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 30, 2007
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
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2.):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition
Brown-Forman Corporation issued a press release today, August 30, 2007,
reporting results of its operations for the fiscal quarter ended July 31, 2007.
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 30, 2007
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 30, 2007 By: /s/ Nelea A. Absher
Nelea A. Absher
Vice President and
Assistant Corporate Secretary
Exhibit Index
99.1 Press Release, dated August 30, 2007, issued by Brown-Forman Corporation,
reporting results of operations for the fiscal quarter ended July 31,
2007.
Exhibit 99.1
FOR IMMEDIATE RELEASE
BROWN-FORMAN REPORTS STRONG FIRST QUARTER EARNINGS DUE TO CONTINUED
INTERNATIONAL GROWTH
REPORTED EARNINGS UP 1%; UNDERLYING GROWTH CONTINUES AT A DOUBLE-DIGIT RATE
Louisville, KY, August 30, 2007 - Brown-Forman Corporation reported diluted
earnings per share for its first quarter ended July 31, 2007 of $0.77, up 1%
from the $0.76 earned in the first quarter last year.(1) Underlying earnings per
share(2) for the quarter were up 10%, after adjusting for the following items:
$0.05 per share of dilution associated with acquisitions; a $0.04 per share
benefit from favorable foreign currency fluctuations; a $0.04 per share net
impact of changes in global trade inventory levels; and a $0.01 per share
absence of interest income earned in last year's first quarter on proceeds from
the sale of Lenox (which were distributed to shareholders in May 2007). This 10%
underlying growth in earnings for the first quarter reflects accelerating trends
for the company's premium global brands internationally and continued gains from
the company's super-premium developing brands.
Paul Varga, chief executive officer said, "These financial results represent a
great start to our fiscal year and a nice continuation of our strong underlying
growth. We are encouraged by healthy consumer demand for our premium global
brands, including Jack Daniel's Tennessee Whiskey, Southern Comfort, and
Finlandia, particularly in international markets. Our integration and early work
with the recently acquired Casa Herradura(3) brands are on track and we remain
optimistic about the company's overall growth prospects."
--------
(1) All financial and statistical information included in this press release
reflects continuing operations of the company for all periods presented
unless otherwise indicated.
(2) Underlying earnings per share represent diluted reported earnings per share
in accordance with GAAP, adjusted for certain items. A reconciliation from
reported to underlying earnings per share (a non-GAAP measure) for the full
year, and the reasons why management believes these adjustments to be useful
to the reader, are included in Schedule A of this press release.
(3) References to Casa Herradura include all brands (el Jimador, Herradura,
New Mix, Antiguo, Suave 35 and other brands) and operations acquired in
January 2007.
First quarter net sales grew $106 million, up 17% over the prior-year period.
Gross profit increased $42 million, up 12% from the first quarter of last year.
Continuing consumer demand for the company's premium global brands, the addition
of acquired brands, and a weaker U.S. dollar contributed to these strong
results. The company's overall gross margin as a percent of net sales declined
due in part to the addition of Casa Herradura results.
Advertising expenses in the quarter were up $13 million, or 16%, over last
year's first quarter due to incremental investments behind the company's premium
global brands, new investments in support of acquired brands, and a weaker U.S.
dollar. SG&A expenses increased approximately $15 million, or 12%, compared to
the same prior year period, due primarily to the addition of acquired brands.
Operating income increased $13 million, up 9% over the first quarter last year.
Jack Daniel's global depletions(4) registered mid-single digit gains in the
quarter, led by double-digit growth outside of the U.S. The brand's
international volume expansion reflected strong growth in the U.K., France,
Australia, Asia, and Eastern Europe. In the U.S., Jack Daniel's volume growth
rate moderated slightly, increasing at a low-single digit rate for the
three-month period. Global volumes for Southern Comfort grew at a mid-single
digit rate in the quarter, as double-digit gains in the U.K., South Africa, and
Germany offset modest declines in the U.S. Worldwide Finlandia volumes
accelerated in the quarter, as double-digit increases reflect continued
expansion in Eastern Europe. Depletions for our super-premium developing brands,
including Woodford Reserve and Chambord, increased at a double-digit rate in the
quarter. Volumes for our mid-priced regional brands were up mid-single digits,
as solid growth for Fetzer Valley Oaks, Korbel, and Bonterra more than offset
declines for Canadian Mist, Bolla, and Early Times.
--------
(4) Depletions are shipments from wholesale distributors to retail customers,
and are commonly regarded in the industry as an approximate measure of
consumer demand.
Full-Year Outlook
The company's full-year earnings outlook remains unchanged at $3.35 to $3.55 per
diluted share, representing growth of 7% to 13% over comparable prior-year
earnings of $3.14 per share. This outlook includes projected earnings dilution
of $0.13 to $0.18 per share associated with the Casa Herradura acquisition,
which is also unchanged.
