11-K 1 lenoxsav_02.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 11-K FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS AND SIMILAR PLANS PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) (X) ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2002 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-123 A. Full Title of Plan: Lenox, Incorporated Employee Savings and Investment Plan B. Name of Issuer of the Securities held Pursuant to the Plan and the Address of its Principal Executive Office: Brown-Forman Corporation 850 Dixie Highway Louisville, Kentucky 40210 INDEX Pages Report of Independent Accountants 2 Financial Statements: Statement of Net Assets Available for Benefits, December 31, 2002 and 2001 3 Statement of Changes in Net Assets Available for Benefits for the years ended December 31, 2002 and 2001 4 Notes to Financial Statements 5-9 Supplemental Schedules: Schedule of Assets (Held at End of Year), December 31, 2002 10 Schedule of Reportable Transactions for the Year Ended December 31, 2002 11 Signatures 12 Consent of Independent Accountants 13 Report of Independent Accountants To the Employee Benefits Committee Brown-Forman Corporation Lenox, Incorporated Employee Savings and Investment Plan In our opinion, the accompanying statements of net assets available for benefits and the related statements of changes in net assets available for benefits present fairly, in all material respects, the net assets available for benefits of the Lenox, Incorporated Employee Savings and Investment Plan (the Plan) at December 31, 2002 and 2001, and the changes in net assets available for benefits for the years then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Plan's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of assets (held at end of year) and of reportable transactions are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These supplemental schedules are the responsibility of the Plan's management. The supplemental schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ PricewaterhouseCoopers LLP April 25, 2003 2 Lenox, Incorporated Employee Savings and Investment Plan Statements of Net Assets Available for Benefits December 31, 2002 and 2001 2002 2001 ---------------------------------------------- --------------------------------------------- Participant Nonparticipant Participant Nonparticipant Directed Directed Total Directed Directed Total ----------- -------------- ----------- ----------- -------------- ----------- Investments, at fair value: Mutual funds $32,329,370 -- $32,329,370 $40,415,312 -- $40,415,312 Investment contract and money market portfolios 18,909,627 -- 18,909,627 16,709,552 -- 16,709,552 Brown-Forman Corporation Class B common stock 851,887 $ 573,392 1,425,279 544,974 $ 578,591 1,123,565 Loans to participants 1,972,996 -- 1,972,996 2,352,370 -- 2,352,370 ----------- -------------- ----------- ----------- -------------- ----------- 54,063,880 573,392 54,637,272 60,022,208 578,591 60,600,799 Employers' contributions receivable 429,721 -- 429,721 410,021 -- 410,021 Employees' contributions receivable 252,667 -- 252,667 244,946 -- 244,946 ----------- -------------- ----------- ----------- -------------- ----------- Net assets available for benefits $54,746,268 $ 573,392 $55,319,660 $60,677,175 $ 578,591 $61,255,766 =========== ============== =========== =========== ============== ===========
The accompanying notes are an integral part of the financial statements. 3 Lenox, Incorporated Employee Savings and Investment Plan Statements of Changes in Net Assets Available for Benefits For the Years Ended December 31, 2002 and 2001 2002 2001 ---------------------------------------------- --------------------------------------------- Participant Nonparticipant Participant Nonparticipant Directed Directed Total Directed Directed Total ----------- -------------- ----------- ----------- -------------- ----------- Additions: Contributions: Employer $ 1,813,968 -- $ 1,813,968 $ 1,947,905 -- $ 1,947,905 Employee 4,299,617 -- 4,299,617 4,114,427 -- 4,114,427 ----------- -------------- ----------- ----------- ------------- ----------- 6,113,585 -- 6,113,585 6,062,332 -- 6,062,332 Interest income 898,782 -- 898,782 1,002,344 -- 1,002,344 Dividend income 397,609 $ 12,107 409,716 365,404 $ 12,517 377,921 Net appreciation in fair value -- 24,389 24,389 -- -- -- Net transfers from other plans 276,495 -- 276,495 -- -- -- ----------- -------------- ----------- ----------- -------------- ----------- Total additions 7,686,471 36,496 7,722,967 7,430,080 12,517 7,442,597 ----------- -------------- ----------- ----------- -------------- ----------- Deductions: Withdrawals by participants 4,364,120 41,695 4,405,815 2,712,388 33,618 2,746,006 Net depreciation in fair value 9,253,258 -- 9,253,258 7,257,986 38,066 7,296,052 Net transfers to other plans -- -- -- 458,295 -- 458,295 ----------- -------------- ----------- ----------- -------------- ----------- Total deductions 13,617,378 41,695 13,659,073 10,428,669 71,684 10,500,353 ----------- -------------- ----------- ----------- -------------- ----------- Net decrease (5,930,907) (5,199) (5,936,106) (2,998,589) (59,167) (3,057,756) Net assets available for benefits: Beginning of year 60,677,175 578,591 61,255,766 63,675,764 637,758 64,313,522 ----------- -------------- ----------- ----------- -------------- ----------- End of year $54,746,268 $573,392 $55,319,660 $60,677,175 $578,591 $61,255,766 =========== ============== =========== =========== ============== ===========
