United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JULYOCTOBER 31, 1999
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File No. 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
Louisville, Kentucky 40210
(Address of principal executive offices) (Zip Code)
(502) 585-1100
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: SeptemberDecember 1, 1999
Class A Common Stock ($.15 par value, voting) 28,988,091
Class B Common Stock ($.15 par value, nonvoting) 39,522,081
BROWN-FORMAN CORPORATION
Index to Quarterly Report Form 10-Q
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) Page
Condensed Consolidated Statement of Income
Three months ended JulyOctober 31, 1998 and 1999 3
Six months ended October 31, 1998 and 1999 3
Condensed Consolidated Balance Sheet
April 30, 1999 and JulyOctober 31, 1999 4
Condensed Consolidated Statement of Cash Flows
ThreeSix months ended JulyOctober 31, 1998 and 1999 5
Notes to the Condensed Consolidated Financial Statements 6 - 78
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 89 - 1113
Item 3. Quantitative and Qualitative Disclosures about Market Risk 1113
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 1214
Signatures 1315
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
BROWN-FORMAN CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(Dollars in millions, except per share amounts)
Three Months Ended JulySix Months Ended
October 31, October 31,
1998 1999 1998 1999
------- ------- -------- --------
Net sales $ 441.6572.5 $ 437.3643.0 $1,014.1 $1,080.3
Excise taxes 55.7 52.872.7 75.8 128.4 128.6
Cost of sales 157.9 152.5211.6 244.7 369.5 397.2
------- ------- -------- --------
Gross profit 228.0 232.0288.2 322.5 516.2 554.5
Advertising expenses 69.5 81.7 133.6 143.1
Selling, general, and
administrative expenses 103.8 108.4
Advertising expenses 64.1 61.4111.1 124.3 214.9 232.7
------- ------- -------- --------
Operating income 60.1 62.2107.6 116.5 167.7 178.7
Interest income 1.0 2.21.5 2.5 2.5 4.7
Interest expense 2.5 3.93.2 4.2 5.7 8.1
------- ------- -------- --------
Income before income taxes 58.6 60.5105.9 114.8 164.5 175.3
Taxes on income 21.4 22.138.6 41.9 60.0 64.0
------- ------- -------- --------
Net income 37.2 38.467.3 72.9 104.5 111.3
Less: Preferred stock
dividend requirements 0.1 -- 0.2 --
Preferred stock
redemption premium 0.3 -- 0.3 --
------- ------- -------- --------
Net income applicable
to common stock $ 37.166.9 $ 38.472.9 $ 104.0 $ 111.3
======= ======= ======== ========
Earnings per share
- Basic and Diluted $ 0.540.97 $ 0.561.06 $ 1.51 $ 1.62
======= ======= ======== ========
Shares (in thousands) used in the
calculation of earnings per share
- Basic 68,686 68,50868,664 68,510 68,674 68,509
- Diluted 68,750 68,60068,735 68,583 68,741 68,591
Cash dividends declared
per common share $ 0.28 $ 0.295 $ 0.56 $ 0.59
======= ======= ======== ========
See notes to the condensed consolidated financial statements.
