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): June 1, 2006
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, June 1, 2006 reporting
results of its operations for the fiscal quarter and fiscal year ended April 30,
2006. 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 June 1, 2006
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: June 1, 2006 By: /s/ Nelea A. Absher
Nelea A. Absher
Vice President and
Assistant Corporate Secretary
Exhibit Index
99.1 Press Release, dated June 1, 2006, issued by Brown-Forman Corporation,
reporting results of operations for the fiscal quarter and fiscal year
ended April 30, 2006.
Exhibit 99.1
FOR IMMEDIATE RELEASE
BROWN-FORMAN FISCAL 2006 EARNINGS FROM CONTINUING OPERATIONS UP 15%
Louisville, KY, June 1, 2006 - Brown-Forman Corporation reported record earnings
for the fiscal year ended April 30, 2006, driven by continued volume growth and
margin improvement from the company's premium beverage brands, particularly the
company's leading brand, Jack Daniel's Tennessee Whiskey. Solid volume and
profit growth were also registered by Southern Comfort, Finlandia Vodka, Jack
Daniel's ready-to-drink products, and Fetzer California Wines. The company's
premium developing brands, such as Sonoma-Cutrer, Gentleman Jack, Jack Daniel's
Single Barrel, and Woodford Reserve, recorded impressive double-digit growth in
volume and profits. Diluted earnings from continuing operations for the full
year were a record $3.20 per share, up 15% over the prior year.
Reported results from continuing operations for the current and prior year
included several unusual and timing-related items, the net impact of which
resulted in an underlying earnings growth rate that equaled the reported
earnings growth rate of 15%. These adjustments, which are outlined below,
include the absence of a gain recorded in the prior fiscal year related to the
company's sale of its shares in Glenmorangie plc; a current year gain related to
consideration received by the company for the early termination of marketing and
distribution rights to the Glenmorangie family of brands; a net gain related to
the restructuring of the ownership of the company's Australian distributor; a
gain on the sale of winery property; and the benefit of higher estimated global
trade inventories.
Earnings Per Share from Continuing Operations
Fiscal Fiscal
2005 2006 Change%
Reported $2.77 $3.20 15%
Glenmorangie gain (0.40) (0.11)
Australian distributor transition (0.15)
Gain on sale of winery (0.04)
Trade inventory levels 0.10 (0.05)
All other, net(1) 0.03 0.02
Adjusted (2) $2.50 $2.87 15%
Fourth quarter diluted earnings per share from continuing operations were $0.61,
up 20% from the same period last year, reflecting double-digit revenue and
profit growth for the company's premium global brands. Adjusting for the
favorable impact of higher year-end estimated global trade inventories,
incremental incentive compensation expense in the quarter (which represents
adjustments to prior period estimates based on stronger-than-expected full year
performance), and other items (including lower net interest expense, a lower
effective tax rate, and negative foreign exchange), earnings growth for the
fourth quarter approximated that of the full year.
--------
(1) Consists of various items including lower net interest expense, foreign
exchange effects, and tax rate changes.
(2) Management believes that disclosing this measure of earnings per share
growth is important because it more accurately reflects the underlying
operations of the company.
Fiscal 2006 revenues and gross profit were up 10% and 13%, respectively. Gross
profit growth of $151 million was driven primarily by outstanding results for
the company's premium global brands, including Jack Daniel's, Southern Comfort,
and Finlandia. Gross margin improved to 54.0%, up from 52.5% in the prior year,
due to price increases for several key brands, a favorable shift of business to
more profitable regions and brands, significantly lower costs for several wine
brands, and higher margins associated with changes in distribution agreements.
Advertising expenses increased 10%, driven by incremental investments behind the
company's premium global brands and premium developing brands, such as Tuaca
Italian Liqueur and Woodford Reserve. SG&A grew 12% for the year, due partially
to changes in the company's global distribution structure designed to improve
the company's direct influence over in-market brand-building activities, a
strategy that also resulted in incremental gross profit in most of these
countries. Reported operating income from continuing operations grew $117
million, up 26% for the year.
These exceptional financial results were driven by continued robust consumer
demand for Jack Daniel's throughout the world. Global depletions(3) for the
brand exceeded 8.5 million nine-liter cases, up 8% over the prior year, while
its gross profit grew at a double-digit rate. During fiscal 2006, the brand's
volume grew for the 14th consecutive year, adding 665,000 nine-liter cases to
its already large base, including a gain of nearly 300,000 nine-liter cases in
the U.S., its largest market. Internationally, the brand posted volume gains in
all regions of the world, with particular strength in China, South Africa,
France, Germany, Romania and Canada.
