year Ended
April 30,
2004 2005
------ ------
Depreciation and amortization $56 $58
Excise taxes $364 $417
Effective tax rate 33.5% 35.3%
Cash dividends paid per common share $0.80 $0.915
Shares (in thousands) used in the
calculation of earnings per share
- Basic 121,359 121,746
- Diluted 121,986 122,507
These figures have been prepared in accordance with the company's customary
accounting practices.