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, 19971999
Commission file number 1-123
BROWN-FORMAN CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 61-0143150
(State ofor other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
850 Dixie Highway 40210
Louisville, Kentucky 40210(Zip Code)
(Address of principal executive offices) (Zip Code)
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) of the ActName of Each Exchange
Title of Each Class on Which Registered
------------------- ----------------------
Class A Common Stock (voting) $0.15 par value New York Stock Exchange
Class B Common Stock (nonvoting) $0.15 par value New York Stock Exchange
Securities registered pursuant to
Section 12(g) of the Act: None
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)90 days.
Yes X|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, 1997,1999, of the voting stockand nonvoting
equity held by nonaffiliates of the registrant was $403,708,767.approximately $2,500,000,000.
The number of shares outstanding for each of the registrant's classes of
Common Stock on May 28, 19971999 was:
Class A Common Stock (voting) 28,988,091
Class B Common Stock (nonvoting) 40,008,14739,518,147
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Portions of the Registrant's 19971999 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 24, 199722, 1999 are incorporated by reference into Part
III of this report.
PART I
Item 1. Business
- ------ --------
(a) General development of business:
Brown-Forman Corporation ("we," "us," or "our" below) 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. Our principal executive offices are located
at 850 Dixie Highway, Louisville, Kentucky 40210
(mailing address: P.O. Box 1080, Louisville, Kentucky 40201-1080).
(b) Financial information about industry segments:
Information regarding net sales, operating income, and total assets of each of
our business segments is in Note 11 of Notes to Consolidated Financial
Statements on page 35 of our 19971999 Annual Report to Stockholders, which
information is incorporated into this report by reference in response to Item 8.
(c) Narrative description of business:
The following is a description of our operations.
WinesWine and Spirits Segment
- -------------------------
Wines------------------------
Wine 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.barrels.
The Segment's brands consist of the following:
Tennessee Whiskeys
Jack Daniel's Tennessee Whiskey
Southern Comfort
Canadian Mist Canadian Whisky
Early Times Kentucky Whisky
Finlandia Vodkas**
Old Forester Kentucky Straight Bourbon Whisky
Bushmills Irish Whiskeys**
Glenmorangie Single Highland Malt Scotch Whiskies**
Jack Daniel's Country Cocktails
Gentleman Jack Rare Tennessee Whiskey
Jack Daniel's Single Barrel Jack Daniel's Master Distiller
Gentleman JackTennessee Whiskey
Woodford Reserve Kentucky Straight Bourbon Whiskeys
Old ForesterWhiskey
Forester 1870 Early Times
Woodford Reserve
Kentucky Whiskey
Early Times
-2-Straight Bourbon Whisky
Black Bush Special Irish Whiskey**
Bushmills Malt Single Malt Irish Whiskey**
Ardberg Single Islay Malt Scotch Whisky**
Glen Moray Single Speyside Malt Scotch Whisky**
Tropical Freezes
Pepe Lopez Tequilas
Korbel California Brandy*
Usher's Scotch Whisky**
Oblio Sambucas**
Jack Daniel's & Cola
2
Canadian Mist
Southern Comfort
Pepe Lopez Tequilas
Korbel California Brandy*
Jack Daniel's Country Cocktails
Finlandia Vodkas**
Bushmills Irish Whiskeys**
Black Bush Special Irish Whiskey**
Glenmorangie Single Highland Malts**
Usher's Scotch Whisky**
Jack Daniel's & Cola
Southern Comfort & Cola
Tropical Freezes
Oblio Sambucas**
Jack Daniel's Oak-aged Beers
California Wines
Fetzer Veneyards
Korbel Champagnes*
Jekel Vineyards
Bel Arbor
Armstrong Ridge*
Italian Wines
Bolla
Fontana Candida**
Brolio**
Fontanafredda**
Carmen Vineyards Chilean Wines**
Michel Picard French Wines**
Noilly Prat Vermouths**
* Brands marketed by Brown-Forman worldwide by agency agreement.
