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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
BROWN-FORMAN CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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(BROWN-FORMAN CORPORATION LOGO)
OWSLEY BROWN II
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
June 29, 2001
Dear Brown-Forman Stockholder:
It is my pleasure to invite you to attend our Annual Stockholders Meeting:
Thursday, July 26, 2001
9:30 A.M. (Eastern Daylight Time)
Brown-Forman Conference Center
850 Dixie Highway
Louisville, Kentucky
Attending the meeting will give you the opportunity to hear a discussion of our
business over the past year and to ask questions.
I hope to see you on July 26. All Class A Stockholders are urged to fill in and
return to us the attached proxy (voting) card, whether or not you can attend in
person. Your vote is very important to us.
Sincerely,
/s/ Owsley Brown
--------------------------------------------
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(BROWN-FORMAN CORPORATION LOGO)
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
Brown-Forman Corporation will hold its annual meeting for holders of its Class A
Common Stock IN THE CONFERENCE CENTER AT OUR CORPORATE OFFICES, 850 DIXIE
HIGHWAY, LOUISVILLE, KENTUCKY, AT 9:30 A.M., LOUISVILLE TIME (EDT), ON THURSDAY,
JULY 26, 2001.
We are holding this meeting to:
- elect a board of ten directors to hold office until the next annual
stockholders' meeting; and
- transact whatever other business may properly come before the meeting.
You can vote at the meeting if you held Class A Common Stock of record on our
books at the close of business on June 18, 2001. Holders of Class B Common Stock
may attend the meeting but may not vote. We will not close the stock transfer
books. Class A stockholders can vote either in person or by proxy, which means
you designate someone else to vote your shares.
FOR CLASS A STOCKHOLDERS, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE:
- SIGN AND DATE THE ENCLOSED PROXY CARD; AND
- RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
GIVING A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE YOUR SHARES IF YOU ATTEND THE
MEETING IN PERSON AND DECIDE TO VOTE DIFFERENTLY. ONLY HOLDERS OF CLASS A COMMON
STOCK MAY VOTE AT THE MEETING. WE ARE NOT ASKING FOR PROXY CARDS FROM HOLDERS OF
CLASS B COMMON STOCK.
We enclose a copy of our Annual Report for the fiscal year ended April 30, 2001,
for you to review.
Louisville, Kentucky
June 29, 2001
By Order of the Board of Directors
Michael B. Crutcher, Secretary
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TABLE OF CONTENTS
QUESTIONS AND ANSWERS........................................................1
INTRODUCTION.................................................................3
Purpose.............................................................3
Voting Stock........................................................3
Voting Rights.......................................................3
ELECTION OF DIRECTORS........................................................4
Committees..........................................................5
Directors' Meetings.................................................5
STOCK OWNERSHIP..............................................................6
Voting Stock Owned by "Beneficial Owners"...........................6
Stock Owned by Directors and Executive Officers.....................7
Section 16(a) Beneficial Ownership Reporting Compliance.............7
AUDIT COMMITTEE..............................................................8
Audit Committee Report..............................................8
EXECUTIVE COMPENSATION......................................................10
Compensation Committee Report......................................10
Summary Compensation Table.........................................12
Option Grants under the Omnibus Compensation Plan..................13
Aggregated Option Values at End of Fiscal 2001.....................13
RETIREMENT PLAN DESCRIPTIONS................................................14
DIRECTOR COMPENSATION.......................................................15
FIVE-YEAR PERFORMANCE GRAPH.................................................16
OTHER INFORMATION...........................................................17
Transactions with Management.......................................17
Appointment of Independent Accountants.............................17
Other Proposed Action..............................................17
Stockholder Proposals for 2002 Annual Meeting......................17
CHARTER OF THE AUDIT COMMITTEE.......................................Exhibit A
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QUESTIONS AND ANSWERS
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Q: WHAT IS THE PURPOSE OF THIS PROXY STATEMENT?
A: By law, we must give our stockholders certain basic information so they
can vote knowledgeably at our annual stockholders meeting.
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Q: WHO MAY VOTE?
A: Persons who held our Class A Common Stock on June 18, 2001. Class B
Common stockholders cannot vote.
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Q: WHAT AM I VOTING ON?
A: The election of all members of our Board of Directors. You may also
vote on any other matter that is properly brought before the meeting.
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Q: WHAT IS THE PROXY CARD FOR?
A: By completing and signing the Proxy (voting) Card, you authorize the
individuals named on the card to vote your shares for you.
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Q: WHAT IF I SUBMIT A PROXY CARD AND THEN CHANGE MY MIND ON HOW I
WANT TO VOTE?
A: No problem. You may revoke your proxy by writing us or by attending
the meeting and casting your vote in person.
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Q: WHO ARE THE NOMINEES FOR DIRECTORS?
A: We have ten directors. All of them are running for re-election. We
describe each director briefly in this Proxy Statement.
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Q: WHOM MAY I CALL WITH A QUESTION ABOUT THE ANNUAL MEETING?
A: For information about your stock ownership or for other stockholder
services, please call Linda Gering, our Stockholder Services Manager, at
502-774-7690. For information about the meeting itself, please call
Michael B. Crutcher, our Corporate Secretary, at 502-774-7631.
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INTRODUCTION
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THIS SECTION DESCRIBES THE PURPOSE OF THIS PROXY STATEMENT, WHO CAN VOTE, AND
HOW TO VOTE.
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PURPOSE. The Board of Directors of Brown-Forman Corporation is sending you this
Proxy Statement to solicit proxies for use at the annual stockholders meeting,
which will be held Thursday, July 26, 2001, at 9:30 Louisville time (EDT) at
Brown-Forman Corporation, 850 Dixie Highway, Louisville, Kentucky. The Board
requests you to sign and return the enclosed proxy.
