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United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 30, 1996
Commission file number 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
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
------------------- ------------------------
Preferred $.40 Cumulative Stock, $10.00 par value, New York Stock Exchange
redeemable at company's option at $10.25 per share
plus unpaid accrued dividends; liquidating value
$10.00 per share plus unpaid accrued dividends
Class A Common Stock (voting) $.15 par value New York Stock Exchange
Class B Common Stock (nonvoting) $.15 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) None
of the Act
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value, at April 30, 1996, of the voting stock held by
nonaffiliates of the registrant was $283,475,205.
The number of shares outstanding for each of the registrant's classes of
Common Stock on May 28, 1996 was:
Class A Common Stock (voting) 28,988,091
Class B Common Stock (nonvoting) 40,008,147
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Portions of the Registrant's 1996 Annual Report to Stockholders are
incorporated by reference into Parts I, II, and IV of this report.
Portions of the Proxy Statement of Registrant for use in connection with
the Annual Meeting of Stockholders to be held July 25, 1996 are incorporated
by reference into Part III of this report.
PART I
Item 1. Business
(a) General development of business:
Brown-Forman Corporation was incorporated under the laws of the State of
Delaware in 1933, successor to a business founded in 1870 as a partnership
and subsequently incorporated under the laws of the Commonwealth of
Kentucky in 1901. Its principal executive offices are located at 850 Dixie
Highway, Louisville, Kentucky 40210 (mailing address: P.O. Box 1080,
Louisville, Kentucky 40201-1080). Except as the context may otherwise
indicate, the terms "Brown-Forman" and "company" refer to Brown-Forman
Corporation and its subsidiaries.
The company may from time to time make written or oral forward-looking
statements, including statements contained in the company's filings with
the Securities and Exchange Commission and in its reports to stockholders.
This Annual Report contains forward-looking statements made in good faith
by Brown-Forman pursuant to the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. In connection with these "safe
harbor" provisions, the company is hereby identifying important factors
that could cause actual results to differ materially from those contained
in any forward-looking statement made by or on behalf of the company. Any
such statement is qualified by reference to the following cautionary
statements.
The company's businesses operate in highly competitive markets and are
subject to changes in general economic conditions, intense competition,
changes in consumer preferences, the impact of excise tax increases with
respect to the wines and spirits segment, foreign exchange rate
fluctuations, the degree of acceptance of new product introductions, the
uncertainties of litigation, as well as other risks and uncertainties
detailed from time to time in the company's Securities and Exchange
Commission filings. Developments in any of these areas, which may be more
fully described elsewhere in Part I, Item 1 - Business, and Item 3 - Legal
Proceedings, and in Part II, Item 7 - Management's Discussion and Analysis
of Financial Condition and Results of Operations on pages 18-23 of the
company's 1996 Annual Report to Stockholders, each of which is incorporated
into this section by reference, could cause the company's results to differ
materially from results that have been or may be projected by or on behalf
of the company. The company cautions that the foregoing list of important
factors is not exclusive. The company does not undertake to update any
forward-looking statement that may be made from time to time by or on
behalf of the company.
(b) Financial information about industry segments:
Information regarding net sales, operating income, and total assets of each
of the company's business segments is in Note 13 of Notes to Consolidated
Financial Statements on page 35 of the company's 1996 Annual Report to
Stockholders, which information is incorporated herein by reference in
response to Item 8.
(c) Narrative description of business:
The following is a description of the company's operations.
Wines and Spirits Segment
- -------------------------
Wines and Spirits operations include manufacturing, bottling, importing,
exporting, and marketing a wide variety of alcoholic beverage brands. This
Segment also manufactures and markets new and used oak barrels, plastic
closures, and plastic bottles.
Brands are grouped into four categories: North American Spirits, Specialty
and Imported Items, Wines, and Craft Beers.
North American Spirits consists of the following brands:
Jack Daniel's Tennessee Whiskey
Canadian Mist Canadian Whiskies
Southern Comfort
Old Forester Kentucky Straight Bourbon Whisky
Gentlemen Jack Rare Tennessee Whiskey
Early Times Kentucky Whisky
Woodford Reserve Distillers Select
Kentucky Straight Bourbon Whiskey
Pepe Lopez Tequila
Korbel California Brandies **
Statistics based on case sales, published annually by a leading trade
publication, rank Jack Daniel's as the largest selling Tennessee whiskey in
the United States, Canadian Mist as the largest selling Canadian whisky in
the United States, and Southern Comfort as the largest selling domestic
proprietary liqueur in the United States.
Specialty and Imported Items consists of the following brands:
Jack Daniel's Country Cocktails
Tropical Freezes
Ice Breakers
Jack Daniel's & Cola
Southern Comfort & Cola
Bushmills Irish Whiskies*
Black Bush Special Irish Whiskey*
Glenmorangie Single Highland Malt Scotch Whiskies*
Usher's Scotch Whisky*
Oblio Sambucas*
Wines consists of the following brands:
Fetzer Vineyards California Wines
Korbel California Champagnes and Wines**
Bolla Italian Wines
Jekel Vineyards California Wines
Bel Arbor California Wines
Fontana Candida Italian Wines*
Brolio Italian Wines*
Carmen Vineyards Chilean Wines*
Fontanafredda Italian Wines*
Armstrong Ridge California Champagne**
Noilly Prat Vermouths*
Craft Beers consists of the following brands:
Jack Daniel's 1866 Classic Oak-aged Beers
* Brands marketed by Brown-Forman in the U.S. and other select markets by
agency agreements.
** Brands marketed by Brown-Forman worldwide by agency agreement.
A leading industry trade publication reported Korbel California Champagnes
as the largest selling premium champagne in the United States. This trade
publication also reported that, among numerous imported wines, Bolla
Italian Wine is the leading premium imported table wine in the United
States. Fetzer was ranked eighteenth among all table wines.
Brown-Forman believes that statistics used to rank these products are
reasonably accurate.
Brown-Forman's strategy with respect to the Wines and Spirits Segment is to
market high quality products that satisfy consumer preferences and support
them with extensive international, national, and regional marketing
programs. These programs are intended to extend consumer brand recognition
and brand loyalty.
Sales managers and representatives or brokers represent the Segment in all
states. The Segment distributes its spirits products domestically either
through state agencies or through wholesale distributors. The contracts
which Brown-Forman has with many of its distributors have formulas which
determine reimbursement to distributors if Brown-Forman terminates them;
the amount of reimbursement is based primarily on the distributor's length
of service and a percentage of its purchases over time. Some states have
statutes which limit Brown-Forman's ability to terminate distributor
contracts.
Jack Daniel's Tennessee Whiskey and Southern Comfort are the principal
products exported by the Segment. These brands are sold through contracts
with brokers and distributors in most countries.
The principal raw materials used in manufacturing and packaging distilled
spirits are corn, rye, malted barley, glass, cartons, and wood for new
white oak barrels, which are used for storage of bourbon and Tennessee
whiskey. None of these raw materials are in short supply, and there are
adequate sources from which they may be obtained.
The principal raw materials used in the production of wines are grapes and
packaging materials. Grapes are primarily purchased from independent
growers. Adequate sources exist for these raw materials.
Production of whiskies is scheduled to meet demand three to five years in
the future. Accordingly, inventories are larger in relation to sales and
total assets than would be normal for most other businesses.
The industry is highly competitive and there are many brands sold in the
consumer market. Trade information indicates that Brown-Forman is one of
the largest wine and spirit suppliers in the United States in terms of
revenues.
The wine and spirits industry is regulated by the Bureau of Alcohol,
Tobacco, and Firearms of the United States Treasury Department with respect
to production, blending, bottling, sales, advertising, and transportation
of its products. Also, each state regulates advertising, promotion,
transportation, sale, and distribution of such products.
Under federal regulations, whisky must be aged for at least two years to be
designated "straight whisky." The Segment ages its straight whiskies for a
minimum of three to five years. Federal regulations also require that
"Canadian" whisky must be manufactured in Canada in compliance with
Canadian laws and must be aged in Canada for at least three years.
Consumer Durables Segment
- -------------------------
The Consumer Durables Segment includes the manufacturing and/or marketing
of the following:
Fine China Dinnerware
Contemporary Dinnerware
Casual Dinnerware and Glassware
Crystal Stemware
Crystal Barware
China and Crystal Giftware
China Lamps
Collectibles and Jewelry
Sterling Silver, Pewter and Silver-Plated Giftware
Sterling Silver and Stainless Steel Flatware
Fine Table Linens
Luggage
Business Cases and Folios
Personal Leather Accessories
All of the products of the Segment are sold by segment-employed sales
representatives under various compensation arrangements, and where
appropriate to the class of trade, by specialized independent commissioned
sales representatives and independent distributors.
The Segment's products are marketed domestically through authorized retail
stores consisting of department stores and specialty and jewelry shops and
through retail stores operated by the Segment. Products are also
distributed domestically through the institutional, incentive, premium,
business gift and military exchange classes of trade, and internationally
through authorized retailers and/or distributors in selected foreign
markets. Specially created collectible products are distributed both
domestically and in selected foreign markets through the Segment's direct
response/mail-order division.
Fine china and crystal products are marketed under both the Lenox and
Gorham trademarks. Lenox also markets casual dinnerware. Contemporary
dinnerware, glassware and flatware products are marketed under the Dansk
trademark. Sterling silver and stainless flatware and sterling giftware
are marketed under the Gorham and "Lenox. Kirk Stieff Collection"
trademarks. Pewter and silver-plated giftware products are also marketed
under the "Lenox. Kirk Stieff Collection" trademark. Luggage, business
cases, and personal leather accessories are marketed under the Hartmann,
Wings and Crouch & Fitzgerald trademarks. The direct response/mail-order
sales in the United States of specially designed collectibles are marketed
under the Lenox, Princeton Gallery and Gorham trademarks, while such sales
abroad are marketed primarily under the Brooks & Bentley trademark.
The Lenox, Gorham, and Hartmann brand names hold significant positions in
their industries. The Segment has granted to a producer of high quality
table linens a license for use of the Lenox trademarks on selective fine
table linens, subject to the terms of a licensing agreement.
The Segment believes that it is the largest domestic manufacturer and
marketer of fine china dinnerware and fine crystal stemware, and the only
significant domestic manufacturer of fine quality china giftware. The
Segment is also a leading manufacturer and distributor of fine quality
luggage, business cases, and personal leather accessories. The Segment
competes with a number of other companies and is subject to intense foreign
competition in the marketing of its fine china, contemporary and casual
dinnerware, crystal stemware, and luggage products.
In the Segment's china, crystal, and stainless businesses, competition is
based primarily on quality, design, brand, style, product appeal, consumer
satisfaction, and price. In its luggage, business case and personal
leather accessories business, competition is based primarily on brand
awareness, quality, design, style, and price. In its direct response/mail-
order business, the most important competitive factors are the brand,
product appeal, design, sales/marketing program, service, and price of the
products. In its sterling silver, silver-plated, and pewter business and
competition is based primarily on price, with quality, design, brand,
style, product appeal, and consumer satisfaction also being factors.
Clay and feldspar are the principal raw materials used to manufacture china
products and silica is the principal raw material used to manufacture
crystal products. Gold is a significant raw material used to decorate
china and crystal products. Leather and nylon fabric are the principal raw
materials used to manufacture luggage and business cases. Fine silver is
the principal raw material used to manufacture sterling silver giftware and
flatware products, and tin is the principal raw material used to
manufacture pewter products, and stainless steel is the principal raw
material used to manufacture stainless steel flatware. It is anticipated
that raw materials used by the Segment will be in adequate supply. However,
the acquisition price of gold, fine silver, and tin is influenced
significantly by worldwide economic events and commodity trading.
Sales of certain Segment products are traditionally greater in the second
quarter of the fiscal year, primarily because of seasonal holiday buying.
Other Information
- -----------------
As of April 30, 1996, the company employs approximately 7,400 persons,
including 1,000 employed on a part-time basis.
The company is an equal opportunity employer and recruits and places
employees without regard to race, color, national origin, sex, age,
religion, disability, or veteran status.
