-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RlYNbQ2kgxerjYtILzcudV+UPG/j7zneOKH5tuV3y1p5bf1dWAqJoD5N+FLmGiok cOOsUpkIRt2xf7vVfwhFIA== 0000014693-96-000009.txt : 19960911 0000014693-96-000009.hdr.sgml : 19960911 ACCESSION NUMBER: 0000014693-96-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960731 FILED AS OF DATE: 19960910 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BROWN FORMAN CORP CENTRAL INDEX KEY: 0000014693 STANDARD INDUSTRIAL CLASSIFICATION: BEVERAGES [2080] IRS NUMBER: 610143150 STATE OF INCORPORATION: DE FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-00123 FILM NUMBER: 96627875 BUSINESS ADDRESS: STREET 1: 850 DIXIE HWY CITY: LOUISVILLE STATE: KY ZIP: 40210 BUSINESS PHONE: 5025851100 MAIL ADDRESS: STREET 1: P O BOX 1080 CITY: LOUISVILLE STATE: KY ZIP: 40201 FORMER COMPANY: FORMER CONFORMED NAME: BROWN FORMAN INC DATE OF NAME CHANGE: 19870816 FORMER COMPANY: FORMER CONFORMED NAME: BROWN FORMAN DISTILLERS CORP DATE OF NAME CHANGE: 19840807 FORMER COMPANY: FORMER CONFORMED NAME: BROWN FORMAN DISTILLERY CO DATE OF NAME CHANGE: 19670730 10-Q 1 United States Securities and Exchange Commission Washington, D.C. 20549 Form 10-Q ________ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 31, 1996 Commission File No. 1-123 _________ BROWN-FORMAN CORPORATION (Exact name of Registrant as specified in its Charter) Delaware 61-0143150 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 850 Dixie Highway 40210 Louisville, Kentucky (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code (502) 585-1100 ________ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: August 30, 1996 Class A Common Stock (voting) 28,988,091 Class B Common Stock (nonvoting) 40,008,147 BROWN-FORMAN CORPORATION Index to Quarterly Report Form 10-Q Part I. Financial Information Item 1. Financial Statements Page Number Condensed Consolidated Statement of Income Three months ended July 31, 1996 and 1995 3 Condensed Consolidated Balance Sheet July 31, 1996 and April 30, 1996 4 Condensed Consolidated Statement of Cash Flows Three months ended July 31, 1996 and 1995 5 Notes to the Condensed Consolidated Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 - 8 Part II. Other Information Item 1. Legal Proceedings 9 Item 4. Submission of Matters to a Vote of Security Holders 9 Item 6. Exhibits and Reports on Form 8-K 10 Signatures 10 PART I - FINANCIAL INFORMATION Item 1. Financial Statements BROWN-FORMAN CORPORATION CONDENSED CONSOLIDATED STATEMENT OF INCOME (Unaudited) (Expressed in millions except per share amounts) Three Months Ended July 31, 1996 1995 ---- ---- Net sales $ 424 $ 410 Excise taxes 59 58 Cost of sales 153 149 ----- ----- Gross profit 212 203 Selling, general, and administrative expenses 93 88 Advertising expenses 63 58 ----- ----- Operating income 56 57 Interest income 1 1 Interest expense 5 6 ----- ----- Income before income taxes 52 52 Taxes on income 20 20 ----- ----- Net income 32 32 Less preferred stock dividend requirements -- -- Net income applicable to common stock $ 32 $ 32 ===== ===== Weighted average number of common shares outstanding 69 69 ===== ===== Per common share: Net income $ .47 $ .46 ===== ===== Cash dividends paid $ .26 $.248 ===== ===== See notes to the condensed consolidated statements. BROWN-FORMAN CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (Expressed in millions) July 31, April 30, 1996 1996 ---- ---- (Unaudited) Assets - ------ Cash and cash equivalents $ 23 $ 54 Accounts receivable, net 246 257 Inventories: Barreled whisky 167 167 Finished goods 181 169 Work in process 48 59 Raw materials and supplies 43 38 ------ ------ Total inventories 439 433 Other current assets 31 24 ------ ------ Total current assets 739 768 Property, plant and equipment, net 284 281 Intangible assets, net 258 259 Other assets 73 73 ------ ------ Total assets $1,354 $1,381 ====== ====== Liabilities - ----------- Commercial paper $ 50 $ 50 Accounts payable and accrued expenses 196 223 Current portion of long-term debt 6 6 Accrued taxes on income 14 3 Deferred income taxes 21 21 Dividends payable 18 -- ------ ------ Total current liabilities 305 303 Long-term debt 187 211 Deferred income taxes 128 127 Postretirement benefits 52 52 Other liabilities and deferred income 51 54 ------ ------ Total liabilities 723 747 Stockholders' Equity - -------------------- Preferred stock 12 12 Common stockholders' equity 619 622 ------ ------ Total stockholders' equity 631 634 ------ ------ Total liabilities and stockholders' equity $1,354 $1,381 ====== ====== Note: The balance sheet at April 30, 1996 has been taken from the audited financial statements at that date, and condensed. See notes to the condensed consolidated statements. BROWN-FORMAN CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) (Expressed in millions; amounts in brackets are reductions of cash) Three Months Ended July 31, 1996 1995 ---- ---- Cash flows from operating activities: Net income $ 32 $ 32 Adjustments to reconcile net income to net cash provided by (used for) operations: Depreciation 10 9 Amortization of intangible assets 2 2 Deferred income taxes 2 6 Other (4) (6) Changes