Beginning on June 29, 2001, we will solicit proxies by mail. In addition, our
employees may solicit proxies by mail, phone, fax, the Internet or in person. We
will pay all solicitation costs. We will reimburse banks, brokers, nominees, and
other fiduciaries for their reasonable charges and expenses incurred in
forwarding our proxy materials to their principals.
VOTING STOCK. We have two classes of common stock, Class A and Class B. Only
holders of Class A Common Stock may vote. As of the record date, June 18, 2001,
we had outstanding 28,988,091 shares of Class A Common Stock.
VOTING RIGHTS. If you were a Class A stockholder on June 18, 2001, and the books
of our transfer agent reflect your stock ownership, you may cast one vote for
each share recorded in your name. You may vote your shares either in person or
by proxy. To vote by proxy, please mark, date, sign, and mail the proxy card we
enclose with this Proxy Statement.
Giving a proxy will not affect your right to vote your shares if you attend the
meeting and want to vote in person. You may revoke a proxy at any time before it
is voted by sending our Secretary written notice of your revocation. We will
vote all shares represented by effective proxies in accordance with the terms
stated in the proxy.
A quorum to conduct business at the meeting consists of a majority of the
outstanding Class A shares. To be elected, a director must receive a majority of
the votes present at a meeting at which there is a quorum. Likewise, a majority
of the shares represented at the meeting must approve any other matters brought
to a vote at the meeting. We will count shares voted as "abstaining" as present
for purposes of determining the number of shares represented at the meeting, but
as votes withheld in the election of a director or on any other matter coming
before the meeting. If a broker holding your shares in a street name indicates
to us on a proxy card that he or she lacks discretionary authority to vote your
shares, we will not consider your shares as present or voting for any purpose.
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ELECTION OF DIRECTORS
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THIS SECTION GIVES BIOGRAPHICAL INFORMATION ABOUT OUR DIRECTORS AND DESCRIBES
THE COMMITTEES ON WHICH THEY SERVE AND THEIR ATTENDANCE AT MEETINGS.
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At the Annual Meeting, you and our other shareholders will elect ten directors.
All of our directors are standing for re-election. Once elected, a director
holds office until the next annual election of directors or until his or her
successor has been elected and qualified, unless he or she first resigns or
reaches retirement age. The persons named as proxies will vote the enclosed
proxy FOR the election of all nominees below, unless you direct them on the
proxy card to withhold your vote. If any nominee becomes unable to serve before
the meeting, the persons named as proxies may vote for a substitute.
Here are the director nominees, their ages as of April 30, 2001, the years they
began serving as directors, their business experience for the last five years,
and their other directorships:
JERRY E. ABRAMSON, age 54, director since 1999. Of Counsel, Frost Brown Todd LLC
since January 1999; Mayor of Louisville, Kentucky (1986 to 1998).
BARRY D. BRAMLEY, age 63, director since 1996. Non-Executive Chairman, Lenox,
Incorporated (a subsidiary of Brown-Forman) since 1998; Non-Executive
Chairman of Cromwell Parker, PLC, High Wycombe, England (1998 to 2000);
Chairman and Chief Executive Officer of British-American Tobacco Company
Ltd., London, England (1988 to 1996); Director of BAT Industries, PLC,
London, England (1988 to 1996). Other directorships: Anglia Maltings
(Holdings), Ltd. and Skandinavisk Tobakskompagni A/S.
GEO. GARVIN BROWN III*, age 57, director since 1971. Chairman of Trans-Tek, Inc.
since 1988.
OWSLEY BROWN II*, age 58, director since 1971. Our Chief Executive Officer since
1993 and our Chairman since 1995; our President from 1987 to 1995. Other
directorships: NACCO Industries, Inc.
DONALD G. CALDER, age 63, director since 1995. President and CFO, G.L. Ohrstrom
& Co., Inc., a private investment firm, since 1997; Vice President of
Ohrstrom & Co. (1996 to 1997); Partner of predecessor partnership, G.L.
Ohrstrom & Co. (1970 to 1996). Chairman and CEO of Harrow Industries (1997
to 1999). Other directorships: Carlisle Companies Incorporated, Roper
Industries, Inc. and Central Securities Corporation.
OWSLEY BROWN FRAZIER*, age 65, director since 1964. Our former Vice Chairman
(1983 to May 2000).
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* Geo. Garvin Brown III and Dace Brown Stubbs are siblings. Dace Brown
Stubbs and Geo. Garvin Brown III are first cousins of Owsley Brown II
and Owsley Brown Frazier, who are themselves first cousins. Due to
their positions as directors, their family relationships, and their
beneficial ownership of our Class A Common Stock, each may be
considered a "control person" of Brown-Forman.
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RICHARD P. MAYER, age 61, director since 1994. Former Chairman and Chief
Executive Officer of Kraft General Foods North America (now Kraft Foods
Inc.) (1989 to 1996). Other directorships: Dean Foods Company.
STEPHEN E. O'NEIL, age 68, director since 1978. Principal, The O'Neil Group
(1991 to present). Other directorships: Alger American Fund, Inc.; Alger
Fund, Inc.; Castle Convertible Fund, Inc.; NAHC, Inc.; and Spectra Fund,
Inc.
WILLIAM M. STREET**, age 62, director since 1971. Our President since November,
2000; our Vice Chairman from 1987 to November, 2000; President and Chief
Executive Officer, Brown-Forman Beverages Worldwide (a division of
Brown-Forman) since 1994. Other directorships: National City Bank of
Kentucky.
DACE BROWN STUBBS*, age 54, director since 1999. Private investor.
COMMITTEES. The Board has an Audit Committee, which in fiscal 2001 was composed
of outside directors Richard P. Mayer (chairman), Jerry E. Abramson and
Stephen E. O'Neil. We also have a Compensation Committee, which in fiscal
2001 was composed of outside directors Stephen E. O'Neil (chairman), Richard
P. Mayer and Donald G. Calder.
The Audit Committee monitors and oversees the Company's internal controls and
the financial reporting process, including recommending to the Board the hiring
of independent accountants. It met three times during fiscal 2001.