The company believes its employee relations are good.
For information on the effects of compliance with federal, state, and local
environmental regulations, refer to Note 11, "Environmental," on page 33 of
the company's 1996 Annual Report to Stockholders, which information is
incorporated herein by reference in response to Item 8.
Item 2. Properties
- ------ ----------
The corporate offices consist of office buildings, including renovated
historic structures, all located in Louisville, Kentucky.
Significant properties by business segments are as follows:
Wines and Spirits Segment
- -------------------------
The facilities of the Wines and Spirits Segment are shown below. The owned
facilities are held in fee simple.
Owned facilities:
Production facilities:
Distilled Spirits and Wines:
Lynchburg, Tennessee
Louisville, Kentucky
Collingwood, Ontario
Shively, Kentucky
Woodford County, Kentucky
Frederiksted, St. Croix, U.S. Virgin Islands
Mendocino County, California
Monterey County, California
Pedemonte, Italy
Oak Barrels:
Louisville, Kentucky
Mendocino County, California
Plastic Closures and Plastic Bottles:
Louisville, Kentucky
Bottling facilities:
Lynchburg, Tennessee
Louisville, Kentucky
Woodford County, Kentucky
Frederiksted, St. Croix, U.S. Virgin Islands
Monterey County, California
Pedemonte, Italy
Warehousing facilities:
Lynchburg, Tennessee
Louisville, Kentucky
Collingwood, Ontario
Shively, Kentucky
Woodford County, Kentucky
Mendocino County, California
Monterey County, California
Pedemonte, Italy
Leased facilities:
Production and bottling facility in Dublin, Ireland
Wine production, warehousing and bottling facility in Mendocino
County, California
Vineyards in Monterey County, California
The company believes that the productive capacities of the Wines and
Spirits Segment are adequate for the business, and such facilities are
maintained in a good state of repair.
Consumer Durables Segment
- -------------------------
The facilities of the Consumer Durables Segment are shown below. The owned
facilities are held in fee simple.
Owned facilities:
Office facilities:
Lenox corporate - Lawrenceville, New Jersey
Headquarters for Lenox Direct Response/Mail-Order
Division - Langhorne, Pennsylvania
Production and office facilities:
Lenox - Pomona, New Jersey (includes retail store); Oxford, North
Carolina;
Kinston, North Carolina; and Mt. Pleasant, Pennsylvania
(includes retail store)
Gorham - Smithfield, Rhode Island
Hartmann - Lebanon, Tennessee (includes retail store)
Warehousing facilities:
Lenox/Dansk/Gorham - Williamsport, Maryland
Leased facilities:
Office facilities:
Lenox Manufacturing - Absecon, New Jersey
Dansk headquarters - White Plains, New York
Lenox corporate - Lawrenceville, New Jersey
Production/Warehousing/Office facilities:
Kirk Stieff - Baltimore, Maryland (includes retail store)
Warehousing facilities:
Lenox - South Brunswick, New Jersey (includes retail stores);
Oxford, North Carolina;
Kinston, North Carolina; and Mt. Pleasant, Pennsylvania
Hartmann - Lebanon, Tennessee
Retail stores:
The Segment operates 34 Lenox outlet stores in 23 states and
a Lenox Gift Express store and Lenox Collections kiosk in
Pennsylvania. The Segment also operates 60 Dansk outlet stores
in 30 states and 6 Dansk Lifestyle stores in 6 states. In
addition, the Segment operates 2 Crouch & Fitzgerald luggage
stores in 2 states.
The lease terms expire at various dates and are generally renewable, except
for the Crouch & Fitzgerald store leases.
The company is of the opinion that the Segment's facilities are in good
condition and are adequate for the business.
Item 3. 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.)
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.
Trial is scheduled for September, 1996.
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.
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
- ------ ---------------------------------------------------
None.
Executive Officers of the Registrant
------------------------------------
Principal Occupation and
Name Age Business Experience Family Relationship
- ----------------- --- ------------------------ -------------------
Owsley Brown II 53 Chairman of the company Cousin to Owsley
since July, 1995. Chief Brown Frazier
Executive Officer of the
company since July 1993.
President of the company
from July 1987 to July 1993.
Owsley Brown Frazier 60 Vice Chairman of the Cousin to Owsley
company since August 1983. Brown II
William M. Street 57 Vice Chairman of the None
company since July 1987.
Steven B. Ratoff 53 Executive Vice President None
and Chief Financial Officer
of the company since December
1994. Private investor in a
number of small privately-held
companies from February 1992
to November 1994. Senior Vice
President and Chief Financial
Officer for Pharmaceutical
Group of Bristol-Myers Squibb
from January 1990 to January
1992.
John P. Bridendall 46 Senior Vice President and None
Director of Corporate
Development since July 1987.
Russell C. Buzby 62 Senior Vice President and None
Executive Director of Human
Resources and Information
Services since July 1987.
Michael B. Crutcher 52 Senior Vice President, None
General Counsel, and
Secretary since May 1989.
Richard E. Stearns 45 President and Chief None
Executive Officer of Lenox,
Incorporated (a subsidiary
of the company) since
September 1995. President
of Lenox, Incorporated from
April 1992 to September 1995.
President of Lenox Products
Group from May 1990 to April
1992.
Lois A. Mateus 49 Senior Vice President of None
Corporate Communications
and Corporate Services
since January 1988.
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
- ------- ----------------------------------------------------------------
Matters
-------
Except as presented below, for the information required by this item refer
to the section entitled "Quarterly Financial Information" appearing on the
"Highlights" page of the 1996 Annual Report to Stockholders, which
information is incorporated herein by reference.
Holders of record of Common Stock at May 28, 1996:
Class A Common Stock (Voting) 3,045
Class B Common Stock (Nonvoting) 5,051
The principal market for Brown-Forman common shares is the New York Stock
Exchange.
Item 6. Selected Financial Data
- ------ -----------------------
For the information required by this item, refer to the section entitled
"Consolidated Selected Financial Data" appearing on page 17 of the 1996
Annual Report to Stockholders, which information is incorporated herein by
reference in response to Item 8.
Item 7. Management's Discussion and Analysis of Financial Condition and
- ------ ---------------------------------------------------------------
Results of Operations
---------------------
For the information required by this item, refer to the section entitled
"Management's Discussion and Analysis" appearing on pages 18 through 23 of
the 1996 Annual Report to Stockholders, which information is incorporated
herein by reference in response to Item 8.
Item 8. Financial Statements and Supplementary Data
- ------ -------------------------------------------
For the information required by this item, refer to the Report of
Management, Report of Independent Accountants, Consolidated Financial
Statements, and Notes to Consolidated Financial Statements appearing on
pages 24 through 35 of the 1996 Annual Report to Stockholders, which
information is incorporated herein by reference. For selected quarterly
financial information, refer to the section entitled "Quarterly Financial
Information" appearing on the "Highlights" page of the 1996 Annual Report
to Stockholders, which information is incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------- ----------------------------------------------------------------
Financial Disclosures
---------------------
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
- ------- --------------------------------------------------
For the information required by this item, refer to the following sections
of the registrant's definitive proxy statement for the Annual Meeting of
Stockholders to be held July 25, 1996, which information is incorporated
herein by reference: (a) "Election of Directors" on page 1 through the
footnote on page 2 (for information on directors); and (b) the last
paragraph on page 4 (for information on delinquent filings). Also, see the
information with respect to "Executive Officers of the Registrant" under
Part I hereof, which information is incorporated herein by reference.
Item 11. Executive Compensation
- ------- ----------------------
For the information required by this item, refer to the section entitled
"Executive Compensation" on pages 5 through 14 of the registrant's
definitive proxy statement for the Annual Meeting of Stockholders to be
held July 25, 1996, which information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- ------- --------------------------------------------------------------
For the information required by this item, refer to the section entitled
"Security Ownership of Certain Beneficial Owners and Management" appearing
on pages 3 and 4 of the registrant's definitive proxy statement for the
Annual Meeting of Stockholders to be held July 25, 1996, which information
is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
- ------- ----------------------------------------------
For the information required by this item, refer to the section entitled
"Transactions with Management" appearing on page 14 of the registrant's
definitive proxy statement for the Annual Meeting of Stockholders to be
held July 25, 1996, which information is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
- ------- ----------------------------------------------------------------
(a) 1 and 2 - Index to Consolidated Financial Statements and Schedules:
Reference
------------------------
Annual
Form 10-K Report to
Annual Report Stockholders
Page Page(s)
-------------- ------------
Incorporated by reference to the company's
Annual Report to Stockholders for the
year ended April 30, 1996:
Report of Management* -- 24
Consolidated Statement of Income for the
years ended April 30, 1996, 1995, and 1994* -- 25
Consolidated Balance Sheet at April 30, 1996,
1995, and 1994* -- 26 - 27
Consolidated Statement of Cash Flows for the
years ended April 30, 1996, 1995, and 1994* -- 28
Consolidated Statement of Stockholders' Equity
for the years ended April 30, 1996, 1995,
and 1994* -- 29
Notes to Consolidated Financial Statements* -- 30 - 35
Report of Independent Accountants S-1 --
Consolidated Financial Statement Schedule:
II - Valuation and Qualifying Accounts S-2 --
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission have been
omitted either because they are not required under the related
instructions, because the information required is included in the
consolidated financial statements and notes thereto, or because they are
inapplicable.
* Incorporated by reference to Item 8 herein.
(a) 3 - Exhibits:
Filed Herewith:
Exhibit Index
- -------------
4(c) Amendment No. 1 dated as of February 23, 1996, to the Credit
Agreement referenced in the Previously Filed Exhibit Index as 4 (a)
13 Company's Annual Report to Stockholders for the year ended April 30,
1996, but only to the extent set forth in Items 1, 5, 6, 7, and 8
of the company's Annual Report on Form 10-K for the year ended
April 30, 1996.
21 Subsidiaries of the Registrant.
23 Consent of Coopers & Lybrand L.L.P. independent accountants.
27 Financial Data Schedule (not considered to be filed).
Previously Filed:
Exhibit Index
- -------------
3(a) Restated Certificate of Incorporation of registrant which is
incorporated herein by reference to Brown-Forman Corporation's
10-K filed on July 19, 1994.
3(b) Certificate of Amendment to Restated Certificate of Incorporation of
registrant which is incorporated herein by reference to Brown-Forman
Corporation's 10-K filed on July 19, 1994.
3(c) Certificate of Ownership and Merger of Brown-Forman Corporation into
Brown-Forman, Inc. which is incorporated herein by reference to
Brown-Forman Corporation's 10-K filed on July 19, 1994.
3(d) Certificate of Amendment to Restated and Amended Certificate of
Incorporation of Brown-Forman Corporation which is incorporated
herein by reference to Brown-Forman Corporation's 10-K filed on
July 19, 1994.
3(e) The by-laws of registrant, as amended on May 25, 1988, which is
incorporated herein by reference to Brown-Forman Corporation's
10-K filed on July 26, 1993.
4(a) Credit Agreement dated as of November 30, 1994, among the company
and a group of United States and international banks, which is
incorporated herein by reference to Brown-Forman Corporation's
10-K filed on July 17, 1995.
4(b) The Form of Indenture dated as of March 1, 1994 between the company
and The First National Bank of Chicago, as Trustee, which is
incorporated herein by reference to Brown-Forman Corporation's
Form S-3 (Registration No. 33-52551) filed on March 8, 1994.
10(a) Description of compensation arrangement with W. L. Lyons Brown, Jr.,
which is incorporated herein by reference to Brown-Forman
Corporation's 10-K filed on July 17, 1995.
10(b) A description of the Brown-Forman Omnibus Compensation Plan, which is
incorporated herein by reference to the Appendix of the registrant's
definitive proxy statement for the Annual Meeting of Stockholders
held on July 27, 1995.
10(c) Brown-Forman Corporation Restricted Stock Plan which is incorporated
herein by reference to Brown-Forman Corporation's 10-K filed on
July 19, 1994.
10(d) Brown-Forman Corporation Supplemental Excess Retirement Plan, which
is incorporated herein by reference to Brown-Forman Corporation's
10-K filed on July 23, 1990.