in assets and liabilities: Accounts receivable 11 5 Inventories (7) (9) Other current assets (6) (4) Accounts payable and accrued expenses (27) (31) Accrued taxes on income 12 11 ---- ---- Cash provided by operating activities 25 15 Cash flows from investing activities: Additions to property, plant and equipment, net (12) (14) Other (1) -- ---- ---- Cash used for investing activities (13) (14) Cash flows from financing activities: Commercial paper (25) (33) Proceeds from long-term debt -- 30 Cash dividends paid (18) (17) ---- ---- Cash used for financing activities (43) (20) ---- ---- Net decrease in cash and cash equivalents (31) (19) Cash and cash equivalents, beginning of period 54 62 ---- ---- Cash and cash equivalents, end of period $ 23 $ 43 ==== ==== See notes to the condensed consolidated statements. BROWN-FORMAN CORPORATION NOTES TO THE CONDENSED CONSOLIDATED STATEMENTS (Unaudited) 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------- The condensed consolidated statements have been prepared in accordance with the company's customary accounting practices as set forth in the company's 1996 annual report on Form 10-K and have not been audited. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary for a fair presentation of this information have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the company's April 30, 1996 annual report on Form 10-K. To conform to the current year presentation, certain reclassifications have been made to prior year condensed consolidated statements. 2. INVENTORIES ----------- The company uses the last-in, first-out method for determining the cost for substantially all inventories. If the last-in, first-out method had not been used, inventories would have been $86 million and $85 million higher than reported at July 31, 1996, and April 30, 1996, respectively. 3. ENVIRONMENTAL ------------- The company, along with other responsible parties, faces environmental claims resulting from the cleanup of several waste deposit sites. The company has accrued its estimated portion of cleanup costs and expects other responsible parties and insurance coverage to cover the remaining costs. The company believes that any additional costs incurred by the company will not have a material adverse effect on the company's financial condition or results of operations. 4. CONTINGENCIES ------------- In the normal course of business, various suits and claims are brought against the company, some of which seek significant damages. Many of these suits and claims take years to adjudicate and it is difficult to predict their outcome. In the opinion of management, based on advice from legal counsel, none of these suits or claims will have a material adverse effect on the company's financial position or results of operations. Item 2. Management's Discussion and Analysis of Financial - ------ ------------------------------------------------- Condition and Results of Operations ----------------------------------- The following Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the company's April 30, 1996 annual report to stockholders. The results of operations for the three months ended July 31, 1996, are not necessarily indicative of the operating results for the full year. Included in this Management's Discussion and Analysis are certain forward- looking statements reflecting management's expectations. The accuracy of these forward-looking statements may be affected significantly by certain risks and uncertainties described herein and in the company's Annual Report on Form 10-K for the year ended April 30, 1996. Results of Operations - --------------------- First Quarter Fiscal 1997 Compared to First Quarter Fiscal 1996 - --------------------------------------------------------------- A summary of operating performance follows (expressed in millions, except percentage and per share amounts): THREE MONTHS ENDED JULY 31, % 1996 1995 CHANGE ---- ---- ------ Net Sales - --------- Wines & Spirits $ 324 $ 298 9 Consumer Durables 100 112 (11) ----- ----- Total $ 424 $ 410 3 Operating Income $ 56 $ 57 (2) - ---------------- Net Income $ 32 $ 32 1 - ---------- Earnings Per Share $0.47 $0.46 1 - ------------------ Effective Tax Rate 38.0% 38.6% - ------------------ Sales of the company's wines and spirits segment increased 9% for the quarter, led by worldwide sales gains for Jack Daniel's Tennessee Whiskey. First quarter results were also aided by sales gains for Brown-Forman's premium wine brands. Gains within the wines and spirits segment were partially offset by lower sales of Tropical Freezes. Prior year sales of Tropical Freezes benefited from high levels of consumer trial and the establishment of trade inventories during its very successful national introduction. Revenues from Brown-Forman's consumer durables segment declined 11% for the quarter, primarily as a result of lower sales at Lenox Collections, the company's direct marketing division. Excluding Lenox Collections, sales at Brown-Forman's consumer durables segment were flat, as weak sales of china and crystal to department and specialty stores offset gains in the company's