3
BROWN-FORMAN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in millions)
April 30, JulyOctober 31,
1999 1999
(Unaudited)
-------- --------
Assets
- ------
Cash and cash equivalents $ 171.2 $ 180.8114.8
Short-term investments -- 72.4
Accounts receivable, net 273.8 255.8405.6
Inventories:
Barreled whiskey 190.6 194.2190.3
Finished goods 189.1 212.1209.0
Work in process 89.3 75.196.8
Raw materials and supplies 55.9 56.653.9
-------- --------
Total inventories 524.9 538.0550.0
Other current assets 29.4 34.531.9
-------- --------
Total current assets 999.3 1,009.11,174.7
Property, plant and equipment, net 348.0 350.2357.5
Intangible assets, net 264.2 264.5262.5
Other assets 123.9 124.7131.4
-------- --------
Total assets $1,735.4 $1,748.5$1,926.1
======== ========
Liabilities
- -----------
Commercial paper $ 226.6 $ 211.6290.6
Accounts payable and accrued expenses 242.3 254.9342.1
Current portion of long-term debt 17.8 8.30.2
Accrued taxes on income -- 25.4
Dividends payable -- 20.25.0
Deferred income taxes 30.4 30.4
-------- --------
Total current liabilities 517.1 550.8668.3
Long-term debt 52.9 55.546.6
Deferred income taxes 137.2 116.3110.2
Accrued postretirement benefits 56.7 56.958.1
Other liabilities and deferred income 54.0 53.553.9
-------- --------
Total liabilities 817.9 833.0937.1
Stockholders' Equity
- --------------------
Common stock 10.3 10.3
Retained earnings 945.0 943.31,016.2
Cumulative translation adjustment (8.0) (8.5)(7.9)
Treasury stock (490,000 and 486,493486,066 Class B
common shares at April 30 and JulyOctober 31,
respectively) (29.8) (29.6)
-------- --------
Total stockholders' equity 917.5 915.5989.0
-------- --------
Total liabilities and stockholders' equity $1,735.4 $1,748.5$1,926.1
======== ========
Note: The balance sheet at April 30, 1999, has been taken from the audited
financial statements at that date, and condensed.
See notes to the condensed consolidated financial statements.
4
BROWN-FORMAN CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(In millions; amounts in parentheses are reductions of cash)
ThreeSix Months Ended
JulyOctober 31,
1998 1999
------- -------
Cash flows from operating activities:
Net income $ 37.2104.5 $ 38.4111.3
Adjustments to reconcile net income to net
cash provided by (used for) operations:
Depreciation 11.5 12.823.2 25.2
Amortization 2.4 2.64.7 5.1
Deferred income taxes (15.5) (20.3)
Other (5.0) (14.2)
Other (6.3) (1.7)(5.6)
Changes in assets and liabilities:
Accounts receivable 27.7 18.0(86.4) (131.8)
Inventories (12.0) (15.9)(35.5) (27.9)
Other current assets 1.9 (5.1)(1.2) (2.5)
Accounts payable and accrued expenses (17.6) 9.649.1 96.8
Accrued taxes on income 18.3 25.41.1 5.5
------- -------
Cash provided by operating activities 58.1 69.939.0 55.8
Cash flows from investing activities:
Additions to property, plant, and equipment (9.7) (12.5)
Disposals(22.2) (30.4)
Net purchases of property, plant, and equipment 0.1 0.7short-term investments -- (72.4)
Other (4.2) (6.4)(7.2) (9.1)
------- -------
Cash used for investing activities (13.8) (18.2)(29.4) (111.9)
Cash flows from financing activities:
Net change in commercial paper (10.0) (15.0)96.0 64.0
Reduction of long-term debt (7.4) (23.9)
Acquisition of treasury stock (3.0) --
(6.9)Redemption of preferred stock (12.1) --
Dividends paid (19.4) (20.2)(38.7) (40.4)
------- -------
Cash used forprovided by (used for)
financing activities (29.4) (42.1)34.8 (0.3)
------- -------
Net increase (decrease) in
cash and cash equivalents 14.9 9.644.4 (56.4)
Cash and cash equivalents, beginning of period 78.3 171.2
------- -------
Cash and cash equivalents, end of period $ 93.2122.7 $ 180.8114.8
======= =======
See notes to the condensed consolidated financial statements.
5
BROWN-FORMAN CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In these notes, "we," "us," and "our" refer to Brown-Forman Corporation.
1. Condensed Consolidated Financial Statements
We prepared these unaudited condensed consolidated statements using our
customary accounting practices as set out in our 1999 annual report on Form 10-K
(the "1999 Annual Report"). We made all of the adjustments (which includes only
normal, recurring adjustments) needed to present this data fairly.
We condensed or left out some of the information found in financial statements
prepared according to generally accepted accounting principles ("GAAP"). You
should read these financial statements together with the 1999 Annual Report,
which does conform to GAAP.
