BROWN FORMAN CORP - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - March 2, 2016

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Exhibit 99.1

Brown-Forman Corporation
Pro Forma Condensed Consolidated Financial Statements (Unaudited)


On March 1, 2016, Brown-Forman Corporation (the “Company”) completed the sale of its Southern Comfort and Tuaca brands (the “Sale”) to Sazerac Company, Inc. for approximately $542 million in cash (subject to a post-closing inventory adjustment).

The following unaudited pro forma condensed consolidated financial statements (the “pro forma financial statements”) are based on our historical consolidated financial statements as adjusted to give effect to the Sale. The unaudited pro forma condensed consolidated balance sheet as of January 31, 2016, gives effect to the Sale as if it had occurred on January 31, 2016. The unaudited pro forma condensed consolidated statements of operations for the nine months ended January 31, 2016, and the fiscal year ended April 30, 2015, give effect to the Sale as if it had occurred on May 1, 2014.

The pro forma financial statements are for illustrative and informational purposes only and may not necessarily reflect what the Company’s financial position or results of operations would have been had the Sale been completed on the dates noted above. In addition, the pro forma financial statements do not purport to be indicative of the Company’s future financial position or results of operations.

The pro forma adjustments give effect only to events that are directly attributable to the Sale, factually supportable, and — with respect to the pro forma statements of operations — expected to have a continuing impact on our consolidated results. The pro forma adjustments are based upon currently available information and certain assumptions that the Company believes are reasonable under the circumstances. The pro forma financial statements should be read together with the Company’s historical financial statements and notes thereto, which are included in the Company’s annual report on Form 10-K for the fiscal year ended April 30, 2015, and quarterly report on Form 10-Q for the period ended January 31, 2016.
















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Brown-Forman Corporation
Pro Forma Condensed Consolidated Balance Sheet (Unaudited)
As of January 31, 2016
(Dollars in millions)
 
Historical
 
Divested Business (a)
 
Sales Proceeds (b)
 
Pro Forma
Assets
 
 
 
 
 
 
 
Cash and cash equivalents
$
317

 
$
—

 
$
532

 
$
849

Accounts receivable, net
630

 
—

 
—

 
630

Inventories
1,031

 
—

 
—

 
1,031

Assets held for sale
48

 
(48
)
 
—

 
—

Other current assets
379

 
—

 
—

 
379

Total current assets
2,405

 
(48
)
 
532

 
2,889

 
 
 
 
 
 
 
 
Property, plant and equipment, net
621

 
(1
)
 
—

 
620

Goodwill
589

 
—

 
—

 
589

Other intangible assets
582

 
—

 
—

 
582

Other assets
136

 
—

 
—

 
136

Total assets
$
4,333

 
$
(49
)
 
$
532

 
$
4,816

 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Accounts payable and accrued expenses
$
498

 
$
—

 
$
—

 
$
498

Dividends payable
68

 
—

 
—

 
68

Short-term borrowings
509

 
—

 
—

 
509

Other current liabilities
25

 
—

 
—

 
25

Total current liabilities
1,100

 
—

 
—

 
1,100

 
 
 
 
 
 
 
 
Long-term debt
1,229

 
—

 
—

 
1,229

Accrued pension and other postretirement benefits
305

 
—

 
—

 
305

Other liabilities
282

 
—

 
—

 
282

Total liabilities
2,916

 
—

 
—

 
2,916

 
 
 
 
 
 
 
 
Commitments and contingencies
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stockholders’ Equity
 
 
 
 
 
 
 
Common stock
34

 
—

 
—

 
34

Additional paid-in capital
114

 
—

 
—

 
114

Retained earnings
3,561

 
(49
)
 
532

 
4,044

Accumulated other comprehensive loss, net of tax
(323
)
 
—

 
—

 
(323
)
Treasury stock, at cost
(1,969
)
 
—

 
—

 
(1,969
)
Total stockholders’ equity
1,417

 
(49
)
 
532

 
1,900

Total liabilities and stockholders’ equity
$
4,333

 
$
(49
)
 
$
532

 
$
4,816

 See accompanying notes to the unaudited pro forma condensed consolidated financial statements.