** Brands marketed by Brown-Forman in the U.S. and other select markets by
agency agreements.
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 whiskey in the
United States, and Southern Comfort as the largest selling domestic proprietary
liqueur in the United States.
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 Italian table wine in the United States. Fetzer was
ranked thirteenthSouthern Comfort & Cola
Don Eduardo Tequilas***
Tuaca Liqueur****
Fetzer Vineyards California Wines
Korbel California Champagnes and Wines*
Bolla Italian Wines
Sonoma-Cutrer Chardonnay Wines
Jekel Vineyards California Wines
Bonterra Vineyards California Wines
Carmen Vineyards Chilean Wines**
Michel Picard French Wines**
Brolio Italian Wines**
Bel Arbor California Wines
Fontana Candida Italian Wines**
McPherson Australian Wines**
Armstrong Ridge California Champagne*
Noilly Prat Vermouths**
* Brands marketed by Brown-Forman worldwide by agency agreement.
** Brands marketed by Brown-Forman in the U.S. and selected markets by
agency agreements.
*** Part of a joint venture agreement between Brown-Forman and
Tequila Orendain.
**** Part of a joint venture agreement between Brown-Forman and Tuoni & Canepa.
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 whiskey in the
United States, and Southern Comfort as the largest selling domestic proprietary
liqueur in the United States.
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 Italian table wine in the United States. Fetzer was
ranked ninth among California varietal wines and eighteenth among all domestic
table wines.
We believe the statistics used to rank these products are reasonably accurate.
-3-
Our strategy with respect to the WinesWine and Spirits Segment is to market high
quality products that satisfy consumer preferences and to 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 we have
with many of our distributors have formulas which determine reimbursement to
distributors if we terminate 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 our 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.
3
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
and, from time to time, are adversely affected by weather and other forces which
may limit production. We believe that our relationships with our growers are
good.
Due to aging requirements, production of whiskeys 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 we are one of the largest wine
and spirit suppliers in the United States in terms of revenues.
The wineswine 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, whiskey must be aged for aat least two years to be
designated "straight whiskey." The Segment ages its straight whiskeys for a
minimum of three to five years. Federal regulations also require that "Canadian"
whiskey must be manufactured in Canada in compliance with Canadian laws and must
be aged in Canada for at least three years.
-4-
Consumer Durables Segment
- -------------------------
The Consumer Durables Segment includes the manufacturing and/or marketing of the
following:
Fine China Dinnerware
Casual Dinnerware and Glassware
Crystal Stemware
Crystal Barware
China and Crystal Giftware
China Lamps
Collectibles and Jewelry
Sterling Silver, Pewter and Silver-PlateSilver-Plated Giftware
Sterling Silver and Stainless Steel Flatware
Contemporary Tabletop, Houseware and Giftware
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.
4
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, duty free stores and/or distributors in selected foreign markets.
Specially created collectible products are distributed both domestically and in
selected foreign markets through the direct response/mail-order channel and the
internet, as well as through authorized collectible retailers.
Fine china and casual dinnerware, as well as fine china giftware, are marketed
under the Lenox trademark. Crystal stemware, barware and giftware are marketed
under both the Lenox and Gorham trademarks. Contemporary tabletop, houseware and
giftware 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"Stieff" trademarks. Pewter and silver-plated giftware products are
also marketed under the "Lenox. Kirk Stieff Collection"Stieff" trademark. Luggage, business cases,
and personal leather accessories are marketed under the Hartmann, Wings, Veronica Hart, 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 licenses for the use of the Lenox trademark
on selected fine table linens, wall coverings and premium collector plates,candles, subject to the terms
of licensing agreements.
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 -5-
competition in the marketing of its fine china,
contemporary and casual dinnerware, crystal stemware and giftware, stainless
flatware, and luggage products.