2. Short-term Investments
Short-term investments are those with maturities of less than one year, but
greater than three months, when purchased. These investments are readily
convertible to cash and are stated at cost, which approximates fair value.
3. Inventories
We use the last-in, first-out method to determine the cost of almost all of our
inventories. If the last-in, first-out method had not been used, inventories
would have been $110.1 million higher than reported as of April 30, 1999, and
$112.5$113.4 million higher than reported as of JulyOctober 31, 1999.
3.4. Environmental
Along with other responsible parties, we face environmental claims resulting
from the cleanup of several waste deposit sites. We have accrued our estimated
portion of cleanup costs. We expect either the other responsible parties or
insurance to cover the remaining costs. We do not believe that any additional
costs we incur to satisfy environmental claims will have a material adverse
effect on our financial condition or results of operations.
4.5. Contingencies
We get sued in the ordinary course of business. Some suits and claims seek
significant damages. Many of them take years to resolve, which makes it
difficult for us to predict their outcomes. We believe, based on our legal
counsel's advice, that none of the suits and claims pending against us will have
a material adverse effect on our financial condition or results of operations.
5.6
6. Earnings Per Share
Basic earnings per share is calculated using net income reduced by dividend
requirements on preferred stock, divided by the weighted average number of
common shares outstanding during the period. Diluted earnings per share is
calculated in the same manner, except that the denominator also includes
additional common shares that would have been issued if outstanding stock
options had been exercised during the period. The dilutive effect of outstanding
stock options is determined by application of the treasury stock method.
6
6.7. Business Segment Information
Three Months Ended JulySix Months Ended
October 31, October 31,
1998 1999 1998 1999
------ ------ -------- --------
Net sales:
Wine and spirits $330.9 $325.1$395.9 $458.9 $ 726.8 $ 784.0
Consumer durables 110.7 112.2176.6 184.1 287.3 296.3
------ ------ -------- --------
Consolidated net sales $441.6 $437.3$572.5 $643.0 $1,014.1 $1,080.3
====== ====== ======== ========
Operating income:
Wine and spirits $ 63.282.9 $ 64.187.6 $ 146.1 $ 151.7
Consumer durables (3.1) (1.9)24.7 28.9 21.6 27.0
------ ------ 60.1 62.2-------- --------
107.6 116.5 167.7 178.7
Interest expense, net 1.5 1.7 1.7 3.2 3.4
------ ------ -------- --------
Consolidated income
before income taxes 58.6 60.5$105.9 $114.8 $ 164.5 $ 175.3
====== ====== 7.======== ========
8. Comprehensive Income
Comprehensive income, which is defined as the change in equity from transactions
and other events from nonowner sources, was as follows (in millions):
Three Months Ended JulySix Months Ended
October 31, October 31,
1998 1999 1998 1999
------ ------ ------ ------
Net income $ 37.267.3 $ 38.472.9 $104.5 $111.3
Foreign currency translation
adjustment 3.2 (0.5)1.8 0.6 5.0 0.1
------ ------ ------ ------
Comprehensive income $ 40.469.1 $ 37.973.5 $109.5 $111.4
====== ====== 8.====== ======
9. Reclassifications
Certain prior year amounts have been reclassified to conform with the current
year presentation.
7
10. New Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities."
Statement No. 133 requires that all derivatives be measured at fair value and
recognized in the balance sheet as either assets or liabilities. Statement No.
133 also requires that changes in a derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement.statement and requires
formal documentation, designation, and assessment of the effectiveness of
derivatives that receive hedge accounting.
In June 1999, the FASB issued Statement No. 137, "Accounting for Derivative
Instruments and Hedging Activities -- Deferral of the Effective Date of FASB
Statement No. 133," which makes Statement No. 133 effective for fiscal years
beginning after June 15, 2000. We plan to adopt Statement No. 133 as of May 1,
2001. The adoption of SFAS No. 133 is not expected to have a material impact on our consolidated
financial statements.
9. Reclassifications
Certain prior year amounts have been reclassified to conform with the current
year presentation.