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Brown-Forman Corporation
Pro Forma Condensed Consolidated Statement of Operations (Unaudited)
For the Nine Months Ended January 31, 2016
(Dollars in millions, except per share amounts)

 
Historical
 
Divested Business (c)
 
Pro Forma
Net sales
$
3,078

 
$
(163
)
 
$
2,915

Excise taxes
718

 
(48
)
 
670

Cost of sales
729

 
(28
)
 
701

Gross profit
1,631

 
(87
)
 
1,544

Advertising expenses
317

 
(32
)
 
285

Selling, general, and administrative expenses
507

 
(7
)
 
500

Operating income
807

 
(48
)
 
759

Interest expense, net
33

 
—

 
33

Income before income taxes
774

 
(48
)
 
726

Income taxes
229

 
(13
)
(d)
216

Net income
$
545

 
$
(35
)
 
$
510

Earnings per share:
 
 
 
 
 
Basic
$
2.67

 
$
(0.17
)
 
$
2.50

Diluted
$
2.65

 
$
(0.17
)
 
$
2.48

Average common shares outstanding (in thousands):
 
 
 
 
 
Basic
204,242

 
—

 
204,242

Diluted
205,576

 
—

 
205,576

See accompanying notes to the unaudited pro forma condensed consolidated financial statements.

3



Brown-Forman Corporation
Pro Forma Condensed Consolidated Statement of Operations (Unaudited)
For the Year Ended April 30, 2015
(Dollars in millions, except per share amounts)

 
Historical
 
Divested Business (c)
 
Pro Forma
Net sales
$
4,096

 
$
(237
)
 
$
3,859

Excise taxes
962

 
(69
)
 
893

Cost of sales
951

 
(40
)
 
911

Gross profit
2,183

 
(128
)
 
2,055

Advertising expenses
437

 
(52
)
 
385

Selling, general, and administrative expenses
697

 
(6
)
 
691

Other expense (income), net
22

 
—

 
22

Operating income
1,027

 
(70
)
 
957

Interest expense, net
25

 
—

 
25

Income before income taxes
1,002

 
(70
)
 
932

Income taxes
318

 
(20
)
(d)
298

Net income
$
684

 
$
(50
)
 
$
634

Earnings per share:
 
 
 
 
 
Basic
$
3.23

 
$
(0.24
)
 
$
2.99

Diluted
$
3.21

 
$
(0.24
)
 
$
2.97

Average common shares outstanding (in thousands):
 
 
 
 
 
Basic
211,593

 
—

 
211,593

Diluted
213,083

 
—

 
213,083

See accompanying notes to the unaudited pro forma condensed consolidated financial statements.

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Brown-Forman Corporation
Notes to the Pro Forma Condensed Consolidated Financial Statements (Unaudited)
(Dollars in millions)

(a)
To eliminate the book value of the assets included in the business sold to Sazerac Company, Inc.
(b)
To record proceeds (representing a sale price of approximately $542 net of estimated transaction-related costs of $10) from the sale to Sazerac Company Inc., which remains subject to a post-closing inventory adjustment. The tax impacts related to the proceeds from the sale have not been included in the unaudited pro forma condensed consolidated balance sheet because some significant facts are uncertain at this time. Therefore, income tax-related adjustments could materially change as we finalize our accounting to be reported in the annual report on Form 10-K for the fiscal year ending April 30, 2016.
(c)
To eliminate the operating results of the business sold to Sazerac Company, Inc.
(d)
Represents the income tax effect of the elimination of the revenue and expenses of the divested business. The tax effect was calculated using the historical statutory rates in effect for the periods presented.



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