10(e) Brown-Forman Corporation Stock Appreciation Rights Plan, which is
incorporated herein by reference to Brown-Forman Corporation's
10-K filed on July 23, 1990.
10(f) A description of the Brown-Forman Savings Plan is incorporated herein
by reference to page 10 of the registrant's definitive proxy
statement for the Annual Meeting of Stockholders to be held on
July 25, 1996.
10(g) A description of the Brown-Forman Flexible Reimbursement Plan is
incorporated herein by reference to page 10 of the registrant's
definitive proxy statement for the Annual Meeting of Stockholders
to be held on July 25, 1996.
(b) No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
/s/ Owsley Brown II
-------------------------------------------------
Date: May 23, 1996 By: Owsley Brown II
Chairman of the Board and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities on May 23, 1996 as indicated:
/s/ Barry D. Bramley /s/ Geo. Garvin Brown III /s/ Owsley Brown II
_____________________ _________________________ _______________________
By: Barry D. Bramley By: Geo. Garvin Brown III By: Owsley Brown II
Director Director Director, Chairman
of the Board and
Chief Executive
Officer
/s/ W. L. Lyons Brown, Jr. /s/ Donald G. Calder /s/ Owsley Brown Frazier
_________________________ ______________________ _______________________
By: W. L. Lyons Brown, Jr. By: Donald G. Calder By: Owsley Brown Frazier
Director Director Director, Vice
Chairman of the
Board
/s/ Richard P. Mayer /s/ Stephen E. O'Neil /s/ William M. Street
____________________ _____________________ _______________________
By: Richard P. Mayer By: Stephen E. O'Neil By: William M. Street
Director Director Director, Vice
Chairman of the
Board
/s/ James S. Welch /s/ Steven B. Ratoff /s/ Thomas P. Burnet
_____________________ _____________________ _______________________
By: James S. Welch By: Steven B. Ratoff By: Thomas P. Burnet
Director Executive Vice (Principal Accounting
President and Officer)
Chief Financial Brown-Forman
Officer Corporation
(Principal Financial
Officer) Senior Vice
President and
Chief Financial
Officer
Brown-Forman
Beverages Worldwide
REPORT OF INDEPENDENT ACCOUNTANTS
Brown-Forman Corporation
Louisville, Kentucky
We have audited the consolidated financial statements of Brown-Forman
Corporation and Subsidiaries as of April 30, 1996, 1995, and 1994, and for
the years then ended, which financial statements are included on pages 25
through 35 of the 1996 Annual Report to Stockholders of Brown-Forman
Corporation and incorporated by reference herein. We have also audited the
financial statement schedule listed in the index on page 14 of this Form
10-K. These financial statements and financial statement schedule are the
responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Brown-
Forman Corporation and Subsidiaries as of April 30, 1996, 1995, and 1994
and the consolidated results of their operations and their cash flows for
the years then ended in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information required to be included therein.
As discussed in Note 3 to the consolidated financial statements, in 1994
the company adopted changes in its methods of accounting for postretirement
benefits other than pensions, postemployment benefits, and contributions.
Coopers & Lybrand L.L.P.
Louisville, Kentucky
May 28, 1996
S-1
BROWN-FORMAN CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended April 30, 1996, 1995, and 1994
(Expressed in thousands)
Col. A Col. B Col. C Co. D Col. E
------ ------ ------ ----- ------
Additions
---------
Balance Charged Balance
Beginning Costs End
of and of
Description Period Expenses Deductions Period
----------- --------- -------- ---------- -------
1996
Allowance for Doubtful $14,061 $ 9,386 $10,241(1) $13,206
Accounts
1995
Allowance for Doubtful $12,006 $ 9,343 $7,288(1) $14,061
Accounts
1994
Allowance for Doubtful $10,432 $10,538 $8,964(1) $12,006
Accounts
(1) Doubtful accounts written off, net of recoveries.
S-2
Exhibit (4)
EXECUTION COPY
AMENDMENT NO. 1
DATED AS OF FEBRUARY 23, 1996
to
CREDIT AGREEMENT
DATED AS OF NOVEMBER 30, 1994
This Amendment No. 1 (this "Amendment") is entered into as of February
23, 1996, by and among Brown-Forman Corporation, a Delaware corporation
(the "Company"), the undersigned Banks, The First National Bank of Chicago
and Morgan Guaranty Trust Company of New York, as Co-Agents, and The First
National Bank of Chicago, as Administrative Agent, under the Credit
Agreement referred to below. The parties hereto agree as follows:
WHEREAS, the Company, the Administrative Agent, the Co-Agents and the
Banks are parties to that certain Credit Agreement dated as of November 30,
1994 (the "Credit Agreement"); and
WHEREAS, the Company, the Administrative Agent, the Co-Agents and the
Banks desire to amend the Credit Agreement in certain respects more fully
described hereinafter;
NOW, THEREFORE, in consideration of the undertakings set forth herein,
the parties hereto hereby agree as follows:
1. Defined Terms. Capitalized terms used herein, including in the
Preamble and Recitals, and not otherwise defined herein shall have the
meanings attributed to them in the Credit Agreement.
2. Amendments to the Credit Agreement.
2.1. The definition of "Applicable Margin" set forth in Article I is
hereby amended by deleting it in its entirety and inserting in lieu thereof
the following:
"'Applicable Margin' means (i) for any day on which Level I
Status exists, 0.135 of 1% per annum, (ii) for any day on which Level
II Status exists, 0.15 of 1% per annum, (iii) for any day on which
Level III Status exists, 0.18 of 1% per annum, and (iv) for any day on
which Level IV Status exists, 0.275 of 1% per annum. Reference is
hereby made to the Pricing Schedule set forth in Section 2.4.5(c) for
an illustration of the relationship between the Applicable Margin and
the Status Levels."
2.2. The definition of "Termination Date" set forth in Article I is
hereby amended by deleting the date "November 30, 1999" where it appears
therein and inserting the date "February 23, 2001" in lieu thereof.
2.3. The definition of "Usage Fee" set forth in Article I is hereby
amended by deleting it in its entirety.
2.4. Clause (a) of Section 2.4.5 is hereby amended by deleting it in
its entirety and inserting in lieu thereof the following:
"(a) Facility Fees. The Company hereby agrees to pay to the
Administrative Agent for the account of each Bank a facility fee (the
"Facility Fee") of (a) for any day on which Level I Status exists,
0.065 of 1% per annum, (b) for any day on which Level II Status
exists, 0.075 of 1% per annum, (c) for any day on which Level III
Status exists, 0.09 of 1% per annum, and (d) for any day on which
Level IV Status exists, 0.125 of 1% per annum, on the Aggregate
Commitment for the period from February 23, 1996, to but excluding the
Termination Date (or such earlier date on which the Aggregate
Commitment shall terminate), payable in arrears on each Payment Date
(the first such payment to be made on April 15, 1996) and on the
Termination Date (or such earlier date on which the Aggregate
Commitment shall terminate) for any period then ending for which such
fee shall not have been theretofor paid. The Company shall give
prompt notice to the Administrative Agent of any changes in the Status
Level in accordance with Section 6.15."
2.5. Clause (b) of Section 2.4.5 is hereby amended by deleting it in
its entirety and inserting in lieu thereof the following:
"(b) [Intentionally Omitted]."
2.6 Clause (c) of Section 2.4.5, is hereby amended by deleting it in
its entirety and inserting in lieu thereof the following:
"(c) The following schedule illustrates how the Applicable
Margin and Facility Fees will apply to the Company in different Status
Levels:
PRICING SCHEDULE (expressed in basis points per annum)
-----------------------------------------------------
Status Level Level I Level II Level III Level IV
- ------------ ------- -------- --------- --------
At least
Higher equal to A+ Lower than Lower than
Ratings than A+ and A1 but Level II A- or A3
S&P/Moody's and A1 not higher and higher
than both A+ than or
and A1 equal to A-
and A3
Facility Fee 6.5 7.5 9 12.5
Applicable 13.5 15 18 27.5"
Margin
3. Representations and Warranties. In order to induce the
Administrative Agent, the Co-Agents and the Banks to enter into this
Amendment, the Company hereby represents and warrants to the Administrative
Agent, the Co-Agents and the Banks as of the date of this Amendment that:
(a) The execution and delivery by the Company of this Amendment
and the performance of its obligations under the Credit Agreement, as
amended by this Amendment, and under the Notes are within the
Company's corporate powers, have been duly authorized by all necessary
corporate proceedings, have received all necessary governmental
approvals (if any shall be required), and do not and will not
contravene or conflict with any provision of, or result in the
creation or imposition of a Lien upon any properties of the Company or
any Subsidiary under, any law, or the charter or by-laws of the
Company or any Subsidiary, or any agreement, indenture or instrument
to which the Company or any Subsidiary is a party or by which it or
its property is bound.
(b) The Credit Agreement, as amended by this Amendment, is the
valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditor's rights generally.
(c) The representations and warranties contained in Article V of
the Credit Agreement are true and correct on and as of the date of
this Amendment.
(d) There exists no Default or Unmatured Default.
4. Amendment Effective Date. This Amendment shall become
effective as of the date first written above upon receipt by the
Administrative Agent, with sufficient copies for the Co-Agents and the
Banks, of counterparts of this Amendment duly executed by the Company, the
Administrative Agent, the Co-Agents and each of the Banks.
5. Ratification of the Credit Agreement. All of the terms,
conditions and covenants of the Credit Agreement, except as specifically
amended herein, shall remain in full force and effect. The Credit
Agreement as amended herein is hereby ratified, approved and confirmed in
all respects.
6. Reference to the Credit Agreement. From and after the date first
above written, each reference in the Credit Agreement to "this Agreement",
"hereof", "hereunder" or words of like import, and all references to the
Credit Agreement in any and all agreements, instruments, documents, notes,
certificates and other writings of every kind and nature, shall be deemed
to mean the Credit Agreement, as amended by this Amendment.
7. Costs and Expenses. The Company agrees to pay all costs, fees and
out-of-pocket expenses (including attorney's fees and time charges of
attorneys for the Administrative Agent, which attorneys may be employees of
the Administrative Agent) incurred by the Administrative Agent in
connection with the enforcement of this Amendment. The Company's
obligations under this Paragraph 7 shall survive any termination of the
Credit Agreement or this Amendment.
8. CHOICE OF LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS (WITHOUT
APPLICATION OF THE CONFLICT OF LAWS PRINCIPLES THEREOF).
9. Counterparts. This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one amendment.
IN WITNESS WHEREOF, the Company, the Administrative Agent, the Co-
Agents and each of the undersigned Banks have executed this Amendment as of
the date first above written.
BROWN-FORMAN CORPORATION
/s/ Terry Lange
By: ________________________________
Title: Assistant Treasurer
/s/ Garrison R. Cox
By: ________________________________
Title: Assistant Vice President and
Assistant Secretary
THE FIRST NATIONAL BANK OF CHICAGO,
Individually, as Co-Agent and as Administrative
Agent
By: /s/ Robert R. Bourke
--------------------------------
Title: Senior Vice President
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, Individually and as Co-Agent
By: /s/ Laura E. Reim
--------------------------------
Title: Vice President
ABN AMRO BANK N.V.
By: /s/ James Janovsky
--------------------------------
Title: Group Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ James O'Keane
--------------------------------
Title: Senior Vice President
By: /s/ Raju N. Patel
--------------------------------
Title: Assistant Vice President
BANK OF MONTREAL
By: /s/ Randall Becker
--------------------------------
Title: Managing Director
CITIBANK N.A.
By: /s/ David L. Harris
--------------------------------
Title: Assistant Vice President
CORESTATES BANK, N.A.
By: /s/ Thomas J. McDonnell
--------------------------------
Title: Vice President
FIRST NATIONAL BANK OF BOSTON
By: /s/ Howard V. Hennigar, Jr.
--------------------------------
Title: Managing Director
THE INDUSTRIAL BANK OF JAPAN TRUST
COMPANY
By: /s/ J. Kenneth Biegen
--------------------------------
Title: Senior Vice President
MELLON BANK, N.A.