78
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
You should read the following discussion and analysis along with our 1999 Annual
Report. Note that the results of operations for the threesix months ended JulyOctober 31,
1999, do not necessarily indicate what our operating results for the full fiscal
year will be. In this Item, "we," "us," and "our" refer to Brown-Forman
Corporation.
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 which
follows, 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:
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 United States, 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.
Beverage Risk Factors: The U.S. beverage alcohol business is highly sensitive to
tax increases; an increase in the federal or state excise taxestax (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 for 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 to which 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.
89
Consumer Durables Risk Factors: Earnings projections for our consumer durables
segment anticipate a continued strengthening of our Lenox and Hartmann
businesses. These projections could be offset by factors such as poor consumer
response to direct mail, a soft retail environment at outlet malls, further
department store consolidation, or weakened demand for tableware, giftware
and/or leather goods.
Results of Operations:
FirstSecond Quarter Fiscal 2000 Compared to FirstSecond Quarter Fiscal 1999
Here is a summary of our operating performance (expressed in millions,
except percentage and per share amounts):
Three Months Ended
JulyOctober 31,
1998 1999 Change
------ ------ ------
Net Sales:
Wine & Spirits $330.9 $325.1 (2 %)$395.9 $458.9 16 %
Consumer Durables 110.7 112.2 1176.6 184.1 4 %
------ ------
Total $441.6 $437.3 (1 %)$572.5 $643.0 12 %
Gross Profit:
Wine & Spirits $172.7 $175.8 2$198.8 $230.8 16 %
Consumer Durables 55.3 56.2 289.4 91.7 3 %
------ ------
Total $228.0 $232.0 2$288.2 $322.5 12 %
Operating Income (Loss):Income:
Wine & Spirits $ 63.282.9 $ 64.1 187.6 6 %
Consumer Durables (3.1) (1.9) N/M24.7 28.9 17 %
------ ------
Total $ 60.1 $ 62.2 4$107.6 $116.5 8 %
Net Income $ 37.267.3 $ 38.4 372.9 8 %
Earnings per Share - Basic and Diluted $ 0.540.97 $ 0.56 41.06 9 %
Effective Tax Rate 36.5% 36.5%
Sales and gross profit for our wine and spirits segment decreased 2% as some wholesalers adjusted
their inventory purchasing patterns and as we reduced our lower-margin business.
This decline was offset in part by revenue from the recently-acquired Sonoma-
Cutrer Vineyards. Gross profit and operating income from the wine and spirits
segment increased 2% and 1%, respectively,16% for the
quarter. These results
primarily reflectThe segment continued to perform well in the strengthU.S. and in many important
international markets, led by strong worldwide growth of Jack Daniel'sDaniel's. Southern
Comfort worldwide revenue and angross profit also grew, mostly as a result of U.S.
volume improvement. The company's wine brands continued to grow, as Korbel
Champagne made substantial volume gains domestically in anticipation of the
millennium celebration and Fetzer wine volumes improved mix of higher-
margin productglobally. Operating
income grew at a slower rate than sales and gross profit, reflecting a
significant increase in advertising for the quarter as well as price increasesthe effect of the
acquisition of Sonoma-Cutrer Vineyards and favorable cost trends.investments in technology.
Revenues and gross profit for the quarter from our consumer durables segment
increased 1%4% and 3%, respectively, primarily reflecting gains in sales of fine
china, flatware and crystal to department stores, and continued growth for the
segment's direct marketing businesses. Operating income grew 17% for the period,
reflecting aggressive efforts to contain costs.