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(3) Depletions are shipments from wholesale distributors to retail customers,
and are commonly regarded in the industry as an approximate measure of
consumer demand.
Southern Comfort's volumes were up 5% for the second consecutive fiscal year,
fueled by growth in the U.S., South Africa, and Germany. Finlandia's depletion
growth rate accelerated to 15%, led by healthy double-digit growth in Poland,
Israel, and Russia.
Overall depletions for the company's mid-priced regional brands declined
slightly, as solid growth for Fetzer and Korbel was offset by declines for
Canadian Mist, Bolla and Early Times. Volumes for the company's super-premium
developing brands were up nearly 20%, led by excellent double-digit growth for
Sonoma-Cutrer, Bonterra, Tuaca, and Woodford Reserve.
The following chart summarizes the fiscal 2006 worldwide depletions for
Brown-Forman's largest beverage brands.
Brand Nine-Liter Cases % Change vs 2005
(000's)
Jack Daniel's 8,550 8%
Total RTDs(4) 3,095 9%
Fetzer 2,410 9%
Southern Comfort 2,400 5%
Finlandia 2,120 15%
Canadian Mist 2,035 (4%)
Bolla 1,220 (5%)
Korbel Champagne 1,215 4%
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(4) RTD (ready-to-drink) volumes include Jack Daniel's, Southern Comfort and
Finlandia RTD products.
Outlook
Paul Varga, the company's chief executive officer, stated "Fiscal 2006 was
certainly one of the strongest in our company's 136 year history. The strength
and health of our brands, the focused brand-building efforts of our people and
partners, and the favorable environment for premium wines and spirits all
combined to produce these exceptional results. For fiscal 2007, we expect
earnings within the range of $3.10 to $3.30 per share, representing growth of 7%
to 14% over comparable fiscal 2006 earnings."
Conference Call
Brown-Forman will host a conference call to discuss full year 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 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.
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 9681406. A digital audio recording of the conference call will also be
available on the Brown-Forman website approximately one hour after the
conclusion of the conference call. The replay will be available for at least 30
days following 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 Champagne, 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,"
"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;
- lower consumer confidence or purchasing in the wake of catastrophic events;
- tax increases, whether at the federal or state level or in major
international markets and/or tariff barriers or other restrictions affecting
beverage alcohol;
- limitations and restrictions on distribution of products and alcohol
marketing, including advertising and promotion, as a result of stricter
governmental policies adopted either in the United States or globally;
- adverse developments in the class action lawsuits filed against Brown-Forman
and other spirits, beer and wine manufacturers alleging that our industry
conspired to promote the consumption of alcohol by those under the legal
drinking age;
- a strengthening U.S. dollar against foreign currencies, especially the
British Pound, Euro, and Australian Dollar;
- reduced bar, restaurant, hotel and travel business in wake of terrorist
attacks or threats, such as occurred in September 2001 in the U.S. and in
July 2005 in London;
- lower consumer confidence or purchasing associated with rising energy prices;
- a decline in U.S. spirits consumption as might be indicated by recent
published trends suggesting a slight reduction in the growth rate of
distilled spirits consumption;
- longer-term, a change in consumer preferences, social trends or cultural
trends that results in the reduced consumption of our premium spirits brands;
- changes in distribution arrangements in major markets that limit our ability
to market or sell our products;
- increases in the price of energy or raw materials, including grapes, grain,
wood, glass, and plastic;
- excess wine inventories or a further world-wide oversupply of grapes;
- termination of our rights to distribute and market agency brands included in
our portfolio;
- adverse developments as a result of state investigations of beverage alcohol
industry trade practices of suppliers, distributors and retailers.