The accompanying notes are an integral part of the financial statements. 4 Lenox, Incorporated Employee Savings and Investment Plan Notes to Financial Statements 1. Description of Plan: The sponsor of the Lenox, Incorporated Employee Savings and Investment Plan (the Plan), Brown-Forman Corporation (the Sponsor), is a diversified producer and marketer of fine quality consumer products in domestic and international markets. The Sponsor's operations include the production, importing, and marketing of wines and distilled spirits and the manufacture and sale of luggage and, through the Lenox, Incorporated division, the manufacture and sale of china, crystal and silver. The following brief description of the Plan is provided for general information purposes only. Participants should refer to the plan agreement for more complete information. a. General: The Plan is a defined contribution plan covering substantially all salaried employees of Lenox, Incorporated (the Company) and salaried and nonunion hourly employees of the Company's subsidiaries who are not members of a collective bargaining unit nor eligible to participate in the Lenox, Incorporated Retail Savings and Investment Plan. An employee becomes eligible to participate in the Plan after completion of one year of service. Effective January 1, 2002, an employee becomes eligible to participate in the Plan on the employment commencement date. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). b. Contributions: Non-highly compensated employees may contribute to the Plan an amount of not less than 2% nor more than 15% of their annual compensation, not to exceed the Section 402(g) (of the Internal Revenue Code of 1986) limitation in effect for the 2002 calendar year, currently $11,000. New employees may transfer assets from their former employers' qualified plans to the Plan, but cannot make any further contributions until they meet the eligibility requirements to participate in the Plan. The Company's matching contribution is equal to 75% of the participant's elective deferral for the first 5% of the participant's annual compensation. Effective January 1, 2002, non-highly compensated employees may contribute to the Plan between 1% and 50% of their annual compensation, and highly compensated employees may contribute between 1% and 15% of their annual compensation. Each participant's account is credited with the participant's contribution on a monthly basis and an allocation of (i) the Company's matching contribution on a quarterly basis, and (ii) plan earnings on a daily basis. Allocations are based on the participants' contributions and compensation as defined in the Plan. The total annual contributions, as defined by the Plan, credited to a participant's account in a plan year may not exceed the lesser of (i) $30,000, or (ii) 25% of the participant's compensation in the plan year. Effective January 1, 2002, the total annual contributions, as defined by the Plan, credited to a participant's account in a plan year may not exceed the lessor of (i) $40,000 or (ii) 100% of the participant's compensation in the plan year. Additional maximum limits exist if the employee participates in a qualified defined benefit plan maintained by the Company. Forfeited balances of terminated participants' nonvested accounts are used first to reinstate previously forfeited account balances of re-employed participants, if any, and the remaining amounts are used to reduce future company contributions. The forfeited balances totaled $27,371 and $19,078 for 2002 and 2001, respectively. 5 Effective January 1, 2002, participants who have attained age 50 before December 31, 2002 may contribute an additional catch-up contribution up to $1,000, subject to the limitations of the Internal Revenue Code and the Plan. Participants can allocate contributions among various investment options in 1% increments. The Plan currently offers ten mutual funds, one investment contract portfolio, and the Brown-Forman Corporation Class B common stock fund as investment options to participants. c. Paysop Fund: This nonparticipant directed fund consists of company contributions of Class B nonvoting common stock of Brown-Forman Corporation. Contributions for any plan year were limited to one-half of one percent of the annual compensation of all employees covered by the Plan; however, the Company is no longer contributing to this fund. This fund will be eliminated when all stock allocated to participants is withdrawn. d. Vesting: Participants are immediately vested in their employee contributions plus actual earnings thereon. Vesting in the Company's contribution is 25% per year of continuous service with the Company. Participants will become 100% vested in their company contributions account in case of death, normal retirement, or total and permanent disability. Participants employed at the Oxford Plant on September 30, 2002, and whose