Brown-Forman will host a conference call to discuss first quarter results at
10:00 a.m. (EDT) today. 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 and ask for the Brown-Forman
call. No password is required. The company suggests that the 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 via
Brown-Forman's Internet Web site, www.brown-forman.com, and then click on the
link to "Investor Relations."
For those unable to participate in the live call, a digital replay will be
available by calling 800-642-1687 (U.S.) or 706-645-9291 (international). The
identification code is 14130175. A digital audio recording of the conference
call will also be available on the web page approximately one hour after the
conclusion of the conference call. The replays will be available for at least 30
days.
Brown-Forman Corporation is a diversified producer and marketer of fine quality
beverage alcohol brands, including Jack Daniel's, Southern Comfort, Finlandia
Vodka, Tequila Herradura, el Jimador Tequila, Canadian Mist, Fetzer and Bolla
wines, and Korbel California Champagnes.
IMPORTANT NOTE ON FORWARD-LOOKING STATEMENTS:
This 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 about half of our profits, including higher energy prices,
declining home prices, deterioration of the sub-prime lending market, or
other factors;
- lower consumer confidence or purchasing related to changes in economic
conditions, major natural disasters, terrorist attacks or widespread outbreak
of infectious diseases;
- tax increases, whether at the federal or state level or in major
international markets and/or tariff barriers or other restrictions affecting
beverage alcohol;
- limitations and restrictions on distribution of products and alcohol
marketing, including advertising and promotion, as a result of stricter
governmental policies adopted either in the United States or in international
markets;
- adverse developments in the class action lawsuits filed against Brown-Forman
and other spirits, beer and wine manufacturers alleging that our industry
conspired to promote the consumption of alcohol by those under the legal
drinking age;
- a strengthening U.S. dollar against foreign currencies, especially the
British Pound, Euro, Australian Dollar, and the South African Rand;
- reduced bar, restaurant, hotel and travel business, including travel retail;
- longer-term, a change in consumer preferences, social trends or cultural
trends that results in the reduced consumption of our premium spirits brands;
- changes in distribution arrangements in major markets that limit our ability
to market or sell our products;
- adverse impact on performance and reported results as a consequence of
integrating acquisitions and ensuring their conformance to the company's
trade practice standards, financial controls environment and U.S. public
company requirements;
- price increases in energy or raw materials, including grapes, grain, agave,
wood, glass, and plastic;
- excess wine inventories or a world-wide oversupply of grapes or agave;
- termination of our rights to distribute and market agency brands in our
portfolio;
- counterfeit production of our products and any resulting negative effect on
our intellectual property rights or brand equity; and
- adverse developments as a result of state or federal investigations of
beverage alcohol industry trade practices of suppliers, distributors and
retailers.
Brown-Forman Corporation
Unaudited Consolidated Statements of Operations
(Dollars in millions, except per share amounts)
Three Months Ended
July 31,
2006 2007 Change
------ ------ ------
CONTINUING OPERATIONS
Net sales $633.4 $739.1 17%
Gross profit 348.9 391.0 12%
Advertising expenses 80.7 94.0 16%
Selling, general, and
administrative expenses 127.9 143.1 12%
Amortization expense -- 1.3
Other (income), net (2.0) (2.8)
Operating income 142.3 155.4 9%
Interest expense, net 1.1 11.1
Income before income taxes 141.2 144.3 2%
Income taxes 46.6 48.9
Net income 94.6 95.4 1%
Earnings per share:
Basic 0.771 0.774 0%
Diluted 0.762 0.767 1%
DISCONTINUED OPERATIONS
Net loss $(0.9) $(0.1)
Loss per share:
Basic (0.007) (0.001)
Diluted (0.007) (0.001)
TOTAL COMPANY
Net income $93.7 $95.3 2%
Earnings per share:
Basic 0.764 0.773 1%
Diluted 0.755 0.766 1%
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Brown-Forman Corporation
Unaudited Condensed Consolidated Balance Sheets
(Dollars in millions)
April 30, July 31,
2007 2007
------ ------
Assets:
Cash and cash equivalents $ 283 $ 180
Short-term investments 86 --
Accounts receivable, net 404 394
Inventories 694 725
Other current assets 168 117
----- -----
Total current assets 1,635 1,416
Property, plant, and equipment, net 506 505
Goodwill 670 669
Other intangible assets 684 696
Prepaid pension cost 23 19
Other assets 33 34
----- -----
Total assets $3,551 $3,339
===== =====
Liabilities:
Accounts payable and accrued expenses $ 361 $ 334
Accrued income taxes 27 10
Payable to shareholders 204 37
Short-term borrowings 401 343
Current portion of long-term debt 354 354
----- -----
Total current liabilities 1,347 1,078
Long-term debt 422 421
Deferred income taxes 56 52
Accrued postretirement benefits 123 125
Other liabilities 30 58
----- -----
Total liabilities 1,978 1,734