The Compensation Committee sets the compensation of our Chairman/CEO and
President and administers short and long term bonus awards for a group of our
most highly paid officers. It met twice in fiscal 2001.
The Board has no standing nominating committee.
DIRECTORS' MEETINGS. The Board met eight times during fiscal 2001. Each current
director attended at least 75% of the aggregate number of Board and applicable
committee meetings held in fiscal 2001.
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** Because of Mr. Street's position as a director and executive
officer, as well as his beneficial ownership of our Class A
Common Stock, he may be considered a "control person" of
Brown-Forman.
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10
STOCK OWNERSHIP
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THIS SECTION DESCRIBES (A) PEOPLE WHO OWN BENEFICIALLY 5% OR MORE OF OUR VOTING
STOCK AND (B) HOW MUCH STOCK OUR DIRECTORS AND EXECUTIVE OFFICERS OWN. UNDER THE
SEC'S DEFINITION OF "BENEFICIAL OWNERSHIP," SOME SHARES ARE SHOWN AS OWNED BY
MORE THAN ONE PERSON AND ARE THEREFORE COUNTED MORE THAN ONCE.
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VOTING STOCK OWNED BY "BENEFICIAL OWNERS." This table shows each "beneficial
owner" of more than 5% of our Class A Common Stock, our only class of voting
stock, as of April 30, 2001. The Securities and Exchange Commission defines
"beneficial ownership" to include shares over which a person has sole or shared
voting or investment power, as well as all shares underlying options that are
exercisable within sixty days. Under this definition, "beneficial owners" may or
may not receive any economic benefit (such as receiving either dividends or sale
proceeds) from the shares attributed to them. USING THIS DEFINITION, SOME SHARES
SHOWN BELOW ARE OWNED BY MORE THAN ONE PERSON. Some "beneficial owners" share
voting and investment powers as members of advisory committees of certain
trusts of which corporate fiduciaries are the trustees. Counting each share only
once, the aggregate number of shares of Class A Common Stock beneficially owned
by the people in this table is 20,924,195 shares, or 72.1% of the outstanding
shares of that class.
================================================================================
AMOUNT AND NATURE OF
"BENEFICIAL OWNERSHIP"
----------------------------------------
TOTAL SOLE
SOLE SHARED AND SHARED
VOTING AND VOTING AND VOTING AND
INVESTMENT INVESTMENT INVESTMENT PERCENT OF
NAME AND ADDRESS POWER POWER POWER CLASS
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W.L. LYONS BROWN, JR.
501 So. Fourth Avenue
Louisville, Kentucky 736,465 13,045,747 13,782,212 47.5%
OWSLEY BROWN FRAZIER
850 Dixie Highway
Louisville, Kentucky 580,225 11,560,978 12,141,203 41.9%
DACE BROWN STUBBS
135 Sago Palm Road
Vero Beach, Florida 1,000 9,444,864 9,445,864 32.6%
OWSLEY BROWN II
850 Dixie Highway
Louisville, Kentucky 490,822 5,298,608 5,789,340 19.9%
INA B. BOND
8215 West U.S. Highway 42
Skylight, Kentucky 979,149 3,348,381 4,327,530 14.9%
ROBINSON S. BROWN, JR.
5208 Avish Lane
Harrods Creek, Kentucky 190,915 2,871,286 3,062,201 10.6%
SANDRA A. FRAZIER
424 Pennington Lane
Louisville, Kentucky 166,728 2,116,314 2,283,042 7.9%
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STOCK OWNED BY DIRECTORS AND EXECUTIVE OFFICERS. The following table shows the
"beneficial ownership" as of April 30, 2001, by each director nominee, by each
Named Executive Officer (as defined on page 11), and by all directors and
executive officers as a group, of our Class A and Class B Common Stock.
===================================================================================================================
CLASS A COMMON STOCK CLASS B COMMON STOCK
------------------------------------------- ----------------------------------------
SOLE &
VOTING & SHARED VOTING SOLE & SHARED
INVESTMENT POWER & INVESTMENT POWER INVESTMENT POWER INVESTMENT POWER
---------------------- ------------------ -------------------- -----------------
% OF % OF
NAME SOLE SHARED TOTAL CLASS SOLE SHARED TOTAL CLASS
===================================================================================================================
Jerry E. Abramson 140 0 140 * 3,037 0 3,037 *
Barry D. Bramley 100 0 100 * 6,167 0 6,167 *
Geo. Garvin Brown III 52,009 1,298,251 1,350,260 4.7% 6,940 60,845 67,785 *
Owsley Brown II 490,822 5,298,608 5,789,430 19.9% 84,040 4,710,325 4,794,365 12.1%
Donald G. Calder 6,000 0 6,000 * 2,396 0 2,396 *
Michael B. Crutcher 7,663 0 7,663 * 14,632 0 14,632 *
Owsley Brown Frazier 580,225 11,560,978 12,141,203 41.9% 63,282 7,842,965 7,906,247 20%
Stanley E. Krangel 0 0 0 * 5,551 0 5,551 *
Richard P. Mayer 3,000 0 3,000 * 5,396 0 5,396 *
Stephen E. O'Neil 0 0 0 * 2,396 500(1) 2,896 *
William M. Street 560,549 0 560,549 1.9% 24,386 0 24,386 *
Dace Brown Stubbs 1,000 9,444,864 9,445,864 32.6% 3,481 7,842,965 7,846,446 19.9%
James S. Welch, Jr 42 0 42 * 3,967 2,000 5,967 *
All Directors and Executive
Officers as a Group(2) 1,656,946 16,281,808 17,938,754 61.9% 234,773 12,545,730 12,780,503 32.3%
===================================================================================================================
* Less than 1%.
(1) Owned by The O'Neil Foundation, of which Mr. O'Neil is President. Mr.
O'Neil disclaims beneficial ownership of these shares.
