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): June 5, 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, June 5, 2007 reporting
results of its operations for the fiscal year and fiscal quarter ended April 30,
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 June 5, 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: June 5, 2007 By: /s/ Nelea A. Absher
Nelea A. Absher
Vice President and
Assistant Corporate Secretary
Exhibit Index
99.1 Press Release, dated June 5, 2007, issued by Brown-Forman Corporation,
reporting results of operations for the fiscal year and fiscal quarter
ended April 30, 2007.
Exhibit 99.1
FOR IMMEDIATE RELEASE
BROWN-FORMAN FISCAL 2007 UNDERLYING(1) EARNINGS PER SHARE UP 11;
REPORTED EARNINGS PER SHARE INCREASE 1%
June 5, 2007 - Brown-Forman Corporation reported record earnings of $3.22 per
share from continuing operations for the fiscal year ended April 30, 2007,
driven by continued volume growth and margin improvement from the company's
premium brands. Diluted earnings per share from continuing operations for the
full year were up 1% on a reported basis and 11% on an underlying basis.
The company exceeded previously provided earnings guidance for continuing
operations as detailed below:
Fiscal 2007 Diluted Earnings Per Share
March Outlook Actual
Base Continuing Operations $3.20 - $3.30 $3.35
Casa Herradura(2) Impact ($0.14) - ($0.18) ($0.13)
Projected/Reported $3.02 - $3.16 $3.22
--------
(1) 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 and the Notes to this press
release.
(2) References to Casa Herradura include all brands (el Jimador, Herradura,
New Mix, Antiguo, Suave 35 and other brands) and operations acquired in
January, 2007
Fiscal 2007 revenues and gross profit were up 16% and 13%, respectively. Gross
profit grew $173 million, reflecting double-digit gains for Jack Daniel's,
Southern Comfort, Finlandia, and the company's Jack Daniel's & Cola
ready-to-drink product sold primarily in Australia. The improvement in gross
profit for these brands was due to volume growth, margin expansion, and
favorable foreign currency fluctuations. The fiscal 2007 acquisitions of
Chambord liqueur and the Casa Herradura brands also contributed to the
year-over-year increases in revenues and gross profit.
Advertising expenses increased 12% for the year due to incremental investments
behind the company's premium global brands and spending on the recently acquired
Chambord and Casa Herradura family of brands. SG&A grew 14% for the year, due in
large part to the company's global distribution initiatives. Operating income
from continuing operations increased $39 million, up 7% for the year.
Reported results from continuing operations in the current and prior year
included several items that management believes were not representative of
underlying earnings growth. Consistent with past practice, the company excludes
these items to provide an informative measure of underlying growth (see Schedule
A).
Jack Daniel's, Southern Comfort, and Finlandia achieved record profit levels for
the fiscal year. Favorable exchange trends and higher volumes and pricing
contributed to double-digit gross profit growth for each of the brands. Global
depletions for Jack Daniel's were up 6% over the prior year. In the U.S.,
depletions improved in the low-single-digits, while international depletions
grew at a double-digit rate. Depletion growth rates were particularly strong in
Germany, France, South Africa, Italy, Russia, and Japan.
Southern Comfort global depletions grew 3%, with mid-single digit gains in the
U.S. and South Africa. Finlandia volumes were up 15% globally, led by strong
double-digit growth in Poland, the brand's largest market.
Depletions for the company's mid-priced brands were flat for the year, as 5%
depletion growth for both Fetzer Valley Oaks and Korbel was offset by declines
for Canadian Mist, Bolla, and Early Times. Depletions for the company's
super-premium brands grew at a double-digit rate, behind continued growth for
all brands in this category, most notably Sonoma-Cutrer and Woodford Reserve.
The following chart summarizes the fiscal 2007 worldwide depletions (depletions
are shipments from wholesaler distributors to retail customers, and are commonly
regarded in the industry as an approximate measure of consumer demand) for
Brown-Forman's largest volume brands:
Nine-Liter % Change vs
Brand Cases (000s) Fiscal 2006
Jack Daniel's 9,075 6%
Southern Comfort 2,465 3%
Finlandia 2,440 15%
Fetzer Valley Oaks 2,295 5%
Canadian Mist 1,945 (4%)
Jack Daniel's & Cola 1,925 28%
Reported fourth quarter diluted earnings per share from continuing operations
were $0.56, down 9% from the same period last year. However, adjusting quarterly
comparisons for the impact of acquisitions, favorable foreign currency
fluctuations and last year's gain associated with changes in the company's
Australian distribution operation, underlying earnings growth for the fourth
quarter was 11%(3).