Stockholders' equity 1,573 1,605
----- -----
Total liabilities and stockholders' equity $3,551 $3,339
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Brown-Forman Corporation
Unaudited Condensed Consolidated Statements of Cash Flows
(including cash flows from discontinued operations)
(Dollars in millions)
Three Months Ended
July 31,
2006 2007
------ ------
Cash flows from operating activities:
Continuing operations $ 73.6 $128.5
Discontinued operations 2.6 (0.1)
------- -------
Cash provided by operating activities 76.2 128.4
Cash flows from investing activities:
Acquisition of business (250.1) --
Acquisition of brand name -- (12.0)
Net (increase) decrease in short-term investments (26.4) 85.6
Additions to property, plant, and equipment (10.5) (11.4)
Other (1.0) (1.8)
------- -------
Cash (used for) provided by
investing activities (288.0) 60.4
Cash flows from financing activities:
Net decrease in debt (29.3) (58.9)
Special distribution to shareholders -- (203.7)
Dividends paid (34.4) (37.3)
Other 20.2 7.6
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Cash (used for) financing activities (43.5) (292.3)
Effect of exchange rate changes
on cash and cash equivalents 0.4 0.5
------- -------
Net decrease in cash and cash equivalents (254.9) (103.0)
Cash and cash equivalents, beginning of period 474.8 282.8
------- -------
Cash and cash equivalents, end of period $219.9 $179.8
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Brown-Forman Corporation
Continuing Operations Only
Supplemental Information (Unaudited)
(Dollars in millions, except per share amounts)
Three Months Ended
July 31,
2006 2007
------ ------
Net sales $633.4 $739.1
Excise taxes $128.4 $152.0
Net sales (stripped of excise taxes) $505.0 $587.1
Gross profit (as reported) $348.9 $391.0
Gross margin (as reported) 55.1% 52.9%
Gross margin (stripped net sales basis)* 69.1% 66.6%
Effective tax rate 33.0% 33.9%
Cash dividends paid per common share $0.2800 $0.3025
Shares (in thousands) used in the
calculation of earnings per share
- Basic 122,613 123,217
- Diluted 124,066 124,434
* Management believes excluding excise tax from the gross margin calculation
provides a more meaningful comparison because of changes in the company's
distribution structures in several markets. These changes result in the
company collecting and remitting excise taxes which are reported in net sales
and cost of sales, preventing effective comparison across periods where the
same distribution structures were not employed.
These figures have been prepared in accordance with the company's customary
accounting practices.
Schedule A
Brown-Forman Corporation
Continuing Operations Only
Supplemental Information (Unaudited)
Three Months Ended
July 31,
2006 2007 % Change
Reported GAAP Earnings Per Share $0.76 $0.77 1%
Adjustments:
Acquisitions 0.05
Trade Inventory Adjustments (0.07) (0.03)
Foreign Exchange (0.04)
Absence of Interest Income (0.01)
Adjusted Earnings Per Share $0.68 $0.75 10%
Notes:
Acquisitions - Refers to the acquisition of the Casa Herradura brands in January
2007 and Chambord in May 2006, thus making comparisons difficult to understand.
In addition, we believe that excluding the results of these acquisitions
provides helpful information in forecasting and planning the growth expectations
of the company.
Trade inventory levels - Refers to the estimated financial impact of changes in
wholesale trade inventories for the company's brands in markets where we use
third-party distributors. We compute this effect using our historical and
estimated depletion trends and separately identify trade inventory changes in
the variance analysis for our key measures. We believe it is important to make
this adjustment in order for management and investors to understand the results
of our business without distortions that can arise from varying levels of
wholesale inventories.
Foreign exchange - Refers to net gains and losses incurred by the company
relating to sales and purchases in currencies other than the U.S. Dollar. We use
the measure to understand the growth of the business on a constant dollar basis
as fluctuations in exchange rates can distort the underlying growth of our
business (both positively and negatively). To neutralize the effect of foreign
exchange fluctuations, we have historically translated current year results at
prior year rates. While we recognize that foreign exchange volatility is a
reality for a global company, we routinely review our company performance on a
constant dollar basis. We believe this allows both management and our investors
to understand better our company's growth trends.
Absence of interest income - Refers to the absence of interest income in fiscal
2008 that was earned in fiscal 2007 on the cash proceeds from the sale of Lenox
which was distributed to shareholders in May of 2007. We believe adjusting for
this interest income, which was earned by temporarily investing the proceeds
from the sale of a segment of our business, allows management and investors to
better understand the company's underlying growth.
The company cautions that non-GAAP measures should be considered in addition to,
but not as a substitute for, the company's reported GAAP results.