(2) In computing the aggregate number of shares and percentages owned by
all directors and executive officers as a group, we counted each share
only once.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Executive officers,
directors, and "beneficial owners" of more than 10% of our Class A Common Stock
must file reports of changes in ownership of our stock pursuant to Section 16(a)
of the Securities Exchange Act of 1934. We have reviewed the reports and written
representations we received from these persons. Based solely on this review, we
believe that during fiscal 2001 these persons reported all transactions on a
timely basis, except that Mr. James S. Welch, Jr. inadvertently failed to
include certain shares held in trust, for which he is trustee, on his initial
report of stock ownership on Form 3. Mr. Welch reported these shares on an
amendment to the Form 3.
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AUDIT COMMITTEE
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THIS SECTION IS A REPORT FROM THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS. IT
EXPLAINS THE ROLE OF THE AUDIT COMMITTEE AND SETS FORTH THE FEES PAID TO OUR
EXTERNAL AUDITOR.
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AUDIT COMMITTEE REPORT
COMPOSITION. The Audit Committee consists of three non-employee directors. In
accordance with the rules of the New York Stock Exchange, the Board of Directors
has determined that each Committee member is independent and financially
literate and has financial management expertise.
CHARTER. The Committee's purpose and function are described in more detail in
the Charter for the Audit Committee (Exhibit A). This charter was reviewed and
approved by the Board of Directors on May 25, 2000 and is in compliance with
rules of the New York Stock Exchange and Securities and Exchange Commission.
FUNCTION. The Committee's responsibility is to monitor and oversee the financial
reporting process, the system of internal controls, the audit process, and the
corporation's program for compliance with applicable governmental laws and
regulations. To place the Committee's role in perspective, management is
responsible for the Company's internal controls, the financial reporting
process, and the corporation's program for compliance. The external auditors are
responsible for performing an independent audit of the Company's financial
statements in accordance with generally accepted accounting principles and
issuing a report on this. The Committee reviews the work of management and the
external auditors on behalf of the Board of Directors.
The Committee met three times during the year, during which the committee
members had discussions with management and the external auditors. Management
has represented to the Committee that the Company's consolidated financial
statements were prepared in accordance with generally accepted accounting
principles. The Committee discussed those statements with management and the
external auditors, including discussions with the external auditors in executive
session with representatives of management excluded.
The Committee discussed with the external auditors matters required to be
discussed by the Statement on Auditing Standards No. 61 (Communication with
Audit Committees), as amended. The external auditors provided to the Committee
the written disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees). The Committee discussed with
the external auditors their independence and ability to conduct the audit.
In addition, the Committee reviews reports from the internal audit department of
the Company, which investigates the adequacy of internal financial controls. The
Committee hears reports from the Company's legal department on compliance with
the Company's internal Code of Conduct and governmental laws and regulations.
AUDIT FEES. The following is a summary of fees billed to the Company by
PricewaterhouseCoopers LLP for the fiscal year ended April 30, 2001:
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- Audit Fees: $567,992.
- Financial Information Systems Design and Implementation Fees: $0.
- All Other Fees: $1,181,399.
The Audit Committee has considered whether the services provided other than
audit services referenced above are compatible with maintenance of the principal
accountant's independence.
CONCLUSION. Based on the foregoing, we recommended that the Company's audited
financial statements be included in the Company's Annual Report on Form 10-K for
the fiscal year ending April 30, 2001.
RICHARD P. MAYER, CHAIRMAN STEPHEN E. O'NEIL JERRY E. ABRAMSON
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EXECUTIVE COMPENSATION
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THIS SECTION IS A REPORT FROM THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS. THE REPORT EXPLAINS OUR COMPENSATION PHILOSOPHY, HOW COMPENSATION
DECISIONS ARE MADE FOR OUR MOST SENIOR EXECUTIVES, AND HOW WE COMPLY WITH
SECTION 162(m) OF THE INTERNAL REVENUE CODE (WHICH GOVERNS OUR ABILITY TO DEDUCT
THE COMPENSATION OF OUR MOST HIGHLY PAID OFFICERS).
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COMPENSATION COMMITTEE REPORT
FUNCTION. The Compensation Committee consists of three non-employee directors.
The Compensation Committee administers the short and long term bonus plans for
the Company's seven senior executives, who are referred to as Executive
Officers. The Executive Officer group is divided into two subgroups:
- the Chairman/CEO, Owsley Brown II, and President William M. Street;
and
- five other Executive Officers.
The Compensation Committee sets the salaries for Mr. Brown and Mr. Street. The
Management Compensation Review Committee (which consists of Mr. Brown and Mr.
Street) sets salaries for the five other Executive Officers.
The Committee met twice in fiscal 2001 to review and determine the compensation
of Mr. Brown and Mr. Street, and to review compensation recommendations prepared
by the Company's Management Compensation Review Committee for the remaining five
Executive Officers.
COMPENSATION PHILOSOPHY. The Committee sets compensation targets for the seven
Executive Officers using the same philosophy the Company uses in setting
compensation for all salaried employees: first, to offer sufficient compensation
to attract, motivate and retain high-quality talent; and second, to tie bonus
achievement to the Company's successful financial performance.
MR. BROWN AND MR. STREET. The Committee relies in part on survey data to set the
salary and bonuses for Mr. Brown and Mr. Street. The results of two different
surveys, one from Hay Management Consultants and the other from Hewitt
Associates, are reviewed annually. Hay surveys compensation of officers at
companies in the manufacturing business (such as H. J. Heinz and Wm. Wrigley Jr.
Corporation). Hewitt surveys companies in the consumer products business (such
as Fortune Brands and Hershey Foods Corporation). This is the field from which
the Company typically recruits executives. This data is blended (appropriately
adjusted for the size of the company) on a 50% - 50% basis to derive
compensation levels that the Committee believes are representative of the
market. This year the Committee also reviewed survey data from Towers Perrin,
which provides surveys of executive compensation in appropriate manufacturing
and consumer products companies.