employment terminated on or after September 30, 2002 as a direct result of the closing of the Oxford Plant, are fully vested. Participants employed at the Gorham Plant on December 13, 2002, and whose employment terminated on or after December 13, 2002 as a direct result of the closing of the Gorham Plant, are fully vested. e. Withdrawals: Upon termination of service, a participant can elect to transfer his vested interest in the participant directed portion of the Plan to the qualified plan of his new employer, roll over his funds into an Individual Retirement Account, or receive his vested interest in the Plan in a lump-sum amount or in the form of installment payments over a period of time not to exceed his life expectancy. If the vested account balance is less than $5,000, a lump-sum distribution will be made. In the event of death, the participant's beneficiary will receive the vested interest in a lump-sum payment. A participant may also withdraw vested interest of the participant directed funds in the case of financial hardship under guidelines promulgated by the Internal Revenue Service. Effective January 1, 2002, the participant's contribution shall be suspended for six months after the receipt of a hardship distribution. The distribution to a terminated participant is based on the market value of his vested interest in the Plan on the valuation date available immediately preceding the date of the benefit payment. 6 Withdrawals of the Paysop Fund benefits can be made in cash or a single payment of the related common stock. If payment in common stock is elected, fractional shares are paid in cash. In addition, a participant may request permission from the plan administrator to borrow a portion of such participant's vested accrued benefit under the Plan. Loans shall be limited to the lessor of $50,000 or 50% of the vested account balance. Loans must bear a reasonable rate of interest, be collateralized, and be repaid within five years. Participants do not share in the earnings from the Plan's investments to the extent of any outstanding loans, except that the interest paid on such loans is allocated directly to the participant's account. 2. Summary of Significant Accounting Policies: a. Basis of Accounting: The financial statements of the Plan are prepared under the accrual method of accounting. Withdrawals by participants are recorded when paid. Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex- dividend date. b. Valuation of Investments: Investment contract and money market portfolios are valued at cost which approximates fair value. Investments in securities traded on a national securities exchange are valued at the last reported sales price on the last business day of the period. Mutual funds are valued at their net asset value per share as quoted by the National Association of Securities Dealers. Participant loans are valued at cost which approximates fair value. The Brown-Forman Corporation Stock Fund is comprised of Brown-Forman Corporation Class B shares, which are valued at the quoted closing market price. The Plan presents in the accompanying statements of changes in net assets available for benefits the net appreciation or depreciation in the fair value of its investments which consists of the realized gains or losses and the unrealized appreciation or depreciation on those investments. c. Management Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of net assets available for benefits and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of additions to and deductions from net assets during the reporting periods. Actual results could differ from those estimates. 7 3. Investments: The Plan's investments are held by a custodian trust company. The following table presents the fair value of investments. Investments that represent 5% or more of the Plan's net assets are separately identified. December 31 -------------------------------------------------------------- 2002 2001 ---------------------------- ---------------------------- Number of Number of Shares, Units Shares, Units or Principal or Principal Amount Fair Value Amount Fair Value ------------- ---------- ------------- ---------- Mutual funds, investment contract portfolio and stock fund: Janus Worldwide Fund 111,687 $ 3,588,506 110,374 $ 4,838,784 Fidelity Magellan Fund 150,647 11,895,122 155,242 16,179,371 Fidelity Equity-Income Fund 181,310 7,192,558 175,595 8,563,766 Fidelity Growth Company 84,379 3,001,462 84,212 4,481,760 Fidelity Retirement Money Market Portfolio 2,775,487 2,775,487 2,285,387 2,285,387 Managed Income Portfolio 16,134,140 16,134,140 14,424,165 14,424,165 Brown-Forman Corporation Class B Common Stock Fund 79,026 851,887 52,605 544,974 Other investments 493,804 8,624,718 380,728 8,704,001 ---------- ---------- 54,063,880 60,022,208 Common stock: Brown-Forman Corporation Class B common stock* 53,189 573,392 55,847 578,591 ---------- ---------- $54,637,272 $60,600,799 ========== ========== *Nonparticipant directed