By: /s/ Mark Johnston
--------------------------------
Title: Assistant Vice President
NATIONAL CITY BANK, KENTUCKY
By: /s/ Deroy Scott
--------------------------------
Title: Vice President
PNC BANK, KENTUCKY, INC.
By: /s/ Brennan T. Danile
--------------------------------
Title: Commercial Banking Officer
SWISS BANK CORPORATION
By: /s/ H. Clark Worthley
--------------------------------
Title: Associate Director
By: /s/ Sean W. Kelly
--------------------------------
Title: Associate Director
THE SANWA BANK, LIMITED, ATLANTA AGENCY
By: /s/ Shinji Osumi
--------------------------------
Title: Vice President
THIRD NATIONAL BANK IN NASHVILLE
By: /s/ Scott Corley
--------------------------------
Title: Assistant Vice President
WACHOVIA BANK OF GEORGIA, N.A.
By: /s/ Terence C. Snellings
--------------------------------
Title: Senior Vice President
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK AND
CAYMAN ISLANDS BRANCHES
By: /s/ Alan S. Bookspan
--------------------------------
Title: Vice President
By: /s/ Karen E. Hoploch
--------------------------------
Title: Vice President
SOCIETE GENERALE
By: /s/ Steve Fercho
--------------------------------
Title: Vice President
Exhibit 13
HIGHLIGHTS
(Expressed in millions, except per share amounts and ratios)
1996 1995 % Change
------ ------ --------
Net Sales $1,807 $1,680 8%
Operating Income $ 274 $ 268 2%
Net Income $ 160 $ 149 7%
Earnings Per Share $ 2.31 $ 2.15 7%
Cash Dividends Per Share $ 1.02 $ .97 5%
Return on Average Invested Capital 19.7% 19.5%
Return on Average Common Stockholders'
Equity 27.5% 30.1%
Regular cash dividends have been paid for the fifty-first consecutive year.
QUARTERLY FINANCIAL INFORMATION
(Expressed in millions, except per share amounts)
Per Share of Common Stock
-----------------------------------------
Cash Market Price (High-Low)
Net Gross Net Net Dividends ---------------------------------
Sales Profit Income Income Paid Class A Class B
- --------------------------------------------------------------------------------------------------
Fiscal 1996 $1,807 $880 $160 $2.31 $1.016 $42.00 - $32.25 $42.50 - $31.50
Quarters
Fourth 427 212 36 .52 .2600 42.00 - 36.63 42.50 - 36.50
Third 451 216 39 .55 .2600 39.38 - 36.50 39.75 - 36.25
Second 518 249 53 .77 .2480 40.25 - 33.88 40.75 - 33.63
First 411 203 32 .46 .2480 35.00 - 32.25 34.88 - 31.50
Fiscal 1995 $1,680 $824 $149 $2.15 $.9694 $34.13 - $26.75 $33.88 - $26.13
Quarters
Fourth 404 206 34 .49 .2480 34.13 - 30.75 33.88 - 30.38
Third 431 211 38 .54 .2480 32.25 - 28.50 32.50 - 27.88
Second 475 224 49 .71 .2367 30.88 - 26.75 31.38 - 26.13
First 370 183 28 .41 .2367 30.08 - 26.75 30.29 - 26.38
FINANCIAL TABLE OF CONTENTS
17
Consolidated Selected Financial Data
18
Management's Discussion and Analysis
24
Report of Management
24
Report of Independent Accountants
25
Consolidated Statement of Income
26
Consolidated Balance Sheet
28
Consolidated Statement of Cash Flows
29
Consolidated Statement of Stockholders' Equity
30
Notes to Consolidated Financial Statements
CONSOLIDATED SELECTED FINANCIAL DATA
For Fiscal Year Ended April 30,
(Expressed in millions, except per share amounts and ratios)
Operations 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- ---------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net Sales $1,807 1,680 1,628 1,658 1,496 1,366 1,279 1,262 1,330 1,374 1,264
Operating Income $ 274 268 240 255 234 223 225 208 192 182 190
Income Before
Cumulative Effect of
Accounting Changes $ 160 149 161 156 146 145 81 144 103 90 86
Cumulative Effect of
Accounting Changes $ _ _ (32) _ _ _ 12 _ _ _ _
Net Income $ 160 149 129 156 146 145 93 144 103 90 86
Earnings Per Common
Share:
Income Before
Cumulative Effect of
Accounting Changes $ 2.31 2.15 2.04 1.88 1.76 1.74 .96 1.72 1.08 .93 .89
Cumulative Effect of
Accounting Changes $ _ _ (.41) _ _ _ .14 _ _ _ _
Net Income $ 2.31 2.15 1.63 1.88 1.76 1.74 1.10 1.72 1.08 .93 .89
Cash Dividends Per
Common Share $ 1.02 .97 .93 .86 .78 .72 .63 .51 .41 .30 .22
Invested Capital in
the Business
Average Invested Capital $ 875 835 900 925 823 743 704 671 727 802 777
Average Common
Stockholders' Equity $ 578 493 629 765 686 616 564 493 510 547 485
Total Assets $1,381 1,286 1,234 1,311 1,194 1,083 1,021 1,003 932 1,057 1,038
Long-Term Debt $ 211 247 299 154 114 112 114 115 191 199 236
Ratios
Return on Average
Invested Capital 19.7% 19.5% 15.4% 18.0% 18.8% 20.5% 14.6% 23.8% 15.7% 12.6% 12.9%
Return on Average Common
Stockholders' Equity 27.5% 30.1% 20.4% 20.4% 21.3% 23.5% 16.3% 29.2% 20.2% 16.3% 17.7%
Total Long-Term Debt to
Total Long-Term Capital 25.0% 31.1% 39.2% 15.9% 13.4% 14.5% 16.1% 17.2% 29.5% 25.3% 30.9%
Total Cash Dividends Paid to
Net Income 44.2% 45.3% 57.5% 45.8% 44.4% 41.7% 57.4% 29.8% 38.9% 32.8% 25.3%
Current Assets to
Current Liabilities 2.5:1 2.4:1 2.3:1 3.4:1 3.0:1 3.3:1 3.0:1 2.5:1 2.7:1 2.8:1 2.5:1
Notes:
1. Includes the operations of Fetzer Vineyards and Dansk International Designs
Ltd., since their acquisitions on August 31, 1992, and July 2, 1991,
respectively.
2. On October 15, 1993, the company sold Brown-Forman Enterprises, its credit
card processing operations, resulting in an after-tax gain of $18 million.
3. On January 31, 1989, the company sold the U.S. marketing rights for
Martell Cognacs resulting in an after-tax gain of $22 million.
4. On April 27, 1988, the company sold the ArtCarved jewelry division
resulting in an after-tax gain of $17 million.
5. Net income was reduced $60 million and $33 million to reflect the
write-off of the intangible assets of California Cooler in 1990 and 1988,
respectively.
6. Earnings per common share are based on the weighted average number of
common shares outstanding during each year; both earnings and cash
dividends per common share have been appropriately adjusted for the
3-for-1 and 3-for-2 stock splits in fiscal 1994 and 1987, respectively.
7. Return on Average Invested Capital is defined as the sum of net income
(excluding extraordinary items) and the after-tax cost of interest
expense, divided by average invested capital. Average invested capital
is the sum of all interest bearing debt and preferred and common
equity, averaged at year end.
8. Return on Average Common Stockholders' Equity is defined as the sum of
income applicable to common stock divided by average common stockholders'
equity.
9. Total Long-Term Debt to Total Long-Term Capital is defined as long-term
debt divided by the sum of long-term debt and preferred and common equity.
17
MANAGEMENT'S DISCUSSION AND ANALYSIS
This discussion and analysis supplements the consolidated financial
statements beginning on page 25 and will assist the reader in evaluating
Brown-Forman's fiscal 1996 results of operations, financial position, and
cash flows. Included in the Chairman's Letter, beginning on page 2, and
this Management's Discussion and Analysis are certain forward-looking
statements reflecting management's expectations. Forward-looking
statements may be significantly impacted 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.
CONSOLIDATED SALES AND EARNINGS
Fiscal 1996 Compared to 1995
Net sales reached record levels in fiscal 1996, growing $127 million, or
8%. Sales of wines and spirits surged 14%, aided by successful new product
introductions, continued international expansion, and vibrant growth of the
company's wine brands. A 5% sales decline for the consumer durables segment
reflected significantly lower response rates for the Lenox direct mail
business and a generally soft retail environment for consumer durables.
International sales increased 27% in fiscal 1996, largely attributable to a
double-digit growth rate for Jack Daniel's. Overseas sales represented 18%
of Brown-Forman's 1996 revenues, excluding excise taxes, and 16% in both
fiscal 1995 and fiscal 1994. The effect of foreign currency exchange rate
fluctuations on consolidated net sales was not material.
[Brown-Forman Geographic Sales Mix
(excluding excise taxes)
graph]
Operating income improved $6 million, or 2%, during fiscal 1996, driven by
an $18 million increase in the wines and spirits segment. Operating income
growth in the wines and spirits segment was generated from the same sources
responsible for increased sales _ new products, international expansion,
and higher wine volume. The consumer durables segment experienced an $11
million drop in operating income, principally related to the sharp decline
in consumer demand for collectible products marketed by the Lenox direct
marketing division.
[Operating Income
graph]
Earnings reached a record $2.31 per share, up 7% over fiscal 1995.
Earnings growth was derived from higher operating income, lower net
interest expense, and a favorable effective tax rate. The drop in Brown-
Forman's fiscal 1996 effective tax rate reflects benefits from foreign
operations and a shift in the earnings mix towards businesses that carry a
lower relative tax rate. The company's effective tax rate is expected to
increase slightly in fiscal 1997, reflecting a curtailment of certain
overseas benefits.
[Earnings Per Common Share
graph]
18
Fiscal 1995 Compared to 1994
Net sales increased $51 million, or 3%, in fiscal 1995. Higher sales of
wines and spirits were attributable to volume growth of Jack Daniel's, Fetzer
California wines, Korbel Champagnes, and the national introduction of
Tropical Freezes. Consumer durable revenues were up 5%, following
broad-based volume gains across most Lenox divisions. Increases were
partially offset by the absence of revenues from the company's credit card
processing business, which was sold in fiscal 1994.
Operating income, excluding unusual items in the prior year, increased
$19 million, or 8%, during fiscal 1995. Approximately $11 million of this
growth was derived from a strong sales performance and increased
operational efficiencies in the consumer durables segment. The wines and
spirits segment contributed an additional $9 million of operating income as
a result of improved sales coupled with lower advertising expenses in the
cocktails category.
Earnings per share in fiscal 1995 were boosted by a reduction in the average
number of common shares outstanding following a January 1994 stock
repurchase. While the repurchase had a positive impact on earnings per
share, associated financing costs reduced fiscal 1995 net income by
approximately $9 million. A higher effective tax rate in fiscal 1995
resulted from a reduction of overseas tax benefits, a favorable adjustment
to tax accruals in the prior year, and improved profits from the consumer
durables business, which bears a relatively higher effective tax rate.
SHAREHOLDER RETURNS
Brown-Forman's most important financial objective is to increase the value
of its stockholders' investment. Long-term growth in the market value of
the company's stock is a good indication of our success in delivering an
attractive return to shareholders. A $100 investment in Brown-Forman's
Class B stock ten years ago would have grown to $462 by the end of fiscal
1996, assuming reinvestment of all dividends and ignoring personal taxes
and transaction costs. This represents a market value increase of 17%
annually over the ten-year period.
The market value of an investment in Brown-Forman rose 23% in fiscal 1996 -
an impressive performance, although below a strong 31% gain by the S&P
500 for the same period.
[Total Shareholder Return
(including dividend reinvestment)
graph]
Return on average invested capital grew from 19.5% to 19.7% in fiscal 1996,
reflecting profitable growth of the wines and spirits segment and careful
management of capital invested in the consumer durables segment.