Brown-Forman Corporation
Consolidated Statements of Income
(Dollars in millions, except per share amounts)
Three Months Ended
April 30,
2005 2006 Change
------ ------ ------
CONTINUING OPERATIONS
Net sales $511.4 $594.3 16%
Gross profit 281.0 326.2 16%
Advertising expenses 75.5 80.8 7%
Selling, general, and
administrative expenses 119.1 143.5 20%
Other income, net (1.2) (0.7)
Operating income 87.6 102.6 17%
Interest expense (income), net 2.3 (0.3)
Income before income taxes 85.3 102.9 21%
Income taxes 23.1 27.3
Net income 62.2 75.6 21%
Earnings per share:
Basic 0.511 0.618 21%
Diluted 0.507 0.610 20%
DISCONTINUED OPERATIONS
Net income (loss) $ (1.5) $ 2.8
Earnings (loss) per share:
Basic (0.012) 0.023
Diluted (0.012) 0.023
TOTAL COMPANY
Net income $ 60.7 $ 78.4 29%
Earnings per share:
Basic 0.499 0.641 29%
Diluted 0.495 0.633 28%
Brown-Forman Corporation
Consolidated Statements of Income
(Dollars in millions, except per share amounts)
Year Ended
April 30,
2005 2006 Change
------ ------ ------
CONTINUING OPERATIONS
Net sales $2,227.0 $2,444.3 10%
Gross profit 1,169.9 1,321.0 13%
Advertising expenses 295.4 325.6 10%
Selling, general, and
administrative expenses 430.3 480.0 12%
Other income, net (1.8) (47.2)
Operating income 446.0 562.6 26%
Gain on sale of investment
in affiliate 72.3 --
Interest expense, net 13.9 3.4
Income before income taxes 504.4 559.2 11%
Income taxes 164.6 164.0
Net income 339.8 395.2 16%
Earnings per share:
Basic 2.791 3.236 16%
Diluted 2.774 3.202 15%
DISCONTINUED OPERATIONS
Net loss $(31.5) $(74.8)
Loss per share:
Basic (0.259) (0.612)
Diluted (0.257) (0.606)
TOTAL COMPANY
Net income $308.3 $320.4 4%
Earnings per share:
Basic 2.532 2.624 4%
Diluted 2.517 2.596 3%
Brown-Forman Corporation
Condensed Consolidated Balance Sheets
(Dollars in millions)
April 30, April 30,
2005 2006
------ ------
Assets:
Cash and cash equivalents $ 295 $ 475
Short-term investments -- 160
Accounts receivable, net 296 328
Inventories 470 523
Current assets held for sale 157 9
Other current assets 97 115
----- -----
Total current assets 1,315 1,610
Property, plant, and equipment, net 418 429
Trademarks and brand names 334 325
Goodwill 193 195
Noncurrent assets held for sale 218 1
Other assets 171 168
----- -----
Total assets $2,649 $2,728
===== =====
Liabilities:
Accounts payable and accrued expenses $ 264 $ 293
Accrued income taxes 42 48
Short-term borrowings 279 225
Current liabilities held for sale 53 3
----- -----
Total current liabilities 638 569
Long-term debt 351 351
Deferred income taxes 158 133
Accrued postretirement benefits 78 78
Noncurrent liabilities held for sale 83 --
Other liabilities 31 34
----- -----
Total liabilities 1,339 1,165
Stockholders' equity 1,310 1,563
----- -----
Total liabilities and stockholders' equity $2,649 $2,728
===== =====
Brown-Forman Corporation
Condensed Consolidated Statements of Cash Flows
(including cash flows from discontinued operations)
(Dollars in millions)
Year Ended
April 30,
2005 2006
------ ------
Cash flows from operating activities:
Continuing operations $354 $363
Discontinued operations 42 (19)
----- -----
Cash provided by operating activities 396 $344
Cash flows from investing activities:
Proceeds from sale of discontinued operations -- 195
Proceeds from sale of investment in affiliate 93 --
Investment in short-term securities -- (160)
Acquisition of minority interest in subsidiary (64) --
Additions to property, plant, and equipment (45) (52)
Other -- 13
----- -----
Cash used for investing activities (16) (4)
Cash flows from financing activities:
Net decrease in debt (50) (55)
Dividends paid (111) (128)
Other 8 23
----- -----
Cash used for financing activities (153) (160)
----- -----
Net increase in cash and cash equivalents 227 180
Cash and cash equivalents, beginning of period 68 295
----- -----
Cash and cash equivalents, end of period $295 $475
===== =====
Brown-Forman Corporation
Continuing Operations Only
Supplemental Information
(Dollars in millions, except per share amounts)
Three Months Ended
April 30,
2005 2006
------ ------
Depreciation and amortization $11.3 $11.2
Excise taxes $97.2 $122.5
Effective tax rate 27.1% 26.6%
Cash dividends paid per common share $0.245 $0.280
Shares (in thousands) used in the
calculation of earnings per share
Basic 121,807 122,288
Diluted 122,724 123,787
Year Ended
April 30,
2005 2005
------ ------
Depreciation and amortization $44.1 $43.5
Excise taxes $416.6 $468.4
Effective tax rate 32.6% 29.3%
Cash dividends paid per common share $0.915 $1.050
Shares (in thousands) used in the
calculation of earnings per share
Basic 121,746 122,094
Diluted 122,507 123,439
These figures have been prepared in accordance with the company's customary
accounting practices.