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 24, 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, August 24, 2005 reporting
results of its operations for the fiscal quarter ended July 31, 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 August 24, 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: August 24, 2005 By: /s/ Nelea A. Absher
Nelea A. Absher
Vice President and
Assistant Corporate Secretary
Exhibit Index
99.1 Press Release, dated August 24, 2005, issued by Brown-Forman Corporation,
reporting results of operations for the fiscal quarter ended July 31,
2005.
Exhibit 99.1
FOR IMMEDIATE RELEASE
BROWN-FORMAN EARNINGS FROM CONTINUING OPERATIONS UP SHARPLY IN THE FIRST QUARTER
Louisville, KY, August 24, 2005 - Brown-Forman Corporation today reported
diluted earnings from continuing operations of $0.71 per share for the first
quarter ended July 31, 2005, an increase of 46% over the $0.49 per share for the
same period last year. All financial and statistical information included in
this press release reflects the continuing operations of the Company's
businesses for all periods presented unless otherwise indicated.
Continuing Operations
Earnings growth was driven by continued strong consumer demand for the Company's
premium global brands -- Jack Daniel's Tennessee Whiskey, Southern Comfort, and
Finlandia Vodka. Volumes of Jack Daniel's, the Company's leading brand, grew to
over 8 million nine-liter cases on a twelve month basis, up 9% when compared to
the prior twelve month period. The Company's quarterly results were favorably
affected by a net increase in global trade inventories and consideration
received from the buyout of the Company's distribution rights for the
Glenmorangie family of brands, while the prior year's first quarter results
benefited from profits associated with a new product introduction. Adjusting the
quarterly results for these items, earnings per share from continuing operations
grew approximately 19% over the prior year period.
Diluted EPS Growth from Continuing Operations 46%
Net increase in global trade inventories (21%)
Consideration from sale of Glenmorangie distribution rights (14%)
Absence of profits from new product introduction in prior year 8%
Adjusted EPS Growth from Continuing Operations 19%(1)
Revenue and gross profit increased 14% and 20%, respectively, for the quarter.
Growth was driven by higher volumes and improved margins for Jack Daniel's,
Finlandia, and Southern Comfort. Additionally, improving volume trends for
several of the Company's mid-priced wine and spirits brands, coupled with volume
and profit growth from the Company's developing brand portfolio, contributed to
the robust results. Advertising and promotion investments were up $11 million,
or 17%, as the Company continued its strategy of consistent and significant
investment behind its premium brands. SG&A expenses increased $14 million, or
14%, reflecting increased pension expenses, legal and transaction advisory fees,
and expenses associated with new distribution agreements in Europe.
Discontinued Operations
On July 21, 2005, the Company announced that it had agreed to sell substantially
all of the assets and liabilities of Lenox, Incorporated to Department 56, Inc.
for $190 million. This transaction has received regulatory approval and is
expected to close during the Company's second quarter. As a result, the Company
has reported the operations of Lenox, including the assets not being sold to
Department 56, as discontinued operations in its financial statements. In the
first quarter ended July 31, the Company reported a net loss from discontinued
operations of $48 million, or $0.38 per share, versus a net loss of $9 million,
or $0.07 per share, for the same prior year period. The loss recorded in the
quarter includes a previously-disclosed impairment charge and fees related to
the transaction of approximately $0.32 per share. Excluding these items, results
from discontinued operations improved slightly over the prior year.
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(1) Management believes that disclosing this measure of earnings per share is
important because it more accurately reflects the underlying operations of
the Company.
Outlook for Continuing Operations
Chief Executive Officer Paul Varga commented, "First quarter results were strong
and reflect the benefits from the consistent brand building we've done with our
portfolio in an environment that is conducive to our investments. We remain
encouraged about our growth prospects, and for the full fiscal year, we expect
earnings in the range of $2.70 to $2.80 per share from continuing operations."
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 in September, 2001 in the U.S. and in July, 2005 in
London.