[Return on Average Invested Capital
graph]
19
Return on average common stockholders' equity, benefiting from the
company's January 1994 share repurchase, grew to 30.1% in fiscal 1995. A
decline to 27.5% in fiscal 1996 reflects the impact of reducing the
company's debt as a percentage of total capital.
[Return on Average Common Stockholders' Equity
graph]
SHARE REPURCHASE AND STOCK SPLIT
On January 14, 1994, the company concluded a Dutch auction tender offer,
acquiring 2,734,452 shares of Class A and 10,933,518 shares of Class B
common stock at a total cost of $408 million. While interest costs associated
with the share repurchase lowered net income, the transaction had a positive
effect on earnings per share, adding an incremental $.15 to fiscal 1995 and
$.07 to fiscal 1994.
During 1994, the company effected a three-for-one stock split for all shares
of Class A and Class B common stock, distributed on May 20, 1994, in the form
of a stock dividend. Also during 1994, the company retired its treasury
stock. The Consolidated Statement of Stockholders' Equity details the impact
of this retirement.
WINES AND SPIRITS SEGMENT
Summary of Operating Performance
(Expressed in millions, except percentages)
1996 1995 1994
---- ---- ----
Net Sales $1,294 $1,138 $1,105
% Change 14% 3% (1%)
Operating Income $ 262 $ 244 $ 235
% Change 8% 4% (4%)
The wines and spirits business is Brown-Forman's largest segment, representing
72% of net sales in fiscal 1996, and 68% in both fiscal 1995 and
1994.
Fiscal 1996 Compared to 1995
Net sales in fiscal 1996 increased $156 million, or 14%. Strong consumer
demand for Tropical Freezes, continued increases in worldwide volume of Jack
Daniel's and Southern Comfort, and a double-digit rate of growth for several
of the company's premium wine brands all contributed to record beverage
sales. The company's wine business continued to benefit from media reports
on scientific research indicating that moderate consumption of beverage
alcohol helps reduce the risk of heart disease. Volume levels for
Brown-Forman's other major spirit brands were lower, largely reflecting
consumption trends in the U.S.
One of the company's principal growth initiatives is to accelerate its
expansion into international markets. Beverage sales outside the U.S.
grew strongly in fiscal 1996, up 29%. International sales in fiscal 1996
represented 25% of sales, excluding excise taxes, compared to 22% in fiscal
1995.
[Wines and Spirits Geographic Sales Mix
(excluding excise tax)
graph]
20
Another major growth initiative for Brown-Forman is to add new beverage
products, by either internal development or acquisition. Fully 22% of
fiscal 1996 beverage sales, excluding excise taxes, were generated from new
products introduced or brands added within the past five years.
[Sales of Wines and Spirits
(excluding excise taxes)
graph]
Gross profit performance is a key measure tracked by the company to gauge
the quality of volume growth. Wines and spirits gross profit grew at the
same rate as sales in fiscal 1996 - 14% - indicating that incremental sales
carried healthy margins.
Operating income increased $18 million, or 8%, to a record level in fiscal
1996. Contributing to earnings growth were higher overseas sales of
Jack Daniel's, increased consumer demand for the company's premium wine
brands, successful new product introductions, and modest price increases
on selected major spirits brands in the domestic market. The segment's
operating margin declined from 21.4% to 20.2% in fiscal 1996. This reflects
investments associated with expansion into new international markets and
increased advertising expenses related to both established brands and new
product introductions.
Fiscal 1995 Compared to 1994
Net sales in fiscal 1995 rose $33 million, or 3%, as a result of increased
sales of Jack Daniel's, Korbel Champagne, Fetzer California wines, and the
national introduction of Tropical Freezes. Volume levels for Brown-Forman's
other major spirit brands were lower, largely reflecting consumption trends
in the U.S. Domestic volume declines were offset by price increases on most
major brands.
Operating income improved $9 million, or 4%, in fiscal 1995 following
increased worldwide sales volumes of Jack Daniel's, lower advertising
expense in the cocktails category, and higher overall gross margins.
The increase was partially offset by investments associated with the
company's international expansion initiative.
Business Environment
The sale of beverage alcohol around the world takes place against a backdrop
of long-standing public debate over the role of drinking in society.
Brown-Forman and the public are rightfully concerned about alcohol abuse.
The company strongly opposes abusive drinking and contributes significant
amounts of money to programs aimed at curbing and understanding alcohol
abuse. Brown-Forman also supports and abides by industry marketing and
advertising codes.
Critics of beverage alcohol, however, seek to restrict overall alcohol
consumption, not just alcohol abuse. These industry opponents promote
policies such as sales and advertising restrictions, punitive taxes, and
litigation to seek reimbursement for Medicaid costs from manufacturers.
Adoption of some or all of these policies could adversely affect
Brown-Forman's beverage business. Brown-Forman believes that adults have the
right to make an informed choice about whether to drink and will continue to
oppose these efforts to deter responsible consumption through sales and
advertising restrictions, warning requirements, punitive taxes, or the
dissemination of biased information about alcohol and health.
Beverage alcohol sales are particularly sensitive to higher rates of tax,
which increase the shelf price to the consumer. Although the company is not
aware of any pending legislative proposal to increase U.S. federal excise
taxes, several states have considered such taxes in the last year. If
Congress goes forward with efforts to return responsibility for expensive
social programs to the states, many more states are likely to consider similar
regressive taxes despite the fact that the last federal excise tax increase on
spirits resulted in a loss of revenues. If such taxes were increased at the
federal level or in major market states, they would adversely affect the
market for beverage alcohol.
CONSUMER DURABLES SEGMENT
Summary of Operating Performance
(Expressed in millions, except percentages)
1996 1995 1994
---- ---- ----
Net Sales $513 $542 $513
% Change (5%) 5% (1%)
Operating Income:
As Reported $ 27 $ 38 $ 19
% Change (29%) 102% (22%)
Excluding Unusual Items $ 27 $ 38 $ 27
% Change (29%) 41% (4%)
The consumer durables segment represented 28% of Brown-Forman's net sales in
fiscal 1996, and 32% in both fiscal 1995 and 1994.
Fiscal 1996 Compared to 1995
Net sales declined $29 million, or 5%, in fiscal 1996, primarily attributable
to a sharp decline in consumer response rates at Lenox Collections. Results
were also affected, to a lesser extent, by a difficult retail environment for
outlet stores and consolidation within the department store distribution
channel.
21
Operating income decreased $11 million, or 29%, principally from the decline
in customer response rates within the direct mail collectible business.
Although fiscal 1996 results were disappointing, initiatives in recent
years have helped boost Lenox's U.S. market share for fine china dinnerware
to 41%. Lenox now has eight of the top ten china patterns sold through
U.S. department stores. Management continues to believe that numerous
opportunities exist to leverage our well-known brand names by developing
new products and utilizing new channels of distribution.
Fiscal 1995 Compared to 1994
Net sales in fiscal 1995 increased $28 million, or 5%, driven by sales growth
of Lenox China, Lenox retail operations, Lenox Collections, and Dansk. Sales
growth for the segment resulted principally from increases in volume.
Operating income, excluding unusual items in fiscal 1994, improved $11
million, or 41%, in fiscal 1995. Increased earnings were attributable to
solid sales growth, reduced manufacturing costs, and lower selling, general,
and administrative costs throughout the consumer durables segment.
OTHER SEGMENT
Effective November 1, 1993, the company discontinued the use of this segment.
See Note 4, on page 31, for information related to the sale of the company's
credit card processing business during fiscal 1994. Net sales in fiscal 1994
were $10 million.
UNUSUAL ITEMS
Several unusual items lowered reported earnings per share in fiscal 1994 and
1993. Notes 3, 4, 9, and 13 of the consolidated financial statements discuss
these items in detail. The impact of unusual items on earnings per share is
summarized as follows:
1994 1993
---- ----
EPS before unusual items $1.92 $1.91
Unusual items:
Gain on sale of business .23 _
Adoption of new accounting standards (.41) _
Higher tax legislation (.04) _
Consumer durables charges (.07) (.03)
----- -----
EPS as reported $1.63 $1.88
===== =====
There were no unusual items in fiscal 1996, 1995, or 1992.
LIQUIDITY AND CAPITAL RESOURCES
Brown-Forman's cash flows from operations continue to provide more than
adequate capital to meet operating and capital expenditure requirements, pay
record dividends, and fund acquisition opportunities. The company considers
its ability to internally generate cash to be a significant financial
strength. Both of Brown-Forman's segments generate positive cash flow after
capital spending.
Free cash flow is the cash remaining from operations after satisfying internal
and external business reinvestment opportunities. A consolidated statement
of cash flows is summarized as follows:
(Expressed in millions)
1996 1995 1994
---- ---- ----
Cash flows provided by
(used in):
Operations $171 $197 $221
Investment activities (71) (43) 20
---- ---- ----
Free Cash Flow 100 154 241
Cash flows provided by
(used in):
Financing
Acquisition of
treasury stock _ _ (408)
Dividends (71) (67) (74)
Change in debt (37) (56) 197
---- ---- ----
Increase (decrease) in cash $ (8) $ 31 $(44)
==== ==== ====
Cash provided by operations decreased $26 million in fiscal 1996,
primarily as a result of reduced earnings at Lenox, a build-up of low
alcohol beverage inventories in advance of seasonal requirements, and
higher accounts receivable reflecting an increased mix of international
sales which generally carry longer credit terms. Fiscal 1995 cash from
operations also reflect an increased investment in beverage inventories.
22
The company issued $30 million in medium-term notes in fiscal 1996 in order
to pay down short-term borrowings. The company has a $300 million
revolving credit agreement that expires in fiscal 2001. At April 30, 1996,
the company had no outstanding borrowings under this agreement. At April
30, 1996, the company had $220 million remaining on its $250 million shelf
registration, which was filed with the Securities and Exchange Commission
in fiscal 1994.
[Total Long-Term Debt to Total Long-Term Capital (at April 30)
graph]
The company uses derivative financial instruments for the purpose of
reducing its exposure to adverse fluctuations in interest and foreign
exchange rates. While these hedging instruments are subject to
fluctuations in value, such fluctuations are generally offset by the value
of the underlying exposures being hedged. The company is not a party to
leveraged derivatives and does not hold or issue financial instruments for
speculative purposes. The company had previously sold an option to swap
interest rates that effectively eliminated the call feature on the $100
million 9.375% notes for the period April 1, 1995, to April 1, 1998. This
option was exercised April 1, 1995, effectively converting $100 million of
commercial paper from floating interest rate obligations to 9.375% fixed
rate obligations from April 1, 1995, to April 1, 1998. The option on this
swap was sold in order to manage the level of fixed and floating rate debt.
The premium received on the sale of this option is being amortized as a
reduction of interest expense through April 1, 1998.
The U.S. dollar is the functional currency for substantially all of the
company's consolidated operations. For these operations, all gains and losses
from currency transactions are included in current income. For certain
foreign equity investments, the functional currency is the local currency.
The cumulative translation effects for the few equity investments using
functional currencies other than the U.S. dollar are included in the
cumulative translation adjustment in stockholders' equity.
Foreign currency forwards and options, which typically expire within one
year, are used to hedge payments and receipts of foreign currencies related
to the purchase and sale of goods overseas. Realized gains and losses on
these contracts are recognized in the same period as the hedged transactions.
While these hedges are subject to the risk of loss from fluctuations in
exchange rates, these losses would be offset by gains on the transactions
being hedged. The effects of foreign currency transactions on fiscal 1996,
1995, and 1994 results of operations and financial condition were immaterial.
The company had foreign exchange contracts on hand at April 30, 1996, 1995,
and 1994, primarily hedging German Mark, British Pound and Japanese Yen
revenues, totaling $28 million, $11 million, and $27 million, respectively.
CAPITAL EXPENDITURES
Brown-Forman invested $59 million in property, plant, and equipment in fiscal
1996, $51 million in fiscal 1995, and $27 million in fiscal 1994. These
expenditures primarily reflect the expansion and modernization of
company-wide production facilities.
Capital expenditures for fiscal 1997 are expected to be approximately $60
million, primarily for expanding the company's production and office
facilities. Fiscal 1997 capital expenditure requirements are expected to be
met with internally generated funds.