10
Results of Operations:
Six Months Fiscal 2000 Compared to Six Months Fiscal 1999
Here is a summary of our operating performance (expressed in millions,
except percentage and per share amounts):
Six Months Ended
October 31,
1998 1999 Change
-------- -------- ------
Net Sales:
Wine & Spirits $ 726.8 $ 784.0 8 %
Consumer Durables 287.3 296.3 3 %
-------- --------
Total $1,014.1 $1,080.3 7 %
Gross Profit:
Wine & Spirits $ 371.5 $ 406.6 9 %
Consumer Durables 144.7 147.9 2 %
-------- --------
Total $ 516.2 $ 554.5 7 %
Operating Income:
Wine & Spirits $ 146.1 $ 151.7 4 %
Consumer Durables 21.6 27.0 25 %
-------- --------
Total $ 167.7 $ 178.7 7 %
Net Income $ 104.5 $ 111.3 7 %
Earnings per Share - Basic and Diluted $ 1.51 $ 1.62 7 %
Effective Tax Rate 36.5% 36.5%
Sales and gross profit for the wine and spirits segment increased 8% and 9%,
respectively, led by solid growth of Jack Daniel's and Korbel Champagne. First
half results were also boosted by the impact of the April 1999 acquisition of
Sonoma-Cutrer Vineyards. Operating income increased 4%, as gross profit gains
were partially offset by brand-building and other investment activities.
Revenues and gross profit from the consumer durables segment increased 3% and
2%, respectively, primarily reflecting continued growth ofincreased consumer demand for fine china
dinnerware and metal products in the wholesale channel, as well as strong sales of collectible
products. Operating income grew 25% due to effective management of costs and retail channels. The
operating loss in the
quarter was reduced to $1.9 million, reflecting aggressive
efforts to contain costs.
9
closing of certain unprofitable stores and facilities.
Net interest expense increased slightly from last year's first quarter,year, reflecting financing
costs associated with the acquisition of Sonoma-Cutrer Vineyards.
Looking forward to the full fiscal year, we expect an acceleration of operating
income growth for both business segments. Costs associated with the acquisition
of Sonoma-Cutrer Vineyards are expected to reduce earnings by approximately
$0.03 to $0.04 per share over the next four years, resulting in a fiscal 2000
earnings per share growth rate slightly below that achieved in fiscal 1999.11
As discussed in Note 8 to the accompanying condensed consolidated financial
statements, we are requiredplan to adopt SFASFASB Statement No. 133 byas of May 1, 2001. The
adoption
of SFAS No. 133 is not expected to have a material impact on our consolidated financial
statements.
Liquidity and Financial Condition
Cash and cash equivalents increaseddecreased by $9.6$56.4 million during the threesix months ended
JulyOctober 31, 1999, as cash provided by operating activities exceededwas more than offset
by cash used for financinginvesting and investingfinancing activities. Cash provided by operations
totaled $69.9$55.8 million, primarily reflecting net income before depreciation and
amortization and an increase in accounts payable and accrued expenses during the
period. These amounts were partially offset by the normal seasonal increase in
accrued income taxes and
decrease in accounts receivable during the period. Those amounts were partially
offset byand inventories as well as a continued partial liquidation
of deferred income taxes in compliance with revised U.S. tax regulations and an increase in inventories.regulations. Cash
of $18.2$111.9 million was used for investing activities, consisting mostly of
purchases of short-term investments as well as expenditures to expand and
modernize our production facilities and enhance our information systems. Cash of
$42.1$0.3 million was used for financing activities, reflecting dividend and debt payments
madeoffset by net borrowings during the period.
Dividends
The Board of Directors increased the quarterly cash dividend 5.1% from $0.295 to
$0.31 per share on both Class A and Class B common stock, payable January 1,
2000. As a result, the indicated annual cash dividend per share rose from $1.18
to $1.24.
Year 2000 Issue
Until recently, computer programs generally were written using two digits rather
than four to define the applicable year. Accordingly, programs may recognize a
date using "00" as the year 1900 instead of the year 2000. This problem may
affect the company's information technology systems (IT systems), such as
financial, order entry, inventory control and forecasting systems, and non-IT
systems that contain computer chips, such as production equipment and security
systems. It may also affect the technology systems of third party vendors and
customers, and of governmental entities upon which the company's business
ordinarily relies.