- 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.
Brown-Forman Corporation
Consolidated Statements of Income
(Dollars in millions, except per share amounts)
Three Months Ended
July 31,
2004 2005 Change
------ ------ ------
CONTINUING OPERATIONS
Net sales $481.3 $547.5 14%
Gross profit 253.4 303.0 20%
Advertising expenses 61.6 72.3 17%
Selling, general, and
administrative expenses 96.3 110.3 14%
Other expense (income), net (0.4) (13.7)
Operating income 95.9 134.1 40%
Interest expense, net 4.9 2.6
Income before income taxes 91.0 131.5 44%
Income taxes 31.2 43.6
Net income 59.8 87.9 47%
Earnings Per Share:
Basic 0.49 0.72 47%
Diluted 0.49 0.71 46%
DISCONTINUING OPERATIONS
Net loss $(8.6) $(47.6) 47%
Loss Per Share:
Basic (0.07) (0.39) 47%
Diluted (0.07) (0.38) 46%
TOTAL COMPANY
Net income $51.2 $40.3 (21%)
Earnings Per Share:
Basic 0.42 0.33 (21%)
Diluted 0.42 0.33 (22%)
Brown-Forman Corporation
Condensed Consolidated Balance Sheets
(Dollars in millions)
April 30, July 31,
2005 2005
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Assets:
Cash and cash equivalents $ 294.9 $ 265.3
Accounts receivable, net 295.9 321.0
Inventories 469.9 488.0
Current assets held for sale 157.6 176.6
Other current assets 96.9 89.4
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Total current assets 1,315.2 1,340.3
Property, plant, and equipment, net 417.9 414.2
Trademarks and brand names 334.2 331.5
Goodwill 192.7 188.5
Noncurrent assets held for sale 217.9 182.4
Other assets 171.2 167.3
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Total assets $2,649.1 $2,624.2
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Liabilities:
Accounts payable and accrued expenses $ 264.2 $ 227.1
Accrued income taxes 41.9 75.1
Dividends payable -- 29.9
Current portion of long-term debt 279.3 249.3
Current liabilities held for sale 52.7 63.8
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Total current liabilities 638.1 645.2
Long-term debt 351.5 351.6
Deferred income taxes 157.8 155.2
Accrued postretirement benefits 77.6 79.4
Noncurrent liabilities held for sale 82.9 84.7
Other liabilities 31.2 18.4
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Total liabilities 1,339.1 1,334.5
Stockholders' equity 1,310.0 1,289.7
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Total liabilities and stockholders' equity $2,649.1 $2,624.2
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Brown-Forman Corporation
Condensed Consolidated Statements of Cash Flows
(Dollars in millions)
Three Months Ended
July 31,
2004 2005
------ ------
Cash provided by operating activities $79.2 $33.7
Cash flows from investing activities:
Additions to property, plant, and equipment (9.3) (8.6)
Other (0.4) (0.5)
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Cash used for investing activities (9.7) (9.1)
Cash flows from financing activities:
Net decrease in debt (33.0) (30.0)
Dividends paid (25.9) (29.9)
Other 5.7 5.7
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Cash used for financing activities (53.2) (54.2)
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Net increase (decrease) in cash and cash equivalents 16.3 (29.6)
Cash and cash equivalents, beginning of period 67.7 294.9
------- -------
Cash and cash equivalents, end of period $84.0 $265.3
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Brown-Forman Corporation
Continuing Operations Only
Supplemental Information
(Dollars in millions, except per share amounts)
Three Months Ended
July 31,
2004 2005
------ ------
Depreciation and amortization $10.2 $10.7
Excise taxes $82.0 $97.7
Effective tax rate 34.3% 33.2%
Cash dividends paid per common share $0.2125 $0.245
Shares (in thousands) used in the
calculation of earnings per share
- Basic 121,693 121,945
- Diluted 122,414 123,161
These figures have been prepared in accordance with the company's customary
accounting practices.