retail outlets. Operating income gains from increased sales of wines and spirits were more than offset by investments in newer overseas markets and by lower sales and margins from the consumer durables segment. Net interest expense declined, reflecting lower debt levels and lower average rates for commercial paper borrowings compared to fiscal 1996. The effective tax rate declined reflecting a lower mix of earnings from the consumer durables segment. The company expects the full year tax rate to be slightly above last year's. Financial Condition at July 31, 1996 Compared to Financial - ---------------------------------------------------------- Condition at April 30, 1996 - --------------------------- The company's activities in the first quarter ended July 31, 1996 resulted in a net decrease in cash and cash equivalents, using funds to pay down $25 million of outstanding commercial paper. Cash provided by operating activities was up 62% from the same period last year due largely to lower accounts receivable at the consumer durables segment. Additions to property, plant, and equipment continue to reflect the company's plans to upgrade and expand production facilities in the wines and spirits segment. Total net working capital decreased 7% from April 30, 1996 to $434 million. PART II - OTHER INFORMATION Item 1. Legal Proceedings - ------ ----------------- Expansion Plus, Inc. v. Brown-Forman Corporation, et al., (United States District Court for the Southern District of Texas, Houston Division, Civil Action No. H-94-3498.) As previously reported, in 1988, Brown-Forman purchased a start- up credit card processing business from Expansion Plus, Inc. ("EPI"), which Brown-Forman developed into a much larger business and sold in 1993 for $31,250,000. Several months after the sale, EPI claimed that Brown-Forman never acquired full title to the credit card processing business, was obligated to return all or part of it to EPI, and that the sale of the business to a third party represented a conversion of assets owned by EPI. In October, 1994, EPI filed a tort action against Brown-Forman and the purchaser of the business alleging conversion of property, tortious interference with contractual relationships, misappropriation of trade secrets and breach of a confidential relationship and seeking damages of $31,250,000 plus punitive damages in an amount ten times actual damages. On May 21, 1996, a Magistrate Judge entered a Memorandum and Recommendation that all of EPI's tort claims against Brown- Forman be dismissed. EPI has since filed Objections to the Magistrate's Recommendation and moved to amend its complaint to include a breach of contract claim against Brown-Forman. The District Judge will review and accept, modify or reject the Recommendations and decide whether to allow EPI to amend its complaint. The trial, previously scheduled for September, 1996, has been postponed indefinitely. In the opinion of management, and based upon the advice of legal counsel, the disposition of this suit will not have a material adverse effect on the company's consolidated financial position or results of operations. Item 4. Submission of Matters to a Vote of Security Holders - ------ --------------------------------------------------- At the Annual Meeting of Stockholders of the company held July 25, 1996, the following matter was voted upon: Election of 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, and James S. Welch to serve as directors until the next annual election of directors, or until a successor has been elected and qualified. For Withheld --- -------- Barry D. Bramley 27,901,447 3,973 Geo. Garvin Brown III 27,901,976 3,444 Owsley Brown II 27,898,151 7,269 Donald G. Calder 27,902,109 3,311 Owsley Brown Frazier 27,902,076 3,344 Richard P. Mayer 27,902,109 3,311 Stephen E. O'Neil 27,901,106 4,314 William M. Street 27,902,009 3,411 James S. Welch 27,901,080 4,340 Item 6. Exhibits and Reports on Form 8-K - ------ -------------------------------- (a) Exhibits: Exhibit Number Exhibit ------- ------- 27 Financial Data Schedule (b)Reports on Form 8-K: 1.) There were no reports on Form 8-K filed during the quarter ended July 31, 1996. 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 thereunto duly authorized. BROWN-FORMAN CORPORATION (Registrant) Date: September 5, 1996 By: /s/ Steven B. Ratoff _____________________________ Steven B. Ratoff Executive Vice President and Chief Financial Officer (On behalf of the Registrant and as Principal Financial Officer) EX-27 2
5 This schedule contains summary financial information extracted from the company's July 31, 1996 Form 10-Q and is qualified in its entirety by reference to such financial statements. 1,000,000 3-MOS APR-30-1997 JUL-31-1996 23 0 246 0 439 739 544 287 1,354 305 187 619 0 12 0 1,354 424 424 212 212 0 0 4 52 20 32 0 0 0 32 0.47 0.47 Accounts receivable is shown net of allowance for doubtful accounts. Allowance for doubtful accounts has not changed materially from the April 30, 1996 balance. Cost of goods sold and total costs include excise taxes of $59 million.
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