In the Segment's china 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.price. In its crystal, sterling silver, silver-plated,
and pewter businesses, 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 and platinum are significant raw materials 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; 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, platinum, 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.
5
Other Information
- -----------------
As of April 30, 1997,1999, we employ approximately 7,5007,600 persons, including 1,0501,155
employed on a part-time or temporary basis.
We are an equal opportunity employer and we recruit and place employees without
regard to race, color, religion, national or ethnic origin, sex,veteran status, age,
religion, disability,gender, sexual preference, or veteran status.physical or mental disability.
We believe our employee relations are good.
For information on the effects of compliance with federal, state, and local
environmental regulations, refer to Note 14,13, "Environmental," on page 35 of our
19971999 Annual Report to Stockholders, which information is incorporated into this
report 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.
-6-
Significant properties by business segments are as follows:
WinesWine and Spirits Segment
- -------------------------------------------------
The facilities of the WinesWine 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
- Sonoma County, California
- Pedemonte, Italy
- Soave, 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
- Mendocino County, California
- Monterey County, California
- Pedemonte, Italy
. Warehousing facilities:
- Lynchburg, Tennessee
- Louisville, Kentucky
- Collingwood, Ontario
- Shively, Kentucky
- Woodford County, Kentucky
- Mendocino County, California
- Monterey County, California
- Sonoma County, California
- Pedemonte, Italy
- Soave, Italy
-7-6
Leased facilities:
.- - Production and bottling facility in Dublin, Ireland
.- - Wine production and warehousing facility in Mendocino County, California
.- - Vineyards in Monterey County, California
We believe that the productive capacities of the winesWine and Spirits Segment are
adequate for the business, and that the 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/Collectibles
Division (includes retail store and warehouse) - 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)
- Lenox/Gorham - Smithfield, Rhode Island
(includes retail store)
- Hartmann - Lebanon, Tennessee (includes retail store)
.- - Warehousing facilities:
- Lenox/Dansk/Gorham - Williamsport, Maryland
Leased facilities:
.- - Office facilities:
- Dansk headquarters - White Plains, New York
. Production/Warehousing/Office facilities:
- Kirk StieffNorfolk headquarters - Baltimore, Maryland (includes retail store)
.Wilmington, Delaware
- Brooks & Bentley headquarters - Kent, England
- - Warehousing facilities:
- Lenox - South Brunswick, New Jersey (includes retail store);
Oxford, North Carolina; Kinston, North Carolina; and
Mt. Pleasant, Pennsylvania
- Hartmann - Lebanon, Tennessee
.- - Retail stores:
- The Segment operates 3643 Lenox outlet stores in 2627 states and
a Lenox Gift Express store in Pennsylvaina.Pennsylvania. The Segment also
operates 6352 Dansk stores in 3129 states. In addition, the
Segment operates 2 Crouch & Fitzgerald luggage stores in 2
states and 13 Hartmann luggage outlet storestores in Florida.3 states.
- - Showrooms:
- Lenox/Dansk/Gorham - New York, New York; Dallas, Texas;
Atlanta, Georgia; Ontario, Canada
7
The lease terms expire at various dates and are generally renewable, except for
the Crouch & Fitzgerald store leases.
We believe that the Segment's facilities are in good condition and are adequate
for the business.
-8-
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.)
As we reported earlier, we bought a start-up credit card processing business in
1988 from Expansion Plus, Inc. ("EPI"). We built up this business substantially,
and sold it in 1993 for $31.2 million. Months after the sale, EPI claimed that
we had never acquired full title to the business, that we had to return all or
part of it to EPI, and that our sale of the business to a third party
represented a conversion of EPI's assets.
In October, 1994, EPI filed a tort action against the buyer and us alleging
conversion of property, tortious interference with contractual relationships,
misappropriation of trade secrets, and breach of a confidential relationship.
EPI sought damages of $31.2 million plus punitive damages in an amount ten times
actual damages.