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The compensation mix of Mr. Brown and Mr. Street consists of salary (32%),
annual bonus (24%), and long term compensation (44%). Salaries are set with
respect to the market data. The Committee develops targets for annual and long
term bonuses based on Business Value Added (BVA), which is the Company's
after-tax income in excess of our estimate of the Company's cost of capital.
Long term compensation consists of cash, which is paid based upon reaching BVA
goals over three years, and stock options, which vest after three years and are
exercisable within ten years.
The Committee sets compensation targets that are somewhat above the mid-market
level to attract and retain the type of executives who will provide the fine
leadership our Company needs for success.
In considering compensation for fiscal 2001, in addition to the survey data
discussed above, the Committee looked at the compensation increases
(approximately 4.5%) for Company employees who are not eligible for bonuses, and
the Company's performance last fiscal year. The Committee also looked carefully
at the increases in long term equity-based incentives being offered to top
executives in the market place while weighing the extensive family and personal
holdings of Mr. Brown as well as the holdings of Mr. Street to appropriately
motivate and adequately link these executives to the interests of all
shareholders. In that light, and in light of the good performance of these
executives as reflected in the Company's continuing growth, the Committee
approved appropriate compensation increases for Mr. Brown and Mr. Street.
OTHER EXECUTIVE OFFICERS. The Committee set the short and long term bonuses for
the Company's five other Executive Officers, in each case upon the
recommendation of the Management Compensation Review Committee. The Management
Compensation Review Committee sets the salaries for the Company's other
Executive Officers.
COMPLIANCE WITH TAX LAW LIMITS ON DEDUCTIBILITY OF COMPENSATION: Section 162(m)
of the Internal Revenue Code limits to $1 million the amount of annual
compensation an employer may deduct when paid to a Named Executive Officer
(those Executive Officers shown on the Summary Compensation Table). The law
does, however, allow employers to deduct compensation over $1 million if it is
"performance based" and paid under a formal compensation plan that meets the
Code's requirements. The Company took appropriate steps in setting goals under
the Company's Omnibus Compensation Plan to assure the deductibility of all
compensation paid to Named Executive Officers. The Committee expects the Company
to be able to deduct all fiscal 2001 compensation.
CONCLUSION: Based upon the information available at the time the Committee
determined the compensation for fiscal 2001 for our Executive Officers, the
Committee believes that the levels of compensation were consistent with targeted
levels and that the compensation increases granted during fiscal 2001 were
prudent.
STEPHEN E. O'NEIL, Chairman RICHARD P. MAYER DONALD G. CALDER
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THE NEXT SECTION CONTAINS CHARTS THAT SHOW THE AMOUNT OF COMPENSATION EARNED BY
OUR NAMED EXECUTIVE OFFICERS.
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SUMMARY COMPENSATION TABLE
================================================================================================================
ANNUAL LONG TERM
COMPENSATION COMPENSATION
-------------------- -----------------------
AWARDS: PAYOUTS:
CLASS B LONG TERM ALL OTHER
NAME AND PRINCIPAL POSITIONS FISCAL YEAR SHARES INCENTIVE COMPEN-
ENDED SALARY BONUS(1) UNDERLYING PAYMENTS(2) SATION(3)
APRIL 30, ($) ($) OPTIONS (#) ($) ($)
================================================================================================================
OWSLEY BROWN II 2001 826,661 686,700 39,542 446,827 13,485
Chairman of the Board and Chief 2000 779,021 792,000 27,557 415,846 12,960
Executive Officer 1999 719,160 654,835 25,361 325,920 8,400
================================================================================================================
WILLIAM M. STREET 2001 570,178 489,846 27,229 290,325 13,417
President 2000 542,390 564,960 18,321 531,522 12,926
1999 517,013 467,255 16,478 391,516 8,400
================================================================================================================
STANLEY E. KRANGEL 2001 407,125 313,394 2,323 1,041,667 8,085
President, Lenox Incorporated 2000 387,000 253,703 1,848 193,692 7,710
1999 350,955 225,147 1,967 164,520 6,000
================================================================================================================
MICHAEL B. CRUTCHER 2001 333,950 176,511 4,850 189,098 11,073
Senior Vice President, General Counsel 2000 318,881 181,404 3,575 204,593 10,392
and Secretary 1999 302,721 119,071 3,578 136,602 10,110
================================================================================================================
JAMES S. WELCH, JR. 2001 250,383 136,547 8,443 116,016 10,527
Senior Vice President, Executive Director 2000 215,466 144,243 6,159 66,389 9,584
of Human Resources 1999 161,812 76,718 2,637 19,649 9,244
================================================================================================================
Explanatory Notes:
We award up to 50% of long term bonus compensation as stock options, with the
balance in cash to be paid at the end of each three-year performance period (it
will then appear on this table as a long term compensation payout). Stock option
values can increase or decrease; the present values (as of the grant date) of
the stock option awards in the Long Term Compensation Awards column appear in
the table on page 13.
(1) Represents cash payments under the annual incentive plan.
(2) Represents cash payments under the long term incentive plan.
(3) Represents our contributions to the Savings Plan and our payment of group
term life insurance premiums on behalf of the Named Executive Officers.
12
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OPTION GRANTS UNDER THE OMNIBUS COMPENSATION PLAN
The Omnibus Compensation Plan covers both short term and long term bonuses.
Stock options awarded in fiscal 2001 under this plan are described below.
We grant options with an exercise price of the fair market value of the
underlying stock on the date of grant. Generally, options become exercisable
three years after grant and must be exercised within ten years of grant. This
year, we granted options for approximately 400,000 shares of our stock for long
term bonus awards to management participants. As required by the Omnibus
Compensation Plan, we will buy all shares needed to exercise these options, so
there will be no dilution of the equity of existing stockholders. The table
below summarizes the grants to the Named Executive Officers.