During 2002 and 2001, the Plan's investments, including investments bought, sold, and held during the year, appreciated (depreciated) in value as follows: 2002 2001 ---------- ---------- Mutual funds $(9,212,507) $(7,223,125) Brown-Forman Corporation Class B Common Stock Fund (40,751) (34,861) ---------- ---------- (9,253,258) (7,257,986) Brown-Forman Corporation Class B common stock 24,389 (38,066) ---------- ---------- $(9,228,869) $(7,296,052) ========== ========== 8 4. Tax Status: The Internal Revenue Service has determined, and informed the Company by a letter dated April 16, 2003, that the Plan and related trust are designed in accordance with the applicable sections of the Internal Revenue Code (IRC). 5. Plan Termination: Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of plan termination, participants will become 100% vested in their accounts. 6. Related Party Transactions: Certain administrative costs incurred by the Plan are paid by the Company. Effective January 1, 2002, general administration expenses of the third party recordkeeper and the administration fee for processing loans are allocated to the participants' accounts. Administrative expenses of $25,863 in 2002 were allocated to participants' accounts. Effective July 1, 2002, participant recordkeeping fees were waived by the third party recordkeeper. 9 Lenox, Incorporated Employee Savings and Investment Plan Plan #003 EIN #21-0498476 Schedule H, Line 4i -- Schedule of Assets (Held at End of Year) December 31, 2002 Description of Investment Including Identity of Issue, Borrower, Maturity Date, Rate of Interest, Current Lessor or Similar Party Collateral, Par or Maturity Value Cost Value ---------------------------- ----------------------------------- -------- ----------- PBHG Growth Fund Mutual fund, variable rate and maturity -- $ 869,130 Janus Enterprise Fund Mutual fund, variable rate and maturity -- 904,206 Janus Worldwide Fund Mutual fund, variable rate and maturity -- 3,588,506 PIMCO Total Return Fund Mutual fund, variable rate and maturity -- 2,456,398 Fidelity Magellan Fund* Mutual fund, variable rate and maturity -- 11,895,122 Fidelity Equity-Income Fund* Mutual fund, variable rate and maturity -- 7,192,558 Fidelity Growth Company Fund* Mutual fund, variable rate and maturity -- 3,001,462 Fidelity Asset Manager* Mutual fund, variable rate and maturity -- 2,109,577 Fidelity Retirement Money Money market portfolio, variable rate Market Portfolio* and maturity -- 2,775,487 Managed Income Portfolio* Investment contract portfolio, variable rate and maturity -- 16,134,140 Spartan U.S. Equity Index Fund* Mutual fund, variable rate and maturity -- 312,411 Brown-Forman Corporation* Class B common stock fund -- 851,887 Brown-Forman Corporation* Class B common stock $172,008 573,392 Participant loans* Loans, 6%-6.25% rates, variable maturity -- 1,972,996 ----------- $54,637,272 =========== *Party-in-interest to the Plan
10 Lenox, Incorporated Employee Savings and Investment Plan Plan #003 EIN #21-0498476 Schedule H, Line 4j -- Schedule of Reportable Transactions For the Year Ended December 31, 2002 Expense Current Value Purchase Selling Lease Incurred with Cost of of Asset on Net Gain Identity of Party Involved Description of Asset Price Price Rental Transaction Asset Transaction Date (Loss) -------------------------- -------------------- -------- ------- ------ ------------- ------- ---------------- -------- No reportable transactions.
11 Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the Lenox, Incorporated Employee Savings and Investment Plan has duly caused this report to be signed on behalf of the Plan Administrator by the undersigned thereunto duly authorized. LENOX, INCORPORATED EMPLOYEE SAVINGS AND INVESTMENT PLAN BY: /s/ Milton B. Gillis Milton B. Gillis Member, Employee Benefits Committee (Plan Administrator) Vice President and Director of Compensation and Employee Benefits Brown-Forman Corporation June 24, 2003 12 Consent of Independent Accountants We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-74567) of Brown-Forman Corporation of our report dated April 25, 2003 relating to the financial statements and supplemental schedules of the Lenox, Incorporated Employee Savings and Investment Plan as of and for the years ended December 31, 2002 and 2001 which appear in this Form 11-K. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Louisville, Kentucky June 24, 2003 13 EXHIBIT 99 CERTIFICATE OF PERIODIC FINANCIAL REPORT I, Milton B. Gillis, Vice President and Director of Compensation and Employee Benefits of Brown-Forman Corporation, on behalf of the Brown-Forman Corporation Employee Benefits Committee which functions as the chief executive officer and chief financial officer of the Lenox, Incorporated Employee Savings and Investment Plan (the "Plan") certify, pursuant to Section 906 of the Sarbanes- Oxley Act of 2002, that: (1) the Annual Report on Form 11-K for the Plan for the fiscal year ended December 31, 2002 (the "Periodic Report") which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) and (2) information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Plan. This certificate is being furnished solely for purposes of Section 906 and is not being filed as part of the Periodic Report. Dated: June 26, 2003 /s/ Milton B. Gillis Milton B. Gillis Member, Employee Benefits Committee Vice President and Director of Compensation and Employee Benefits Brown-Forman Corporation