On January 30, 1997, the trial judge entered summary judgment in our favor,
dismissing all of EPI's claims. EPI has appealed to the Federal Appeals Court
for the Fifth Circuit.
Our counsel have advised us, and it is our opinion, that the disposition of
this suit will not have a material adverse effect on our consolidated financial
position or results of operations.None.
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 5456 Chairman of the Companycompany since Cousin to Owsley Brown Frazier
July 1995. Chief Executive Officer
of the company since July 1993.
President of the company
from July 1987 to July 1993.1995.
Owsley Brown Frazier 6163 Vice Chairman of the company Cousin to Owsley Brown II
since August 1983.
William M. Street 5860 Vice Chairman of the company None
since July 1987.
-9-
Steven B. Ratoff 5456 Executive Vice President and Chief None
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 4749 Senior Vice President and None
Director of None Corporate
Development since July 1987.
Russell C. Buzby 63 Senior Vice President and Executive None
Director of Human Resources and
Information Services since July 1987.8
Michael B. Crutcher 5355 Senior Vice President, General None
Counsel, None and Secretary since
May 1989.
Richard E. Stearns 46 President and Chief Executive Officer of None
Lenox, Incorporated (a subsidiary of
the company) since September 1995.
President of Lenox, Incorporated from
April 1992 to September 1995.
Lois A. Mateus 5052 Senior Vice President of Corporate None
Communications and Corporate
Services since January 1988.
Stanley E. Krangel 48 President of Lenox, Incorporated None
(a subsidiary of Brown-Forman) since
June 1998. President of Lenox
Collections from November 1995 to
June 1998.
PART II
Item 5. Market for the Registrant's Common StockEquity 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 19971999 Annual Report to Stockholders, which information
is incorporated into this report by reference.
Holders of record of Common Stock at April 30, 1997:1999:
Class A Common Stock (Voting) 3,1563,150
Class B Common Stock (Nonvoting) 5,0544,936
The principal market for Brown-Forman common shares is the New York Stock
Exchange.
-10-
Item 6. Selected Financial Data
For the information required by this item, refer to the section entitled
"Selected Financial Data" appearing on page 17 of the 19971999 Annual Report to
Stockholders, which information is incorporated into this report by reference in
response to Item 8.reference.
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 2324 of the
19971999 Annual Report to Stockholders, which information is incorporated into this
report by reference in response to Item 8.reference.
Risk Factors Affecting Forward-Looking Statements:
From time to time, we may make forward-looking statements related to our
anticipated financial performance, business prospects, new products, and similar
matters. We make several such statements in the discussion and analysis referred
to above, but we do not guarantee that the results indicated will actually be
achieved.
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements. To comply with the terms of the safe harbor, we note
that the following non-exclusive list of important risk factors could cause our
actual results and experience to differ materially from the anticipated results
or other expectations expressed in those forward-looking statements:
9
Generally: We operate in highly competitive markets. Our business is
subject to changes in general economic conditions, changes in consumer
preferences, the degree of acceptance of new products, and the
uncertainties of litigation. As our business continues to expand
outside the U.S., our financial results are more exposed to foreign
exchange rate fluctuations and the health of foreign economies. Our
operations could also be adversely impacted by incomplete or untimely
resolution of the "Year 2000" issue, as discussed more fully on pages
23 and 24 of the 1999 Annual Report to Stockholders.
Beverage Risk Factors: The U.S. beverage alcohol business is highly
sensitive to tax increases; an increase in federal or state excise
taxes (which we do not anticipate at this time) would depress our
domestic beverage business. Our current outlook for our domestic
beverage business anticipates continued success of Jack Daniel's
Tennessee whiskey, Southern Comfort, and our other core spirits brands.
Current expectations from our foreign beverage business could prove to
be optimistic if the U.S. dollar strengthens against other currencies
or if economic conditions deteriorate in the principal countries where
we export our beverage products, including Germany, the United Kingdom,
Japan, and Australia. The wine and spirits business, both in the United
States and abroad, is also sensitive to political and social trends.
