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): August 26, 2004
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 on August 26, 2004 reporting
results of its operations for the fiscal quarter ended July 31, 2004. 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 August 26, 2004
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: August 26, 2004 By: /s/ Nelea A. Absher
Nelea A. Absher
Vice President and Assistant
Corporate Secretary
Exhibit Index
99.1 Press Release, dated August 26, 2004, issued by Brown-Forman Corporation
Exhibit 99.1
FOR IMMEDIATE RELEASE
BROWN-FORMAN CORPORATION REPORTS RECORD FIRST QUARTER EARNINGS
Louisville, KY, August 26, 2004 - Brown-Forman Corporation reported diluted
earnings per share for its first quarter ended July 31, 2004 of $0.42, up 66%
from the $0.26 earned in the same period last year. Earnings growth was driven
primarily by continued volume and margin improvement from the company's premium
spirits portfolio and profits from the company's introductory shipments of its
new low-carbohydrate wine brands, One.6 Chardonnay and One.9 Merlot. In
addition, this quarter benefited from the absence of an approximate $0.06 per
share charge related to last year's legal settlement with a former distributor
in the United Kingdom. Partially offsetting this first quarter earnings growth
was continued softness within the Consumer Durables segment, higher pension and
postretirement expenses, volume declines for Fetzer Premium Varietals, and a
decline in profits from Jack Daniel's Country Cocktails.
Adjusting for the $10 million of legal settlement expenses incurred in the first
quarter of the prior year, the current year benefit of the company's new wine
brands, favorable foreign exchange, and the net effect of restructuring charges
in both segments, the company's operating income grew by 15%.
Beverages
The Beverage segment benefited from a healthy environment for premium spirits,
particularly in the United States. Global depletion trends for the company's
most important brand, Jack Daniel's Tennessee Whiskey, accelerated in the first
quarter. Depletions are nine-liter case movements from wholesale distributors to
retailers, and are generally used in the spirits and wine industry to
approximate consumer demand. Jack Daniel's volumes increased at a double-digit
rate in the United States and in half the brand's ten largest international
markets. Southern Comfort depletions grew in the mid-single digits globally as
Continental Europe improved over its weak performance last year. Finlandia
depletions continued to increase in the United States and Poland, but were
sluggish in other global markets. Results for the company's core wine brands,
Fetzer Premium Varietals and Bolla, remained soft due to the intensely
competitive retail price environment in the United States. However, Korbel
Champagne grew its volume in the mid-single digits and strengthened its market
share leadership in the sparkling wine category.
Beverage revenue and gross profit increased by 12% and 13%, respectively, for
the quarter. Growth was driven primarily by higher global volumes and improved
pricing for both Jack Daniel's and Southern Comfort, the establishment of
initial trade inventories for One.6 Chardonnay and One.9 Merlot, and a modest
benefit from a weaker U.S. dollar.
Beverage advertising expenses increased 8% during the quarter, driven by higher
brand-building investments behind Jack Daniel's and Finlandia, and promotional
investments supporting the launch of the new low-carbohydrate wine products.
Consumer Durables
The environment for the company's Lenox business remained very challenging. In
the Durables segment, net sales were down 5% and gross profit decreased 6%
during the quarter, despite increases in revenue and gross profit for Hartmann
luggage. Lenox sales to department stores were sluggish and revenues from the
company's retail outlets declined in the first quarter. As a result of lower
consumer response rates, revenues also declined in the direct-to-consumer
channel.
Consumer Durables is a seasonal business that typically reports a loss in the
first quarter. The segment reported an operating loss of $15 million this
quarter, including approximately $3 million in restructuring charges, compared
to a $12 million loss during the same period last year. The new management team
at Lenox continues to focus its efforts on rationalizing marginal and
unprofitable businesses, creating organizational efficiencies, increasing
manufacturing and operational efficiency, building its brands, and meeting end
consumer needs.