Fiscal 2008 Outlook
Global trends for our premium beverage portfolio remain strong, and we continue
to believe there are excellent opportunities to invest behind our brands. We
anticipate earnings in the range of $3.53 to $3.68 per share for fiscal 2008,
representing growth of 8% to 13% over comparable fiscal 2007 earnings of $3.27
per share. This outlook excludes the projected earnings dilution of $0.13 to
$0.18 per share associated with the Casa Herradura acquisition, two-thirds of
which we expect to be transition-related costs. These costs will include
integration and compliance expenditures and non-cash charges associated with the
purchase of distribution rights for the Herradura brand in the U.S.
--------
(3) 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
fourth quarter, and the reasons why management believes these adjustments
to be useful to the reader, is included in Schedule B and the Notes to this
press release.
Including anticipated dilution from the Casa Herradura acquisition, the company
expects fiscal 2008 earnings of $3.35 to $3.55 per share, representing growth of
7 to 13% over comparable 2007 earnings.
Fiscal Fiscal 2008
2007 Outlook
GAAP Reported Earnings Per Share $3.22
Gain on sale of winery assets ($0.08)
-------
Adjusted Earnings Per Share including Casa Herradura $3.14 $3.35 - $3.55 7-13% growth
Costs associated with the Casa Herradura acquisition $0.13 $0.18 - $0.13
-------
Adjusted Earnings Per Share excluding Casa Herradura $3.27 $3.53 - $3.68 8-13% growth
=======
Our full-year earnings expectations are moderated by our expectations for a
higher effective tax rate, anticipated higher raw material costs, and the
absence of $0.06 of interest income earned in fiscal 2007 on proceeds held from
the sale of Lenox, which was distributed to shareholders on May 10, 2007.
Brown-Forman will host a conference call to discuss the results at 10:00 a.m.
(EDT) this morning. All interested parties in the U.S. are invited to join the
conference call 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 participants dial in
approximately ten minutes in advance of the 010:00 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, through a link to
"Investors/Information." For those unable to participate in the live call, a
replay will be available by calling 800-642-1687 (U.S.) or 706-645-9291
(international). The identification code is 9424319. A digital audio recording
of the conference call will also be available on the Web site approximately one
hour after the conclusion of the conference call. The replay will be available
for at least 30 days following 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,
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 a significant portion of our profits;
- lower consumer confidence or purchasing in the wake of higher energy prices
or catastrophic events;
- 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 Mexican Peso;
- reduced bar, restaurant, hotel and travel business, including travel retail,
in the wake of terrorist attacks;
- lower consumer confidence or purchasing associated with high energy prices;
- 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;
- increases in the price of energy or raw materials, including grapes, grain,
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 included 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
April 30,
2006 2007 Change
------ ------ ------
CONTINUING OPERATIONS
Net sales $585.1 $690.8 18%
Gross profit 323.0 361.9 12%
Advertising expenses 80.1 93.9 17%
Selling, general, and
administrative expenses 140.8 158.9 13%
Other (income) expense, net (0.6) 0.5
Operating income 102.7 108.6 6%
Interest (income) expense, net (0.3) 10.9
Income before income taxes 103.0 97.7 (5%)
Income taxes 27.3 28.4
Net income 75.7 69.3 (8%)
Earnings per share:
Basic 0.619 0.563 (9%)
Diluted 0.611 0.557 (9%)
DISCONTINUED OPERATIONS
Net income (loss) $2.7 $(2.5)
Earnings (loss) per share:
Basic 0.022 (0.020)
Diluted 0.022 (0.020)
TOTAL COMPANY
Net income $78.4 $66.8 (15%)