DIVIDENDS
Quarterly dividends were increased 5% in fiscal 1996 to $.26, which results
in an indicated annual dividend of $1.04 per common share. The increase was
based on the expectation of continued strong cash flow. Cash dividends paid
as a percentage of net income were 44% in fiscal 1996, compared to 45% and
58% for fiscal 1995 and fiscal 1994, respectively. Brown-Forman has paid
regular cash dividends for 51 consecutive years.
[Cash Dividends Paid
Per Share of Common Stock
graph]
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 consolidated financial position or
results of operations.
23
REPORT OF MANAGEMENT
We are responsible for the presentation of the information contained
in the consolidated financial statements and for its integrity and
objectivity. Our statements have been prepared in accordance with
generally accepted accounting principles and include amounts based on our
best estimates and judgments with appropriate consideration given to
materiality. We also prepared the related financial information and are
responsible for its accuracy and consistency with the financial statements.
The consolidated financial statements have been audited by Coopers &
Lybrand, L.L.P., independent certified public accountants. We have made
available to Coopers & Lybrand all the company's financial records and
related data, as well as the minutes of stockholders', directors', and
other appropriate meetings. Furthermore, we believe that all
representations made to Coopers & Lybrand during the audit were valid and
appropriate.
We are responsible for establishing and maintaining a system
of internal control designed to provide reasonable assurance at reasonable
cost that financial records are reliable for preparing financial statements
and that assets are properly accounted for and safeguarded. The company
has an internal audit function that is intended to provide a review and
monitoring process that allows the company to be reasonably sure that the
system of internal control operates effectively. In addition, as part of
the audit of the financial statements, Coopers & Lybrand completed a study
and evaluation of selected internal accounting controls to establish a
basis for reliance thereon in determining the nature, timing, and extent of
audit tests to be applied. We have considered the internal auditors' and
Coopers and Lybrand's recommendations concerning the system of internal
control and have taken actions that we believe are cost-effective in the
circumstances to respond appropriately to these recommendations. We
believe that as of April 30, 1996, the system of internal control is
adequate to accomplish the objectives discussed herein.
We also recognize our responsibility for fostering a strong ethical
climate so that the company's affairs are conducted according to the highest
standards of personal and corporate conduct. This responsibility is
characterized and reflected in the company's Code of Conduct, which is
publicized throughout the company. The Code of Conduct addresses, among
other things, the necessity of ensuring open communication within the
company; disclosure of potential conflicts of interests; compliance with all
applicable domestic and foreign laws, including those relating to financial
disclosure; and maintaining the confidentiality of proprietary information.
The company has a systematic program to assess compliance with the Code of
Conduct.
The Board of Directors, through its Audit Committee, composed solely of
directors who are not employees of the company, meets with management, the
internal auditors and the independent certified public accountants to
ensure that each is properly discharging its respective responsibilities.
Both the independent certified public accountants and the internal auditors
have free access to the Audit Committee, without management present, to
discuss the results of their work, including internal accounting controls
and the quality of financial reporting.
/s/ Owsley Brown II
- -------------------
Owsley Brown II
Chairman of the Board
and Chief Executive Officer
/s/ Steven B. Ratoff
- --------------------
Steven B. Ratoff
Executive Vice President
and Chief Financial Officer
REPORT OF INDEPENDENT ACCOUNTANTS
BROWN-FORMAN CORPORATION
We have audited the accompanying consolidated balance sheet of
Brown-Forman Corporation and Subsidiaries as of April 30, 1996, 1995, and
1994, and the related consolidated statements of income, stockholders' equity
and cash flows for the years then ended. These financial statements are the
responsibility of the company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Brown-Forman Corporation and Subsidiaries at April 30, 1996, 1995, and
1994, and the consolidated results of their operations and their cash flows
for the years then ended in conformity with generally accepted accounting
principles.
As discussed in Note 3 to the consolidated financial statements, in 1994
the company adopted changes in its methods of accounting for postretirement
benefits other than pensions, postemployment benefits, and contributions.
/s/ Coopers & Lybrand L.L.P.
Louisville, Kentucky
May 28, 1996
24
CONSOLIDATED STATEMENT OF INCOME
(Expressed in millions, except per share amounts)
Year Ended April 30, 1996 1995 1994
- ------------------- ---- ---- ----
Net sales $1,807 $1,680 $1,628
Excise taxes 263 260 264
Cost of sales 664 596 574
------ ------ ------
Gross profit 880 824 790
Selling, general, and
administrative expenses 375 355 348
Advertising expenses 231 201 202
------ ------ ------
Operating income 274 268 240
Gain on sale of business before
income taxes _ _ 30
Interest income 3 2 4
Interest expense 20 23 17
------ ------ ------
Income before income taxes
and cumulative effect of
accounting changes 257 247 257
Taxes on income 97 98 96
------ ------ ------
Income before cumulative
effect of accounting changes 160 149 161
Cumulative effect of accounting
changes _ _ (32)
------ ------ ------
Net income $ 160 $ 149 $ 129
====== ====== ======
Earnings per common share:
Income before cumulative
effect of accounting changes $ 2.31 $ 2.15 $ 2.04
Cumulative effect of
accounting changes _ _ (.41)
------ ------ ------
Net income $ 2.31 $ 2.15 $ 1.63
====== ====== ======
The accompanying notes are an integral part of the consolidated financial
statements.
25
CONSOLIDATED BALANCE SHEET
(Expressed in millions, except share and per share amounts)
April 30, 1996 1995 1994
- -------- ---- ---- ----
Assets
Cash and cash equivalents $ 54 $ 62 $ 31
Accounts receivable, less
allowance for doubtful accounts
of $13 in 1996, $14 in 1995,
and $12 in 1994 257 234 241
------ ------ ------
Inventories:
Barreled whisky 167 163 144
Finished goods 169 123 123
Work in process 59 59 60
Raw materials and supplies 38 37 31
------ ------ ------
Total inventories 433 382 358
Other current assets 24 20 20
------ ------ ------
Total Current Assets 768 698 650
Property, plant, and
equipment, net 281 252 246
Intangible assets, less
accumulated amortization
of $108 in 1996, $98 in
1995, and $89 in 1994 259 263 276
Other assets 73 73 62
------ ------ ------
Total Assets $1,381 $1,286 $1,234
====== ====== ======
The accompanying notes are an integral part of the consolidated financial
statements.
26
April 30, 1996 1995 1994
- -------- ---- ---- ----
Liabilities
Commercial paper $ 50 $ 50 $ 54
Accounts payable and accrued
expenses 223 221 216
Current portion of long-term debt 6 6 5
Accrued taxes on income 3 _ 4
Deferred income taxes 21 9 2
------ ------ ------
Total Current Liabilities 303 286 281
Long-term debt 211 247 299
Deferred income taxes 127 114 102
Accrued postretirement benefits 52 51 47
Other liabilities and deferred
income 54 42 41
------ ------ ------
Total Liabilities 747 740 770
Stockholders' Equity
Capital Stock:
Preferred $.40 cumulative, $10 par
value, redeemable at company's
option at $10.25 per share plus
unpaid accrued dividends;
1,177,948 shares authorized
and outstanding 12 12 12
------ ------ ------
Class A common stock, voting,
$.15 par value; authorized
shares, 30,000,000; issued
shares, 28,988,091 4 4 4
Class B common stock, nonvoting,
$.15 par value; authorized
shares, 60,000,000; issued
shares, 40,008,147 6 6 6
Retained earnings 616 527 446
Cumulative translation
adjustment (4) (3) (4)
------ ------ ------
Common Stockholders' Equity 622 534 452
------ ------ ------
Total Stockholders' Equity 634 546 464
------ ------ ------
Total Liabilities and
Stockholders' Equity $1,381 $1,286 $1,234
====== ====== ======
27
CONSOLIDATED STATEMENT OF CASH FLOWS
(Expressed in millions; amounts in brackets are reductions of cash)
Year Ended April 30, 1996 1995 1994
- ------------------- ---- ---- ----
Cash flows from operating
activities:
Net income $160 $149 $129
Adjustments to reconcile
net income to net cash provided
by (used for) operations:
Cumulative effect of changes in
accounting principles _ _ 32
Depreciation 37 35 37
Amortization of intangible
assets 9 9 9
Deferred income taxes 26 19 6
Gain on sale of business,
net of income taxes _ _ (18)
Other 4 1 _
Change in assets and liabilities,
excluding the effects of
businesses acquired and sold:
Accounts receivable (18) 6 (2)
Inventories (40) (24) 7
Other current assets (2) 1 4
Accounts payable and accrued
expenses (8) 5 32
Accrued taxes on income 3 (4) (15)
---- ---- ----
Cash provided by operating
activities 171 197 221
==== ==== ====
Cash flows from investing activities:
Proceeds from sale of business _ _ 32
Additions to property, plant,
and equipment (59) (51) (27)
Disposals of property, plant,
and equipment 3 10 2
Investment in affiliate, net of
cash acquired (8) _ _
Net sales (purchases) of
short-term investments _ _ 18
Other (7) (2) (5)
---- ---- ----
Cash provided by (used for)
investing activities (71) (43) 20
---- ---- ----
Cash flows from financing activities:
Commercial paper (60) 50 204
Proceeds from long-term debt 30 _ _
Reduction of long-term debt (7) (106) (7)
Acquisition of treasury stock _ _ (408)
Dividends paid (71) (67) (74)
---- ---- ----
Cash (used for) financing
activities (108) (123) (285)
---- ---- ----
Net increase (decrease) in cash
and cash equivalents (8) 31 (44)
Cash and cash equivalents, beginning
of year 62 31 75
---- ---- ----
Cash and cash equivalents,
end of year $ 54 $ 62 $ 31
==== ==== ====
The accompanying notes are an integral part of the consolidated financial
statements.
28
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Years Ended April 30, 1996, 1995, and 1994
(Expressed in millions,except share and per share amounts)
Common Stock Capital in Cumulative
Preferred Class Class Excess of Retained Translation Treasury
Total Stock A B Par Value Earnings Adjustment Stock
----- ----- ---- ---- --------- -------- ---------- --------
Balance, April 30, 1993 $ 819 $ 12 $ 2 $ 4 $ 90 $1,057 $ (2) $ (344)
Net income 129 129
Cash dividends
Preferred, per
share $ .40 (1) (1)
Common, per share $.93 (73) (73)
Acquisition of treasury
stock (Class A, 2,734,452
shares and Class B,
10,933,518 shares) (408) (408)
Retirement of treasury
stock (Class A,
7,197,615 shares and
Class B, 39,984,798
shares) _ (1) (2) (90) (659) 752
Issuance of shares in
connection with 3-for-1
stock split _ 3 4 (7)
Foreign currency
translation adjustment (2) (2)
---- ---- ---- ---- ---- ---- ---- ----
Balance, April 30, 1994 464 12 4 6 _ 446 (4) _
Net income 149 149
Cash dividends
Preferred, per share
$.40 (1) (1)
Common, per share
$.97 (67) (67)
Foreign currency
translation adjustment 1 1
---- ---- ---- ---- ---- ---- ---- ----
Balance, April 30, 1995 546 12 4 6 _ 527 (3) -
Net income 160 160
Cash dividends
Preferred, per share
$.40 (1) (1)
Common, per share
$1.02 (70) (70)
Foreign currency
translation adjustment (1) (1)
----- ---- ---- ---- ---- ---- ---- ----
Balance, April 30, 1996 $ 634 $12 $ 4 $ 6 $ _ $ 616 $(4) $ _
===== ==== ==== ==== ==== ==== ==== ====
The accompanying notes are an integral part of the
consolidated financial statements.
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except share and per share amounts)
1. ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of all
majority-owned subsidiaries. Investments in affiliates in which the company
has the ability to exercise significant influence, but not control, are
accounted for by the equity method. All other investments in affiliates are
carried at cost. Intercompany transactions are eliminated.
Cash Equivalents
Cash equivalents include demand deposits with banks and all highly liquid
investments with original maturities of three months or less.