The Company is addressing the Year 2000 issues in three phases: assessment,
design of appropriate remediation, and implementation. For our IT systems as
well as our non-IT systems, we have completed the assessment and remediation
design phases and have substantially completed the implementation phase, which
consists of replacing or repairing non-compliant systems, testing the new
systems and training employees to use them. In addition, we are assessinghave assessed the
Year 2000 preparedness of important customers and suppliers and are monitoring
their remediation efforts.
10
The total cost of Year 2000 issues is currently estimated at $21-23$22-23 million. Of
the total estimated cost, we expect that approximately 60% will be attributable
to new systems and thus capitalized. The other 40% will be expensed as incurred.
All costs are expected to be funded through operating cash flows. Through
JulyOctober 31, 1999, we have incurred approximately $20$22 million, of which $13
million has been capitalized and $7$9 million has been expensed.
12
We expect to manage the Year 2000 issues in a timely manner and, based on our
efforts to date, we believe that substantial disruptions in our business
operations due to Year 2000 non-compliance of our systems are unlikely. However,
it is not possible to anticipate all possible future outcomes, especially since
third parties are involved. Thus, there could be circumstances in which the
company would be unable to process customer orders, produce or ship products,
invoice customers, collect payments, receive customary governmental approvals or
authorizations as they relate to our business, or perform other normal business
activities. To address these risks, we have begun and intend to continue
developingconstructed contingency plans
designed to mitigate potential disruptions in operations, including stockpiling
raw materials and finished goods, identifying alternative sources of supplies,
creating back-up order processing and invoicing procedures, and other
appropriate measures.
We expect to complete development
and testing of these contingency plans by the end of October 1999.
The costs expected completion dates and risks described above represent management's best estimates.
However, there can be no guarantee that these estimates will prove to be
accurate. Actual results could differ significantly. If we do not successfully
complete anticipated replacements and other remediation to our IT systems, if
unanticipated disruptions in our non-IT systems occur, or if any of our
significant vendors or customers do not successfully achieve Year 2000
compliance on a timely basis, our operations or financial results could be
adversely affected in the future.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Since April 30, 1999, there have been no material changes in the company's
interest rate, foreign currency and commodity price exposures, the types of
derivative financial instruments used to hedge those exposures, or the
underlying market conditions.
1113
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders of the company held July 22, 1999, the
following matters were voted upon:
1. Election of Jerry E. Abramson, Barry D. Bramley, Geo. Garvin Brown III,
Owsley Brown II, Donald G. Calder, Owsley Brown Frazier, Richard P. Mayer,
Stephen E. O'Neil, William M. Street, Dace Brown Stubbs, and James S. Welch
to serve as directors until the next annual election of directors, or until
a successor has been elected and qualified.
For Withheld
---------- --------
Jerry E. Abramson 28,184,282 17,258
Barry D. Bramley 28,185,073 16,467
Geo. Garvin Brown III 28,187,911 13,629
Owsley Brown II 28,187,911 13,629
Donald G. Calder 28,188,635 12,905
Owsley Brown Frazier 28,185,089 16,451
Richard P. Mayer 28,188,635 12,905
Stephen E. O'Neil 28,183,109 18,431
William M. Street 28,188,635 12,905
Dace Brown Stubbs 28,188,248 13,292
James S. Welch 28,188,632 12,908
2. The approval of additional shares to be used for future awards under the
Brown-Forman Omnibus Compensation Plan (the "Plan") and the approval of the
performance measures used for awards under the Plan.
For 26,865,509
Against 1,161,572
Abstain 174,459
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit
Number Exhibit
------- -------
3(ii) By-Laws (Article 2.1 amended to create a
uniform mandatory retirement age of 70 for
all directors).
27 Financial Data Schedule
(b) Reports on Form 8-K: None
1214
SIGNATURES
As required by the Securities Exchange Act of 1934, the Registrant has caused
this report to be signed on its behalf by the undersigned authorized officer.
BROWN-FORMAN CORPORATION
(Registrant)
Date: SeptemberDecember 7, 1999 By: /s/ Steven B. Ratoff
Steven B. Ratoff
Executive Vice President and
Chief Financial Officer
(On behalf of the Registrant and
as Principal Financial Officer)
1315