Earnings per share:
Basic 0.641 0.543 (15%)
Diluted 0.633 0.537 (15%)
(more)
Brown-Forman Corporation
Unaudited Consolidated Statements of Operations
(Dollars in millions, except per share amounts)
Year Ended
April 30,
2006 2007 Change
------ ------ ------
CONTINUING OPERATIONS
Net sales $2,412.2 $2,806.1 16%
Gross profit 1,308.3 1,480.8 13%
Advertising expenses 323.3 361.1 12%
Selling, general, and
administrative expenses 469.2 537.0 14%
Other (income), net (47.4) (19.6)
Operating income 563.2 602.3 7%
Interest expense, net 3.5 16.3
Income before income taxes 559.7 586.0 5%
Income taxes 164.2 185.9
Net income 395.5 400.1 1%
Earnings per share:
Basic 3.239 3.257 1%
Diluted 3.204 3.222 1%
DISCONTINUED OPERATIONS
Net loss $(75.1) $(10.6)
Loss per share:
Basic (0.615) (0.087)
Diluted (0.608) (0.086)
TOTAL COMPANY
Net income $320.4 $389.5 22%
Earnings per share:
Basic 2.624 3.170 21%
Diluted 2.596 3.136 21%
(more)
Brown-Forman Corporation
Unaudited Condensed Consolidated Balance Sheets
(Dollars in millions)
April 30, April 30,
2006 2007
------ ------
Assets:
Cash and cash equivalents $ 475 $ 283
Short-term investments 160 86
Accounts receivable, net 323 404
Inventories 511 694
Other current assets 140 181
----- -----
Total current assets 1,609 1,648
Property, plant, and equipment, net 425 506
Goodwill 192 670
Other intangible assets 325 684
Prepaid pension cost 146 23
Other assets 31 33
----- -----
Total assets $2,728 $3,564
===== =====
Liabilities:
Accounts payable and accrued expenses $ 289 $ 361
Accrued income taxes 49 27
Payable to shareholders -- 204
Short-term borrowings 225 405
Current portion of long-term debt -- 350
Other current liabilities 6 --
----- -----
Total current liabilities 569 1,347
Long-term debt 351 422
Deferred income taxes 133 69
Accrued postretirement benefits 78 123
Other liabilities 34 30
----- -----
Total liabilities 1,165 1,991
Stockholders' equity 1,563 1,573
----- -----
Total liabilities and stockholders' equity $2,728 $3,564
===== =====
(more)
Brown-Forman Corporation
Unaudited Condensed Consolidated Statements of Cash Flows
(including cash flows from discontinued operations)
(Dollars in millions)
Year Ended
April 30,
2006 2007
------ ------
Cash flows from operating activities:
Continuing operations $361 $349
Discontinued operations (18) 6
----- -----
Cash provided by operating activities 343 355
Cash flows from investing activities:
Acquisition of businesses -- (1,045)
Net (increase) decrease in short-term investments (160) 74
Proceeds from sale of discontinued operations 205 12
Additions to property, plant, and equipment (51) (58)
Other 3 (21)
----- -----
Cash (used for) investing activities (3) (1,038)
Cash flows from financing activities:
Net (decrease) increase in debt (55) 597
Dividends paid (128) (143)
Other 23 33
----- -----
Cash (used for) provided by
financing activities (160) 487
Effect of exchange rate changes
on cash and cash equivalents -- 4
----- -----
Net increase (decrease) in cash and cash equivalents 180 (192)
Cash and cash equivalents, beginning of period 295 475
----- -----
Cash and cash equivalents, end of period $475 $283
===== =====
(more)
Brown-Forman Corporation
Continuing Operations Only
Supplemental Information (Unaudited)
(Dollars in millions, except per share amounts)
Three Months Ended
April 30,
2006 2007
------ ------
Depreciation and amortization $11.0 $13.0
Excise taxes $122.5 $142.4
Effective tax rate 26.6% 29.1%
Cash dividends paid per common share $0.2800 $0.3025
Shares (in thousands) used in the
calculation of earnings per share
- Basic 122,288 123,044
- Diluted 123,787 124,236
Year Ended
April 30,
2006 2007
------ ------
Depreciation and amortization $42.4 $44.8
Excise taxes $468.4 $588.5
Effective tax rate 29.3% 31.7%
Cash dividends paid per common share $1.050 $1.165
Shares (in thousands) used in the
calculation of earnings per share
- Basic 122,094 122,868
- Diluted 123,439 124,201
These figures have been prepared in accordance with the company's customary
accounting practices.