Inventories
Inventories are stated at the lower of cost or market. Approximately 84% at
April 30, 1996, 1995, and 1994 of the total amount of consolidated
inventories are stated on the basis of the last-in, first-out (LIFO) method.
All remaining inventories are valued using the first-in, first-out and
average cost methods.
If the LIFO method had not been used, inventories would have been $85,
$70, and $72 higher than reported at April 30, 1996, 1995, and 1994,
respectively.
A substantial portion of barreled whisky will not be sold within one year
because of the duration of the aging process. All barreled whisky is
classified in current assets in accordance with industry practice. Bulk
wine inventories are classified as work in process.
Warehousing, insurance, ad valorem taxes, and other carrying charges
applicable to barreled whisky held for aging are included in inventory costs.
Revenue Recognition
The company recognizes revenue when goods are shipped or services are
performed.
Long-Lived Assets
Property, plant, and equipment are stated at cost. Provision for
depreciation is made on the basis of estimated useful lives of depreciable
assets, principally using the straight-line method.
Intangible assets, principally the excess of purchase price over the fair
value of identifiable net assets of acquired businesses, are stated at cost
less accumulated amortization. These assets are amortized using the
straight-line method over their estimated useful lives, not exceeding forty
years.
Use of 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 assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the period. Actual
results could differ from these estimates.
Foreign Currency and Hedging Activities
The U.S. dollar is the functional currency for substantially all of the
company's consolidated operations. For these operations, all gains and
losses from currency transactions are included in income currently.
For certain foreign equity investments, the functional currency is the local
currency. The cumulative translation effects for the few equity investments
using functional currencies other than the U.S. dollar are included in the
cumulative translation adjustment in stockholders' equity.
The company uses foreign currency forwards and options to hedge payments
and receipts of foreign currencies related to the purchase and sale of
goods overseas. The purpose of these hedges is to protect against the risk
that currency movements would adversely affect the company's revenues and
product costs. While these hedges are subject to the risk of loss from
fluctuations in exchange rates, these losses would be offset by gains on
the transactions being hedged. Realized gains and losses on these hedging
instruments are recognized in income in the same period as the underlying
transaction. The company does not engage in currency speculation.
Earnings Per Common Share
Earnings per common share are based upon net income reduced by dividend
requirements on preferred stock and the weighted average common shares
outstanding of 68,996,238 in 1996 and 1995, and 78,657,432 in 1994.
Reclassifications
Certain prior year amounts have been reclassified to conform with the current
year presentation.
30
2. BALANCE SHEET INFORMATION
April 30, 1996 1995 1994
- -------- ---- ---- ----
Property, plant, and equipment
Land $ 17 $ 17 $ 18
Buildings 173 164 167
Equipment 404 350 325
---- ---- ----
594 531 510
Less accumulated depreciation 313 279 264
---- ---- ----
$281 $252 $246
==== ==== ====
Accounts payable and accrued expenses
Accounts payable, trade $74 $68 $55
Accrued expenses:
Compensation and commissions 40 45 38
Excise and other non-income taxes 17 21 16
Interest 6 7 9
Advertising 29 31 39
Other 57 49 59
---- ---- ----
149 153 161
---- ---- ----
$223 $221 $216
==== ==== ====
3. ACCOUNTING CHANGES
Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," was issued in March 1995. The statement
requires that long-lived assets and certain identifiable intangibles be
reviewed for impairment value, based upon undiscounted future cash flows
and appropriate losses be recognized, whenever the carrying amount of an
asset may not be recovered. The methodology set forth in SFAS No. 121 is
not significantly different from the company's existing policies, and
therefore, the adoption during fiscal 1996 had no impact on the
consolidated financial statements.
Effective May 1, 1993, the company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," SFAS No. 112,
"Employers' Accounting for Postemployment Benefits," and SFAS No. 116,
"Accounting for Contributions Received and Contributions Made."
The cumulative effect of these changes in accounting principles was
recognized in 1994 as follows:
SFAS Statement No.
------------------
106 112 116 Total
---- ---- ---- -----
Pretax charge $ 43 $ 3 $ 7 $ 53
Income taxes 17 1 3 21
---- ---- ---- ----
Net charge $ 26 $ 2 $ 4 $ 32
==== ==== ==== ====
Net charge per common share $.34 $.02 $.05 $.41
==== ==== ==== ====
Effective January 31, 1994, the company adopted Statement of Position
93-7, "Reporting on Advertising Costs." This statement was issued by the
American Institute of Certified Public Accountants and requires the company
to prospectively capitalize and amortize direct-response advertising to
better match revenues with expenses. The company continues to expense
other advertising costs as incurred.
On May 1, 1993, the company adopted SFAS No. 109, "Accounting for Income
Taxes." The adoption of these standards did not materially affect 1994
earnings before the cumulative effect of accounting changes.
4. CHANGES IN OPERATIONS
In December 1995, Brown-Forman increased its equity investment in
the company that supplies Bolla Italian wines. As a result of this
transaction, Brown-Forman now accounts for its investment in the supplier
using the consolidated basis of accounting.
In October 1993, the company sold substantially all the assets of its
credit card processing operations. The sale resulted in a pretax gain of
approximately $30 ($18 after-tax or $.23 per share).
5. CREDIT FACILITIES
The company has a $300 revolving credit agreement with various domestic and
international banks that expires in fiscal 2001. The most restrictive of the
agreement's covenants requires the company to maintain a minimum level of net
worth. At April 30, 1996, net worth exceeded the required level, as defined
in the agreement, by $284. At April 30, 1996, the company had no outstanding
borrowings under this agreement. At April 30, 1996, the company also had
available for issuance $220 of debt securities under a shelf registration
filing with the Securities and Exchange Commission.
31
6. DEBT
At April 30, the company's long-term debt consisted of the following:
April 30, 1996 1995 1994
- --------- ---- ---- ----
Commercial paper $144 $204 $150
9.375% notes _ _ 100
6.82% to 7.38% medium-term notes,
due 2005 30 _ _
11.25% notes, due through 1999 28 34 39
Variable rate industrial
revenue bonds, due through 2026 14 14 14
Other 1 1 1
---- ---- ----
217 253 304
Less current portion 6 6 5
---- ---- ----
$211 $247 $299
==== ==== ====
At April 30, 1996, the company had an interest rate agreement to convert
$100 of its commercial paper from variable rates to a fixed rate of 9.375%.
This contract matures in 1998. See Note 7 for a description of the
financial instrument.
At April 30, 1996, 1995, and 1994, $144, $204, and $150, respectively, of
commercial paper is classified as long-term debt due to the credit
available under the long-term credit facilities discussed in Note 5 and the
company's intent to refinance these borrowings on a long-term basis. Long-
term debt payment requirements for the five fiscal years after April 30,
1996 are as follows: 1997 - $6; 1998 - $7; 1999 - $7; 2000 - $8; 2001 -
$146. Cash paid for interest was $21 in 1996, $25 in 1995, and $17 in
1994. Excluding the effect of the interest rate agreement discussed above,
the weighted average interest rates on commercial paper were 5.4%, 4.9%,
and 3.8% at April 30, 1996, 1995, and 1994, respectively. The weighted
average interest rates on the variable rate industrial revenue bonds were
4.2%, 4.9%, and 3.4% at April 30, 1996, 1995, and 1994, respectively.
7. FINANCIAL INSTRUMENTS
The company uses derivative financial instruments for the purpose of reducing
its exposure to adverse fluctuations in interest and foreign exchange rates.
While these hedging instruments are subject to fluctuations in value, such
fluctuations are generally offset by the value of the underlying exposures
being hedged. The company is not a party to leveraged derivatives and does
not hold or issue financial instruments for speculative purposes.
Interest Rate Management
The company sold an option in fiscal 1990 to swap interest rates that
effectively eliminated the call feature on the 9.375% notes for the period
April 1, 1995, to April 1, 1998. This option was exercised April 1, 1995,
effectively converting $100 of commercial paper from floating interest rate
obligations to 9.375% fixed rate obligations from April 1, 1995, to April 1,
1998. The option on this swap was sold in order to manage the level of fixed
and floating rate debt. The premium received on the sale of this option is
being amortized as a reduction of interest expense through April 1, 1998.
Foreign Currency Management
The U.S. dollar is the functional currency for substantially all of the
company's consolidated operations. For these operations, all gains and
losses from currency transactions are included in income currently. For
certain foreign equity investments, the functional currency is the local
currency. The cumulative translation effects for equity investments using
functional currencies other than the U.S. dollar are included in the
cumulative translation adjustment in stockholders' equity.
The company uses foreign currency forwards and options, which typically
expire within one year, to hedge payments and receipts of foreign
currencies related to the purchase and sale of goods overseas. Realized
gains and losses on these contracts are recognized in the same period as
the hedged transactions. The company had foreign exchange forward
contracts on hand at April 30, 1996, 1995, and 1994, primarily hedging
German Mark, British Pound, and Japanese Yen revenues, totaling $28, $11,
and $27, respectively.
Carrying Amount and Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, short-term investments, and
commercial paper approximates fair value due to the short maturities of these
instruments. The value of long-term debt is estimated using discounted cash
flows based on the company's incremental borrowing rates for similar types of
borrowings. The value of interest rate and foreign currency contracts are
based on quoted market prices. A comparison of the carrying value and fair
value of these instruments is as follows:
1996 1995
--------------- ---------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ----- -------- -----
Assets: Cash and cash equivalents $ 54 $ 54 $ 62 $ 62
Foreign currency
instruments _ 1 _ (1)
Liabilities:
Commercial paper 50 50 50 50
Long-term debt 217 217 253 253
Interest rate instrument 1 6 1 7
8. COMMITMENTS
Rentals of real estate, office and data processing equipment, vehicles, and
manufacturing equipment under operating leases amounted to approximately $22
for 1996, and $21 for both 1995 and 1994. The company has commitments
related primarily to minimum lease payments totaling $24 in 1997; $20 in
1998; $16 in 1999; $13 in 2000; $4 in 2001; and $2 after 2001.
32
9. TAXES ON INCOME
The provision for taxes on income is composed of the following:
1996 1995 1994
---- ---- ----
Currently payable:
Federal $54 $62 $69
Foreign 5 2 4
State and Local 12 15 17
--- --- ---
71 79 90
Deferred:
Federal 21 15 6
Foreign _ 1 _
State and Local 5 3 _
--- --- ---
26 19 6
--- --- ---
$97 $98 $96
=== === ===
United States and foreign components of income before income taxes and the
cumulative effect of accounting changes are as follows:
1996 1995 1994
---- ---- ----
United States $229 $227 $236
Foreign 28 20 21
---- ---- ----
$257 $247 $257
==== ==== ====
Taxes on income for fiscal 1994 include a $5 charge resulting from an
increase in the corporate income tax rate. Included in this amount is a
charge of $4 for the retroactive effect of a higher tax rate on earnings
from January 1, 1993, to April 30, 1993, and a noncash charge to restate the
deferred tax liability at the new corporate tax rate. The following is a
reconciliation of the effective tax rates with the United States statutory
rates:
Percent of Income Before Taxes
------------------------------
1996 1995 1994
---- ---- ----
Statutory rate 35.0% 35.0% 35.0%
State taxes, net of U.S.
Federal tax benefit 4.1 4.6 4.1
Income taxed at other than U.S.
Federal statutory rate (2.2) (.7) (1.5)
Tax benefit of Foreign Sales
Corporation (1.3) (1.1) (1.3)
Nondeductible amortization 1.2 1.2 1.1
Adjustment of prior years' accruals .3 (.3) (2.1)
Adjustment of prior year's rate _ _ 1.2
Other, net .7 1.1 .9
---- ---- ----
37.8% 39.8% 37.4%
==== ==== ====
Deferred tax assets and liabilities are composed of the following:
April 30, 1996 1995 1994
- -------- ---- ---- ----
Deferred tax assets:
Postretirement and other benefits $ 36 $ 32 $ 31
Accrued liabilities and other 15 31 38
---- ---- ----
Total deferred tax assets 51 63 69
Deferred tax liabilities:
Intercompany transactions 141 132 119
Depreciation 21 20 22
Undistributed foreign earnings 17 17 17
Pension plans 18 16 14
Other 2 1 1
---- ---- ----
Total deferred tax liabilities 199 186 173
---- ---- ----
Net deferred tax liability $148 $123 $104
==== ==== ====
Deferred income taxes were not provided on certain undistributed earnings
($59 at April 30, 1996) of certain foreign subsidiaries because such
undistributed earnings are expected to be reinvested indefinitely overseas.