Legal or regulatory measures against beverage alcohol (including its
advertising and promotion) could adversely affect sales. Product
liability litigation against the alcohol industry, while not currently
a major risk factor, could become significant if new lawsuits were
filed against alcohol manufacturers. Current expectations for our
global beverage business may not be met if consumption trends do not
continue to increase. Profits could also be affected if grain or grape
prices increase.
Consumer Durables Risk Factors: Earnings projections for our consumer
durables businesssegment anticipate a continued strengthening of our Lenox business.and
Hartmann businesses. These projections could be offset by factors such
as poor consumer response rates at Lenox Collections, weakened demand for fine
china, a soft retail
environment at outlet malls, or further department store consolidation.
-11-
consolidation, or
weakened demand for tableware, giftware and/or leather goods.
Item 8. Financial Statements7A. Quantitative and Supplementary DateQualitative Disclosures about Market Risk
For the information required by this item, refer to the section entitled "Market
Risks" appearing on page 24 of the 1999 Annual Report of Management,to Stockholders, which
information is incorporated into this report by reference.
Item 8. Financial Statements and Supplementary Data
For the information required by this item, refer to the Consolidated Financial
Statements, and Notes to Consolidated Financial Statements, and Report of Management
appearing on pages 2425 through 3537 of the 19971999 Annual Report to Stockholders,
which information is incorporated into this report by reference, and the Report
of Independent Accountants included on page S-1 of this report. For selected
quarterly financial information, refer to the section entitled "Quarterly
Financial Information" appearing on the "Highlights" page of the 19971999 Annual
Report to Stockholders, which information is incorporated into this report by
reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
10
PART III
Item 10. Directors and Executive Officers of the Registrant
For the information required by this item, refer to the following sections of
our definitive proxy statement for the Annual Meeting of Stockholders to be held
July 24, 1997,22, 1999, which information is incorporated into this report by reference:
(a) "Election of Directors" on page 4 through the thirdfifth paragraph on page 5
(for information on directors); and (b) the last paragraph on page 7 (for
information on delinquent Section 16 filings). Also, see the information with
respect to "Executive Officers of the Registrant" under Part I of this report,
which information is incorporated herein by reference.
Item 11. Executive Compensation
For the information required by this item, refer to the following sections of
our definitive proxy statement for the Annual Meeting of Stockholders to be held
July 24, 1997,22, 1999, which information is incorporated into this report by reference:
(a) "Executive Compensation" on pages 8 through 13;12; (b) "Retirement Plan
Descriptions" on pages 14 and 15;page 13; and (c) "Director Compensation" on page 15.14.
Item 12. Security Ownership of Certain Beneficial Owners and Management
For the information required by this item, refer to the section entitled "Stock
Ownership" appearing on pages 6 through 7 of our definitive proxy statement for
the Annual Meeting of Stockholders to be held July 24, 1997,22, 1999, which information
is incorporated into this report 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 1718 of our definitive proxy
statement for the Annual Meeting of Stockholders to be held July 24, 1997,22, 1999, which
information is incorporated into this report by reference.
-12-11
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 Pages(s)
------------- -------------Page(s)
Incorporated by reference to our Annual
Report to Stockholders for the year
ended April 30, 1997:
Report of Management* -- 241999:
Consolidated Statement of Income for the
years ended April 30, 1997, 1996,1998, and 1995*1999* -- 25
Consolidated Balance Sheet at April 30, 1997, 1996,1998, and 1995*1999* -- 26 - 27
Consolidated Statement of Cash Flows for the
years ended April 30, 1997, 1996,1998, and 1995*1999* -- 28
Consolidated Statement of Stockholders' Equity
for the years ended April 30, 1997, 1996,1998, and 1995*1999* -- 29
Notes to Consolidated Financial Statements* -- 30 - 3536
Report of Management* -- 37
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 in this report.