======================================================================================================================
NUMBER OF SHARES OF
CLASS B COMMON PERCENT OF TOTAL OPTIONS
STOCK UNDERLYING GRANTED TO EMPLOYEES PER SHARE EXPIRATION DATE: PRESENT VALUE AS
NAME OPTIONS GRANTED IN FISCAL YEAR EXERCISE PRICE APRIL 30, OF GRANT DATE(1)
=======================================================================================================================
Brown 39,542 10% 50.44 2010 561,890
STREET 27,229 7% 50.44 2010 386,918
KRANGEL 2,323 * 50.44 2010 33,000
CRUTCHER 4,850 1% 50.44 2010 68,915
WELCH 8,443 2% 50.44 2010 119,970
======================================================================================================================
* less than 1%
(1) We used the Black-Scholes option pricing model to determine present
value. We assumed a risk-free interest rate of 6.3%, stock price
volatility of 27%, a yield of 2.5%, and option life of six years (to
allow for voluntary early exercises and exercises that may accelerate
as a result of disability, termination, retirement, or death).
AGGREGATED OPTION VALUES AT END OF FISCAL 2001
The following table summarizes all option grants that have been made to the
Named Executive Officers through and including fiscal 2001.
=========================================================================================================
NUMBER OF
SHARES VALUE NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED OPTIONS
ACQUIRED IN REALIZED IN UNEXERCISED OPTIONS AT END OF FISCAL YEAR*
FISCAL 2001 FISCAL 2001 ---------------------------- --------------------------------
NAME BY OPTION BY OPTION EXERCISABLE EXERCISABLE
EXERCISE EXERCISE MAY 1, 2001 UNEXERCISABLE MAY 1, 2001 UNEXERCISABLE
=========================================================================================================
Brown 0 0 82,861 67,099 $ 1,065,824 $ 409,655
STREET 0 0 24,386 45,550 144,989 282,092
KRANGEL 0 0 5,551 4,171 62,994 24,066
CRUTCHER 0 0 11,211 8,425 130,455 50,246
WELCH 0 0 3,967 14,602 21,872 87,469
=========================================================================================================
* This value is the total difference between the outstanding options'
exercise price and $60.80, the closing price of our Class B Common
Stock on April 30, 2001.
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RETIREMENT PLAN DESCRIPTIONS
--------------------------------------------------------------------------------
THIS SECTION DESCRIBES RETIREMENT AND SAVINGS PLANS FOR OUR EXECUTIVES.
--------------------------------------------------------------------------------
Our executives participate in several different retirement and savings plans:
(1) RETIREMENT PLANS: We maintain both tax-qualified retirement plans and
non-qualified supplemental excess retirement plans. Most salaried employees
participate in the Salaried Employees Retirement Plan. This plan provides
monthly retirement benefits based on age at retirement, years of service and the
average of the five highest consecutive years' compensation during the final ten
years of employment. Retirement benefits are not offset by Social Security
benefits and are normally payable at age 65. A participant's interest in plan
benefits vests after five years of service. The following table shows the
estimated annual benefits (straight life annuity) payable upon retirement at
normal retirement age to participants at specified levels of compensation and
years of service:
================================================================================
AVERAGE ANNUAL HIGHEST 5
CONSECUTIVE YEARS' YEARS OF SERVICE CLASSIFICATION
COMPENSATION DURING ---------------------------------------------
FINAL 10 YEARS 10 YEARS 20 YEARS 30 YEARS
================================================================================
$ 400,000 $ 68,325 $136,651 $ 204,976
$ 800,000 $138,325 $276,651 $ 414,976
$1,200,000 $208,325 $416,651 $ 624,976
$1,600,000 $278,325 $556,651 $ 834,976
$2,000,000 $348,325 $696,651 $1,044,976
================================================================================
For example, an executive retiring at age 65 with 10 years of service whose
average annual compensation for the five highest of the executive's ten years of
service was $400,000, would receive an estimated $68,325 annually for the
remainder of the executive's life.
Federal tax law limits the benefits that we might otherwise pay to key employees
under "qualified" plans such as the Salaried Employees Retirement Plan.
Therefore, for certain key employees, we also maintain a non-qualified
Supplemental Excess Retirement Plan (SERP). The SERP provides retirement
benefits to make up the difference between a participant's accrued benefit
calculated under the Salaried Employees Retirement Plan and the ceiling imposed
by federal tax law. SERP participants may choose to get a discounted current
cash payment instead of a SERP retirement benefit. The SERP also provides
supplemental retirement benefits for certain key employees who join us in
mid-career, subject to special vesting requirements.
For the Named Executive Officers, covered compensation for fiscal 2001 for these
plans and service credited as of April 30, 2001, were as follows: Owsley Brown
II, $1,618,661 and 30 years; William M. Street, $1,135,138 and 30 years; Stanley
A. Krangel, $660,828 and 6 years; Michael B. Crutcher, $515,354 and 12 years;
and James S. Welch, Jr., $394,626 and 12 years.
(2) SAVINGS PLAN: Subject to a maximum the IRS sets annually ($10,500 for
calendar 2001), most participants in our Savings Plan may contribute between 2%
and 15% of their compensation to their Savings Plan accounts. Our match of
participants' contributions is currently 4.25% (on the first 5% of the
employee's contribution), and vests fully after four years of service.
14
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DIRECTOR COMPENSATION
--------------------------------------------------------------------------------
THIS SECTION DESCRIBES HOW WE COMPENSATE OUR DIRECTORS.
--------------------------------------------------------------------------------
We do not pay our two employee directors (Mr. Brown and Mr. Street) additional
compensation for serving on our Board or its committees. We compensate our
directors who are not employees at an annual rate of $25,000, payable in equal
periodic installments, plus $2,000 per Board meeting and $2,000 per committee
meeting attended; committee chairmen receive an additional $1,000 for chairing
committee meetings. Directors may elect in advance of their one year term to
receive their retainer (but not meeting fees) in the form of an equivalent value
of stock options issued at the start of their terms. In addition, under the
Non-Employee Director Compensation Plan, each director who is not an employee
received options for $25,000 worth of Class B Common Stock (1,760 options with a
per share exercise price of $50.44 each).(1) We reimburse all directors for
reasonable and necessary expenses they incur in performing their duties as
directors, and we provide an additional travel allowance to directors who must
travel to Board meetings from outside the United States.