Schedule A
Brown-Forman Corporation
Supplemental Information
Full Year Diluted Earnings Per Share
from Continuing Operations
Fiscal Fiscal
2006 2007 % Change
Reported GAAP $3.20 $3.22 1%
Australian distribution transition (0.15)
Glenmorangie distribution termination (0.11)
Gain on sale of winery assets (0.04) (0.08)
Trade inventory levels (0.05) (0.01)
Foreign exchange (0.13)
Acquisitions(4) 0.15
Underlying(5) $2.85 $3.15 11%
Schedule B
Brown-Forman Corporation
Supplemental Information
Q4 Diluted Earnings Per Share
from Continuing Operations
Q4 2006 Q4 2007 % Change
Reported GAAP $0.61 $0.56 (9%)
Australian distribution transition (0.01)
Foreign exchange (0.02)
Acquisitions(6) 0.12
Underlying(5) $0.60 $0.66 11%
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(4) Includes $0.02 for Chambord and $0.13 for Casa Herradura.
(5) Management believes that disclosing this measure of earnings per share is
important because it more accurately reflects the underlying operations and
growth of the company.
(6) Includes $0.01 for Chambord and $0.11 for Casa Herradura.
Notes to Schedule A and B:
Australian distribution transition - Refers to the gain recorded during fiscal
2006 associated with changes in our distribution operations in Australia. The
gain represents the receipt of a contractual termination payment, net of the
loss of gross profits associated with the change in timing of revenue
recognition for shipments to this now wholly-owned operation. We believe this
item creates a disproportionate effect on underlying business results, making
comparisons difficult to understand for the reader. In addition, we believe that
excluding this gain provides helpful information in forecasting and planning the
growth expectations of the company.
Glenmorangie distribution termination - Refers to the gain recorded during
fiscal 2006 associated with consideration received from the brand owner for the
termination of the company's distribution and marketing rights for the
Glenmorangie family of brands. We believe this item created a disproportionate
effect on underlying business results, making comparisons difficult to
understand for the reader. In addition, we believe that excluding this gain
provides helpful information in forecasting and planning the growth expectations
of the company.
Gain on sale of winery assets - Refers to the gain recorded during fiscal 2006
associated with the company's sale of the former Jekel winery, and the net gain
recorded during fiscal 2007 associated with the sale of an Italian winery used
in the production of Bolla wines. We believe these items create a
disproportionate effect on underlying business results, making comparisons
difficult to understand for the reader. In addition, we believe that excluding
these gains 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. It does not reflect any changes in markets where the
company sells direct to the retail trade, such as the UK, Australia, Germany and
Poland. 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 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.
Acquisitions - Refers to the various costs (primarily transition and interest
expense) associated with the acquisitions of the Casa Herradura brands and
Chambord. We believe brand acquisitions can create a disproportionate effect on
underlying business results, making comparisons difficult to understand for the
reader. In addition, we believe that excluding the acquisition costs of Chambord
and Casa Herradura brands provide helpful information in forecasting and
planning the growth expectations of the company.
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.
Schedule C
Brown-Forman Corporation
Continuing Operations Only
Supplemental Information
(Dollars in millions)
Three Months Ended
April 30,
2006 2007
------ ------
CONTINUING OPERATIONS
Net sales $585.1 $690.8
Excise taxes (122.5) (142.4)
Net sales (stripped of excise taxes) 462.6 548.4
Gross profit (as reported) 323.0 361.9
Gross margin (stripped net sales basis) 69.8% 66.0%
Year Ended
April 30,
2006 2007
------ ------
CONTINUING OPERATIONS
Net sales $2,412.2 $2,806.1
Excise taxes (468.4) (588.5)
Net sales (stripped of excise taxes) 1,943.8 2,217.6
Gross profit (as reported) 1,308.3 1,480.8
Gross margin (stripped net sales basis) 67.3% 66.8%