(a) 3 - Exhibits: Filed with this report:
Exhibit Index
- -------------
13 Brown-Forman Corporation's Annual Report to Stockholders for the
year ended April 30, 1997,1999, but only to the extent set forth in
Items 1, 5, 6, 7, 7A and 8 of this Annual Report on Form 10-K for
the year ended April 30, 1997.1999.
21 Subsidiaries of the Registrant.
23 Consent of Coopers & Lybrand L.L.P.PricewaterhouseCoopers LLP independent accountants.
-13-12
27 Financial Data Schedule (not considered to be filed).
Previously Filed:
Exhibit Index
- -------------
3(a) Restated Certificate of Incorporation of registrant, which is
incorporated into this report 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 into this report 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 into this report 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
into this report 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 into this report by reference to Brown-Forman
Corporation's 10-K filed on July 26, 1993.
4(a) Credit Agreement dated as3(f) Amendment to the by-laws of November 30, 1994, among Brown-Forman
Corporation and a group of United States and international banks,registrant (to increase the mandatory
retirement age for outside directors), which is incorporated into
this report by reference to Brown-Forman Corporation's 10-KForm 10-Q
filed on July 17, 1995.
4(b) Amendment No. 1 dated as of February 23, 1996, to the Credit Agreement
referenced in 4(a) above, which is incorporated into this report by
reference to Brown-Forman Corporation's 10-K filed on July 3, 1996.
4(c)December 5, 1997.
4 The Form of Indenture dated as of March 1, 1994 between
Brown-Forman Corporation and The First National Bank of Chicago, as
Trustee, which is incorporated into this report 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 into this report 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 into this report 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)10(b) Brown-Forman Corporation Restricted Stock Plan, which is
incorporated into this report by reference to Brown-Forman
Corporation's 10-K filed on July 19, 1994.
10(d)10(c) Brown-Forman Corporation Supplemental Excess Retirement Plan, which
is incorporated into this report by reference to Brown-Forman
Corporation's 10-K filed on July 23, 1990.
-14-
10(e)10(d) Brown-Forman Corporation Stock Appreciation Rights Plan, which is
incorporated into this report by reference to Brown-Forman
Corporation's 10-K filed on July 23, 1990.
10(f)10(e) A description of the Brown-Forman Savings Plan, which is
incorporated into this report by reference to page 10 of the
registrant's definitive proxy statement for the Annual Meeting of
Stockholders held on July 25, 1996.
10(g)10(f) A description of the Brown-Forman Flexible Reimbursement Plan,
which is incorporated into this report by reference to page 10 of
the registrant's definitive proxy statement for the Annual Meeting
of Stockholders held on July 25, 1996.
13
10(g) A description of the Brown-Forman Non-Employee Director
Compensation Plan, which is incorporated into this report by
reference to Brown-Forman Corporation's Form S-8 (Registration No.
333-38649) filed on October 24, 1997.
10(h) Credit Agreement dated as of October 29, 1997, among Brown-Forman
Corporation and a group of United States and international banks,
which is incorporated into this report by reference to Amendment
No. 1 to Brown-Forman Corporation's 10-Q filed on December 15,
1997.