--------
(1) The present value of the options was determined using the
Black-Scholes model described on page 13.
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FIVE-YEAR PERFORMANCE GRAPH
--------------------------------------------------------------------------------
THIS CHART SHOWS HOW BROWN-FORMAN CLASS B COMMON STOCK HAS PERFORMED AGAINST
FOUR STOCK INDEXES OVER THE LAST FIVE YEARS.
--------------------------------------------------------------------------------
This graph compares the cumulative total stockholder return on our Class B
Common Stock against four indexes which include that stock: the Standard &
Poor's 500 Stock Index, the Dow Jones Consumer Non-Cyclical Index (110
companies), the Dow Jones Food and Beverage Makers (45 companies), and the S&P
Beverage Alcohol Index (3 companies). As a diversified producer of both beverage
alcohol products and consumer durables including china, crystal, luggage, and
silverware, our business does not fit easily into specific industry indexes. We
included the Dow Jones Consumer Non-Cyclical Index as a diversified index, even
though portions of our business are cyclical. The Dow Jones Food and Beverage
Makers Index is newly added in 2001, and provides you with the opportunity to
compare our performance against the performance of other producers of consumer
branded products (e.g., Campbell Soup, Hershey Foods Corp., PepsiCo). While the
S&P Beverage Alcohol Index might appear to be a reasonable one against which to
measure our stock's performance, it contains only three companies, and those are
unevenly matched in relative market capitalization.(1) In addition, Brown-Forman
is the only spirits and wine company in the index, the other two being beer
companies. Accordingly, we will not include the S&P Beverage Alcohol index in
future proxy statements. Overall, we believe it is best to compare the
cumulative total stockholder return on our Class B Common Stock not to a single
index, but rather to trends shown by a review of several indexes.
These numbers assume that $100 was invested in our Class B stock and in each
index on April 30, 1996, and that all quarterly dividends were reinvested at the
average of the closing stock prices at the beginning and end of the quarter. The
cumulative returns shown on the graph represent the value that these investments
would have had on April 30 in the years since 1996.
(GRAPH)
----------------------------------------------------
1996 1997 1998 1999 2000 2001
--------------------------------------------------------------------------------
BROWN-FORMAN CLASS B $100 $131 $150 $199 $151 $172
--------------------------------------------------------------------------------
S&P 500 $100 $125 $177 $215 $237 $191
--------------------------------------------------------------------------------
S&P BEVERAGE ALCOHOL $100 $125 $149 $210 $200 $229
--------------------------------------------------------------------------------
DJ CONSUMER, NON-CYCLICAL $100 $132 $165 $189 $151 $158
--------------------------------------------------------------------------------
DJ FOOD & BEVERAGE MAKERS $100 $136 $170 $157 $122 $142
--------------------------------------------------------------------------------
--------
(1) Relative capitalization shown in parentheses: Anheuser-Busch Companies
(89%); Adolph Coors Company (6%); and Brown-Forman (5%).
16
21
OTHER INFORMATION
--------------------------------------------------------------------------------
THIS SECTION SETS OUT OTHER INFORMATION YOU SHOULD KNOW BEFORE YOU CAST YOUR
VOTE.
--------------------------------------------------------------------------------
TRANSACTIONS WITH MANAGEMENT
Jerry E. Abramson is Of Counsel with the Louisville law firm of Frost Brown Todd
LLC. We used this firm's services in fiscal 2001 and expect to use this firm's
services again in fiscal 2002.
Mr. Barry D. Bramley receives compensation for serving as the non-executive
Chairman of the Board of Directors of Lenox, Incorporated. As Chairman, Mr.
Bramley received an annualized retainer, paid in monthly installments, as well
as reimbursement for all reasonable and necessary expenses incurred in
performing the duties of Chairman. Mr. Bramley's retainer during fiscal 2001 was
$227,000.
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Our Board has appointed PricewaterhouseCoopers, LLP as the independent certified
public accountants to audit our consolidated financial statements for the fiscal
year ending April 30, 2002. Through its predecessor, Coopers & Lybrand L.L.P.,
PricewaterhouseCoopers, LLP has served us in this capacity continuously since
1933. We know of no direct or material indirect financial interest that
PricewaterhouseCoopers, LLP has in us or any of our subsidiaries, or of any
connection with us or any of our subsidiaries by PricewaterhouseCoopers, LLP in
the capacity of promoter, underwriter, voting trustee, director, officer, or
employee.
A PricewaterhouseCoopers, LLP representative will attend the annual meeting,
will be given the opportunity to make a statement if he wants to, and will be
available to respond to appropriate questions.
OTHER PROPOSED ACTION
As of June 29, 2001, we know of no business to come before the meeting other
than the election of directors. If any other business should properly be
presented to the meeting, however, the proxies will be voted in accordance with
the judgment of the persons holding them.
STOCKHOLDER PROPOSALS FOR 2002 ANNUAL MEETING
If you have a proposal you want to be considered at the 2002 Annual Meeting of
Stockholders and to be included in the proxy materials for that meeting, we must
receive it in writing by March 5, 2002.
By Order of the Board of Directors
MICHAEL B. CRUTCHER
Secretary
Louisville, Kentucky
June 29, 2001
17
22
(BROWN-FORMAN CORPORATION LOGO)
EXHIBIT A
AUDIT COMMITTEE CHARTER
COMPOSITION:
The Audit Committee shall be comprised of at least three directors, each of
whom shall be independent from management. The Committee shall otherwise
satisfy the applicable membership requirements under the rules of the New
York Stock Exchange, as such requirements are interpreted by the Board of
Directors in its business judgment. The members of the Committee and its
chairperson shall be appointed by the Board of Directors.