Outlook
First quarter financial results were very strong, even after excluding the
benefit from the company's new low-carbohydrate wine product introduction, the
absence of last year's legal settlement and restructuring charges, and the
modest benefit from favorable foreign exchange earnings. Earnings expectations
for the full fiscal year, however, are tempered by the competitive pressures
within the U.S. table wine category and the difficult environment for key pieces
of the Consumer Durables segment. Additionally, the company is contemplating a
reduction in field inventories resulting from a continuing evolution of its
worldwide distribution system. However, as a result of its strong first quarter
performance, and the underlying strength in its premium spirits portfolio, the
company is raising previously provided earnings guidance, and now expects
earnings in the range of $2.35 to $2.43 per share for fiscal 2005.
Conference Call
Brown-Forman will host a conference call to discuss its first quarter fiscal
2005 results today at 10:00 a.m. EDT. 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 8790907. 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 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
July 31,
2003 2004 Change
Net Sales $531.7 $578.0 9%
Beverages 422.8 474.6 12%
Consumer Durables 108.9 103.4 (5%)
Gross Profit $271.4 $297.6 10%
Beverages 221.4 250.5 13%
Consumer Durables 50.0 47.1 (6%)
Advertising Expenses $77.6 $80.6 4%
Beverages 56.7 61.2 8%
Consumer Durables 20.9 19.4 (7%)
Selling, General, and
Administrative Expenses $127.4 $133.3 5%
Beverages 89.2 92.2 3%
Consumer Durables 38.2 41.1 8%
Other Expense (Income), net $14.3 $0.8
Beverages 11.5 (0.6)
Consumer Durables 2.8 1.4
Operating Income (Loss) $52.1 $82.9 59%
Beverages 64.0 97.7 53%
Consumer Durables (11.9) (14.8) (24%)
Interest Expense, net 5.0 4.9
Income Before Income Taxes $47.1 $78.0 66%
Taxes on Income 16.0 26.1
Net Income $31.1 $51.9 67%
Earnings Per Share
- Basic $0.26 $0.43 66%
- Diluted $0.26 $0.42 66%
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, July 31,
2004 2004
Assets:
Cash and cash equivalents $ 67.7 $ 84.0
Accounts receivable, net 348.6 324.3
Inventories 557.2 578.3
Other current assets 110.0 99.4
Total current assets 1,083.5 1,086.0
Property, plant, and equipment, net 515.2 511.2
Prepaid pension cost 118.2 118.4
Trademarks and brand names 246.6 247.1
Goodwill 314.6 315.2
Other assets 97.9 94.8
Total assets $2,376.0 $2,372.7
Liabilities:
Commercial paper $ 49.5 $ 16.5
Accounts payable and accrued expenses 271.5 257.7
Dividends payable -- 25.9
Accrued taxes on income 48.0 68.1
Total current liabilities 369.0 368.2
Long-term debt 630.0 630.2
Deferred income taxes 122.2 110.2
Accrued postretirement benefits 136.7 139.1
Other liabilities 33.0 31.7
Total liabilities 1,290.9 1,279.4
Stockholders' equity 1,085.1 1,093.3
Total liabilities and stockholders' equity $2,376.0 $2,372.7
Brown-Forman Corporation
Supplemental Information
(Dollars in millions, except per share amounts)
Three Months Ended
July 31,
2003 2004
Depreciation and amortization $13.1 $14.1
Excise taxes $71.8 $82.0
Additions to property, plant, and equipment $14.5 $ 9.3
Effective tax rate 34.0% 33.5%
Cash dividends paid per common share $0.1875 $0.2125
Shares (in thousands) used in the
calculation of earnings per share
- Basic 121,220 121,693
- Diluted 121,710 122,414
These figures have been prepared in accordance with the company's customary
accounting practices. Share and per share data has been restated to reflect the
2-for-1 stock split effective in January 2004.