(b) No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
-15-14
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 28, 199727, 1999 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 28, 199727, 1999 as indicated:
/s/ JERRY E. ABRAMSON /s/ RICHARD P. MAYER /s/ OWSLEY BROWN II
- --------------------------------------- --------------------------------- -----------------------------------------
By: Jerry E. Abramson By: Richard P. Mayer By: Owsley Brown II
Director Director Director, Chairman of the Board
and Chief Executive Officer
/s/ BARRY D. BRAMLEY /s/ DONALD G. CALDERSTEPHEN E. O'NEIL
- --------------------------------------- ---------------------------------
By: Barry D. Bramley By: Stephen E. O'Neil
Director Director
/s/ GEO. GARVIN BROWN III /s/ DACE BROWN STUBBS /s/ OWSLEY BROWN FRAZIER
- ------------------------- ---------------------- --------------------------------------------------------------- --------------------------------- -----------------------------------------
By: Barry D. BramleyGeo. Garvin Brown III By: Donald G. CalderDace Brown Stubbs By: Owsley Brown Frazier
Director Director Director, Vice Chairman of the Board
/s/ RICHARD P. MAYERDONALD G. CALDER /s/ STEPHEN E. O'NEILJAMES S. WELCH
- --------------------------------------- ---------------------------------
By: Donald G. Calder By: James S. Welch
Director Director
/s/ LAWRENCE K. PROBUS /s/ STEVEN B. RATOFF /s/ WILLIAM M. STREET
- ------------------------- ---------------------- --------------------------------------------------------------- --------------------------------- -----------------------------------------
By: Richard P. MayerLawrence K. Probus By: Stephen E. O'NeilSteven B. Ratoff By: William M. Street
Director DirectorVice President and Controller Executive Vice President and Director, Vice Chairman of the Board
/s/ JAMES S. WELCH /s/ OWSLEY BROWN II /s/ THOMAS P. BURNET
- ------------------------- ---------------------- ------------------------
By: James S. Welch By: Owsley Brown II By: Thomas P. Burnet
Director Director, Chairman (Principal Accounting of the Board and Officer) Brown-Forman
Chief Executive Corporation
Officer
Senior Vice President
and Chief Financial
/s/ GEO. GARVIN BROWN III /s/ STEVEN B. RATOFF Officer Brown-Forman
- ------------------------- ---------------------- Beverages Worldwide
By: Geo. Garvin Brown III By: Steven B. Ratoff
Director Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
-16-15
REPORT OF INDEPENDENT ACCOUNTANTS
Brown-Forman Corporation
Louisville, Kentucky
We have auditedIn our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the consolidated financial
position of Brown-Forman Corporation and its Subsidiaries as ofat April 30, 1997,
1996,1998, and 1995,1999, and the results of their operations and their cash flows for
the
years then ended, which financial statements are included on pages 25 through 35each of the 1997 Annual Report to Stockholders of Brown-Forman Corporation and
incorporated by reference herein. We have also auditedthree years in the period ended April 30, 1999, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
consolidated financial statement schedule listed in the accompanying index
on page 13 of this Form 10-K.presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
These financial statements and financial statement schedule are the
responsibility of the
company's management. Ourmanagement; our responsibility is to express an opinion on
these financial statements and financial statement schedule based on our audits.
We conducted our audits of these statements in accordance with generally
accepted auditing standards. Those standards which 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 includesstatements, assessing
the accounting principles used and significant estimates made by management,
as well asand evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In ourthe 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, 1997, 1996, and 1995 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.expressed above.
/s/ Coopers & Lybrand L.L.P.PricewaterhouseCoopers LLP
Louisville, Kentucky
May 27, 199726, 1999
S-1
BROWN-FORMAN CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended April 30, 1997, 1996,1998, and 19951999
(Expressed in thousands)
Col. A Col. B Col. C Col. D Col. E
------ ------ ------ ------ ------
Additions
---------
Balance at Charged to Balance at
Beginning Costs End
Description of Period and Expenses Deductions of Period
----------- ------------------- ------------ ---------- -------------------
1997
Allowance for Doubtful Accounts $13,206 $ 5,530 $ 8,516(1) $10,220
19961998
Allowance for Doubtful Accounts $14,061$10,220 $ 9,386 $10,241(1) $13,206
19956,648 $ 5,906(1) $10,962
1999
Allowance for Doubtful Accounts $12,006$10,962 $ 9,3437,582 $ 7,288(1) $14,0617,385(1) $11,159
(1) Doubtful accounts written off, net of recoveries.
S-2