MEETINGS:
The Audit Committee shall meet at least three times per year. The
chairperson may call additional meetings if necessary.
AUTHORITY:
The Audit Committee acts with the authority of the Board to oversee the
financial integrity of the Corporation and to investigate any activity of
the Company that may affect such financial integrity. All employees are
directed to cooperate as requested by the Committee. The Committee is
empowered to retain persons having special competence as necessary to
assist the Committee in fulfilling its responsibility.
RESPONSIBILITY:
The Audit Committee of the Board of Directors is responsible for oversight
of the financial reporting process, the system of internal controls, the
audit process, and the corporation's program for compliance with applicable
governmental laws and regulations. It is the Board's principal agent in
assuring the independence of the corporation's independent accountants, the
integrity of management, and the adequacy of disclosures to stockholders.
23
IN CARRYING OUT ITS RESPONSIBILITY, THE AUDIT COMMITTEE SHALL UNDERTAKE THE
FOLLOWING ACTIVITIES:
1. With respect to the outside auditor:
- Provide advice to the Board of Directors in selecting, evaluating, or
replacing outside auditors, who are ultimately accountable to the
Board of Directors and Audit Committee.
- Review the fees charged by the outside auditors for audit and
non-audit services.
- Request that the outside auditors prepare and deliver annually a
Statement as to Independence.
- Discuss with the outside auditors any relationships or services that
may impact the objectivity and independence of the auditors. If there
are any such issues relating to the objectivity or independence of the
auditors, recommend that the Board of Directors take appropriate
action.
2. With respect to the internal audit department:
- Review and concur in the appointment and replacement of the General
Auditor.
- Review the activities, organizational structure and qualifications of
the internal audit function.
3. With respect to internal controls and financial reporting:
- Advise management, the General Auditor, and the outside auditors that
they are expected to provide to the Audit Committee a timely analysis
of significant financial reporting issues and practices.
- Discuss with management and the outside auditors the quality and
adequacy of the Company's internal control structure.
- Review the outside auditors' proposed audit scope and approach. At the
conclusion of such audit, review audit findings, including any
significant suggestions for improvements provided to management by the
outside auditors.
- Review with management and the outside auditors the audited financial
statements to be included in the Company's Annual Report to
Shareholders to
A-2
24
determine that the outside auditors are satisfied with the disclosure,
content, and quality of the financial statements to be presented to
shareholders. Review and consider with the outside auditors the
matters required to be discussed by Statement of Auditing Standards
No. 61 relating to the conduct of the audit.
- As a whole, or through the Committee chairperson, review with the
outside auditors the Company's interim financial results to be
included in the Company's quarterly reports to be filed with the
Securities and Exchange Commission and the matters required to be
discussed by Statement of Auditing Standards No. 61. This review will
occur prior to the Company's filing of the Form 10-Q.
- Review significant accounting and reporting issues, including recent
professional and regulatory pronouncements, and understand their
impact on the financial statements.
- Review, with the Company's General Counsel, any legal matters that
could have a significant impact on the Company's financial statements.
- Review the findings of any examinations by financial regulatory
agencies, such as the Securities and Exchange Commission.
- Review the Company's corporate compliance program.
4. With respect to other responsibilities:
- Assure that an Audit Committee Report is provided to shareholders in
the Company's proxy statement that complies with the reporting
requirements of the Securities and Exchange Commission and the New
York Stock Exchange for such reports.
- Review this Charter at least annually and recommend any changes to the
full Board of Directors.
- Report Committee actions to the full Board of Directors on a regular
basis and make such recommendations as the Committee may deem
necessary or appropriate.
- Perform other oversight functions as requested by the full Board of
Directors.
A-3
25
PROXY
BROWN-FORMAN CORPORATION
THIS PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
FOR USE BY HOLDERS OF SHARES OF CLASS A COMMON STOCK
ANNUAL STOCKHOLDERS' MEETING, JULY 26, 2001
THE UNDERSIGNED hereby appoint(s) Owsley Brown II, Michael B. Crutcher, and
William M. Street, and each of them attorneys and proxies, with power of
substitution, to vote all of the shares of Class A Common Stock of Brown-Forman
Corporation standing of record in the name of the undersigned at the close of
business on June 18, 2001, at the Annual Meeting of Stockholders of the
Corporation, to be held on July 26, 2001, and at all adjourned sessions thereof,
in accordance with the Notice and the Proxy Statement received, for the election
of directors of the Corporation, and upon such other matters as may properly
come before the meeting.
Election of Directors, Nominees:
Jerry E. Abramson; Barry D. Bramley; Geo. Garvin Brown III; Owsley Brown II;
Donald G. Calder; Owsley Brown Frazier; Richard P. Mayer; Stephen E. O'Neil;
William M. Street; Dace Brown Stubbs
Change of Address
--------------------------------
--------------------------------
--------------------------------
--------------------------------
(If you have written in the above
space, please mark the
corresponding box on the reverse
side of this card.)
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, SEE
REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE
WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT VOTE YOUR
SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
----------------
SEE REVERSE SIDE
----------------
26
------ PLEASE MARK 4762
x YOUR VOTES AS IN
------ THIS EXAMPLE.
This proxy, when properly executed will be voted in the manner directed below
by the undersigned stockholder(s).
If no direction is made, this proxy will be voted FOR the election of the
directors named.
--------------------------------------------------------------------------------
1. Election of FOR* WITHHELD [ ] Change of
Directors [ ] [ ] Address on
(see reverse) Reverse Side
* For all nominee(s), except vote withheld from the following:
--------------------------------------------------------------
--------------------------------------------------------------------------------
SIGNATURE(S) DATE ,2001
---------------------------------------- ---------------
NOTE:Please mark, sign, date and return the proxy card promptly using the
enclosed envelope. This proxy must be signed exactly as the name or names
appear above. If you are signing as a trustee, executor, etc., please so
indicate.