If these amounts were not considered permanently reinvested, additional
deferred taxes of approximately $20 would have been provided.
Cash paid for income taxes was $65 in 1996, $86 in 1995, and $94 in
1994.
10. 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 consolidated financial position or results of operations.
11. 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 consolidated financial position or
results of operations.
33
12. PENSION PLANS
The company has defined benefit pension plans covering certain employees.
The benefits for these plans are based primarily on years of service and
employees' pay near retirement for the salaried employees and stated amounts
for each year of service for the union and hourly employees. The company also
has unfunded plans that provide retirement benefits in excess of qualified
plan formulas or regulatory limitations for certain employees.
Net pension income (expense) includes the following components:
1996 1995 1994
---- ---- ----
Benefit cost for service
during the year $(7) $(8) $(8)
Interest cost on projected
benefit obligation (17) (14) (15)
Actual return (loss) on plan assets 79 (5) 34
Net amortization and deferral (54) 27 (12)
--- --- ---
Net pension income (expense) $ 1 $ _ $(1)
=== === ===
The amounts included in the accompanying consolidated balance sheet were
based on the funded status of the plans at January 31, 1996 and 1995 and are
as follows:
1996 1995
------------------------ ------------------------
Plan Assets Obligations Plan Assets Obligations
Exceed Exceed Exceed Exceed
Obligations Plan Assets Obligations Plan Assets
----------- ---------- ----------- -----------
Actuarial present value
of benefit obligations:
Vested benefit obligations $171 $ 23 $141 $ 14
Nonvested benefit
obligations 11 2 8 1
---- ---- ---- ----
Accumulated benefit
obligations 182 25 149 15
Additional amounts related
to assumed pay increases 30 3 31 6
---- ---- ---- ----
Projected benefit obligations 212 28 180 21
Plan assets at fair value 300 5 232 3
---- ---- ---- ----
Plan assets in excess of
(less than) benefit
obligations 88 (23) 52 (18)
Unamortized net (assets)
obligations at date of
adoption (25) 3 (28) 3
Unrecognized net (gain) loss
resulting from experience
different from that assumed
and changes in actuarial
assumptions (20) 2 16 (3)
Unrecognized prior service
cost 3 5 2 6
Adjustment required to
recognize minimum liability _ (7) _ (2)
Contributions subsequent to
measurement date _ _ _ 1
---- ---- ---- ----
Prepaid (accrued) pension
cost $ 46 $(20) $ 42 $(13)
==== ==== ==== ====
The projected benefit obligation was determined using a weighted average
discount rate of 7% for 1996, 8.5% for 1995, and 7% for 1994. The weighted
average rate of future compensation increases was 4% for 1996, 5.5% for
1995, and 4% for 1994. The expected rate of return on plan assets was 9.5%
for these years. The plans' assets consist primarily of stocks and bonds.
The company's policy for funded plans is to make contributions equal to or
greater than the requirements prescribed by the Employee Retirement Income
Security Act.
34
13. BUSINESS SEGMENT INFORMATION
The company's operations have been classified into three business segments:
wines and spirits, consumer durables, and other. The wines and spirits
segment includes the production, importing, and marketing of wines and
distilled spirits. The consumer durables segment includes the manufacture
and sale of china, crystal, ceramic and crystal collectibles, silver, pewter,
and luggage. Through October 1993, the other segment included a credit card
processing business and an aquaculture business. The credit card processing
business was sold in October 1993 and the use of this segment was
discontinued.
Summarized financial information by business segment for 1996, 1995, and
1994 is as follows:
1996 1995 1994
------ ------ ------
Net sales:
Wines and Spirits $1,294 $1,138 $1,105
Consumer Durables 513 542 513
Other _ _ 10
------ ------ ------
$1,807 $1,680 $1,628
====== ====== ======
Operating income:
Wines and Spirits $ 262 $ 244 $ 235
Consumer Durables 27 38 19
Corporate (15) (14) (14)
------ ------ ------
$ 274 $ 268 $ 240
====== ====== ======
Total assets:
Wines and Spirits $ 835 $ 716 $ 676
Consumer Durables 480 480 501
Corporate 66 90 57
------ ------ ------
$1,381 $1,286 $1,234
====== ====== ======
Depreciation and amortization:
Wines and Spirits $ 24 $ 23 $ 22
Consumer Durables 21 20 23
Corporate 1 1 1
------ ------ ------
$ 46 $ 44 $ 46
====== ====== ======
Capital expenditures:
Wines and Spirits $ 43 $ 38 $ 20
Consumer Durables 16 13 7
------ ------ ------
$ 59 $ 51 $ 27
====== ====== ======
Consumer durables' operating income was reduced by $8 ($5 after-
tax) for the closing or reformatting of seven retail stores in 1994.
There were no significant intersegment sales or transfers during 1996,
1995, or 1994. Operating income by business segment excludes interest
income, interest expense, and unallocated corporate expenses. Corporate
assets consist principally of cash and cash equivalents, short-term
investments, certain corporate receivables, and other assets.
Sales outside the United States, consisting principally of exports of
wines and spirits, amounted to approximately $282, $221, and $213 in 1996,
1995, and 1994, respectively.
14. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The company provides certain health care and life insurance benefits for
eligible retirees.
The postretirement benefit expense includes the following components:
1996 1995 1994
---- ---- ----
Service cost of benefits earned $1 $2 $2
Interest cost on accumulated post-
retirement benefit obligation 3 3 3
Postretirement benefit expense $4 $5 $5
The postretirement benefit liability includes the following
components:
1996 1995 1994
---- ---- ----
Actuarial present value of
accumulated postretirement obligation:
Retirees $21 $21 $25
Fully eligible active participants 1 1 4
Other active participants 21 15 20
43 37 49
Unrecognized net gain (loss) 9 14 (2)
Accrued postretirement benefit $52 $51 $47
Assumptions:
Discount Rate 7.0% 8.5% 7.0%
Healthcare cost trend rates:
Present rate before age 65 7.7% 8.0% 13.5%
Present rate age 65 and after 6.8% 7.0% 12.5%
Ultimate rate in ten years 5.0% 5.0% 5.0%
A 1% increase in the assumed health care cost trend rate would have increased
the accumulated postretirement benefit obligation as of April 30, 1996, by
$6 and the postretirement benefit expense by $1.
35
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
_______________
SUBSIDIARIES
Percentage of
Voting State or
Securities Jurisdiction
Name Owned of Incorporation
Brown-Forman International F.S.C.,
Ltd. 100% U.S. Virgin Islands
Canadian Mist Distillers, Limited 100% Ontario, Canada
Early Times Distillers Company 100% Delaware
Fetzer Vineyards 90.1% California
Jack Daniel Distillery,
Lem Motlow, Prop., Inc. 100% Kentucky
Lenox, Incorporated 100% New Jersey
Dansk International Designs Ltd. 100% (1) New York
Brooks & Bentley Limited 100%(1) United Kingdom
Brooks & Bentley S.A.R.L. 100%(1) France
Brooks & Bentley AF 100%(1) Norway
Longnorth Limited 100% (2) Ireland
Brown-Forman - W.S. Karoulias S.A. 75% (3) Greece
Chissick Limited 100% (2) (3) Ireland
Clintock Limited 100% (2) (3) Ireland
Lantone Limited 100% (2) (3) Ireland
Pitts Bay Trading Limited 75% (3) Bermuda
Lantone Delaware, Inc. 100% (4) Delaware
L-H Limited 100% United Kingdom
Mt. Eagle Corporation 100% Delaware
The Joseph Garneau Co., S.A. 100% (2) Switzerland
Thoroughbred Plastics Corporation 100% Kentucky
Brown-Forman Beverages Worldwide,
Comercio de Bebidas Ltda 100% (5) Brazil
Brown-Forman Worldwide, L.L.C. 100% (5) Delaware
Fratelli Bolla International
Wines, Inc. 95% Kentucky
Brown-Forman Mauritius Limited 100% Mauritius
Brown-Forman Worldwide B.V. 100% Netherlands
The above companies are included in the consolidated financial statements.
The names of certain subsidiaries have been omitted which, if considered in
the aggregate as a single subsidiary, would not constitute a significant
subsidiary.
(1) Owned by Lenox, Incorporated.
(2) Includes qualifying shares assigned to Brown-Forman Corporation.
(3) Owned by Longnorth, Limited.
(4) Owned by Lantone Limited.
(5) Owned 99% by Brown-Forman Corporation and 1% by Early Times Distillers
Company.
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
of Brown-Forman Corporation on Form S-3, (File No. 33-52551) of our report
which includes an explanatory paragraph for the company's adoption of
changes in its methods of accounting for postretirement benefits other than
pensions, postemployment benefits, and contributions, dated May 28, 1996,
on our audits of the consolidated financial statements and financial
statement schedule of Brown-Forman Corporation as of April 30, 1996, 1995,
and 1994, and for the years ended April 30, 1996, 1995, and 1994, which
report is included in this Annual Report on Form 10-K.
/s/ Coopers & Lybrand L.L.P.
Louisville, Kentucky
July 3, 1996
Appendix
In Exhibit 13 to the printed Form 10-K, the following graphs appear:
- -- on page 18, "Brown-Forman Geographic Sales Mix (excluding excise taxes)"
pie graph depicting Fiscal 1996 mix of 82% U.S. and 18 % International.
- -- on page 18, "Operating Income" bar graph in $millions:
Fiscal year 1992 1993 1994 1995 1996
As reported 234 255 240 268 274
Excluding unusual items 234 259 249 268 274
- -- on page 18, "Earnings Per Common Share" bar graph in dollars
Fiscal year 1992 1993 1994 1995 1996
As reported 1.76 1.88 1.63 2.15 2.31
Excluding unusual items 1.76 1.91 1.92 2.15 2.31
- -- on page 19, "Total Shareholder Return (including dividend reinvestment)"
line graph in dollars
Fiscal year B-F (Class B) S&P Beverage S&P 500
Alcohol Index Index
1986 100 100 100
1987 141 157 127
1988 147 152 118
1989 210 199 145
1990 198 202 161
1991 260 273 189
1992 262 304 216
1993 287 298 236
1994 330 326 248
1995 376 338 291
1996 462 417 379
10 year annual growth 17% 15% 14%
- -- on page 19, "Return on Average Invested Capital" bar graph in
percentages:
Fiscal year 1992 1993 1994 1995 1996
As reported 18.8 18.0 15.4 19.5 19.7
Excluding unusual items 18.8 18.2 17.8 19.5 19.7
- -- on page 20, "Return on Average Common Stockholders' Equity" bar graph in
percentages:
Fiscal year 1992 1993 1994 1995 1996
As reported 21.3 20.4 20.4 30.1 27.5
Excluding unusual items 21.3 20.7 23.6 30.1 27.5
- -- on page 20, "Wines and Spirits Geographic Sales Mix (excluding excise
taxes)" pie graph depicting Fiscal 1996 mix of 75% U.S. and 25%
International;
- -- on page 21, "Sales of Wines and Spirits (excluding excise taxes)" pie
graph depicting 22% of total Fiscal 1996 coming from New Products and
Brand Additions within past five years;
- -- on page 23, "Total Long-Term Debt to Total Long-Term Capital (at April
30)" bar graph in percentages of 13.4 in 1992, 15.9 in 1993, 39.2 in
1994, 31.1 in 1995, and 25.0 in 1996;
- -- on page 23, "Cash Dividends Paid Per Share of Common Stock" bar graph is
dollars of $0.78 in 1992, $0.86 in 1993, $0.93 in 1994, $0.97 in 1995,
and $1.02 in 1996.