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 JULY 31, 2003
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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). 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: August 29, 2003
Class A Common Stock ($.15 par value, voting) 28,420,496
Class B Common Stock ($.15 par value, nonvoting) 32,223,205
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 July 31, 2002 and 2003 3
Condensed Consolidated Balance Sheet
April 30, 2003 and July 31, 2003 4
Condensed Consolidated Statement of Cash Flows
Three months ended July 31, 2002 and 2003 5
Notes to the Condensed Consolidated Financial Statements 6 - 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11 - 13
Item 3. Quantitative and Qualitative Disclosures about Market Risk 14
Item 4. Controls and Procedures 14
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 15 - 16
Signatures 17
Certifications 18 - 19
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
July 31,
2002 2003
------- -------
Net sales $ 479.6 $ 532.6
Excise taxes 55.1 71.8
Cost of sales 177.1 188.5
------- -------
Gross profit 247.4 272.3
Advertising expenses 78.4 77.6
Selling, general, and administrative expenses 114.1 128.3
Other expense (income), net (1.2) 14.3
------- -------
Operating income 56.1 52.1
Interest income 0.6 0.4
Interest expense 1.6 5.4
------- -------
Income before income taxes 55.1 47.1
Taxes on income 19.0 16.0
------- -------
Net income $ 36.1 $ 31.1
======= =======
Earnings per share
- Basic and Diluted $ 0.53 $ 0.51
======= =======
Shares (in thousands) used in the
calculation of earnings per share
- Basic 68,376 60,610
- Diluted 68,593 60,855
Cash dividends declared per common share $ 0.70 $ 0.75
======= =======
See notes to the condensed consolidated financial statements.
3
BROWN-FORMAN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in millions)
April 30, July 31,
2003 2003
(Unaudited)
-------- --------
Assets
- ------
Cash and cash equivalents $ 72.0 $ 71.9
Accounts receivable, net 324.6 304.6
Inventories:
Barreled whiskey 221.6 225.1
Finished goods 203.4 233.8
Work in process 112.2 99.9
Raw materials and supplies 47.4 54.5
-------- --------
Total inventories 584.6 613.3
Current portion of deferred income taxes 56.0 56.0
Other current assets 29.9 31.2
-------- --------
Total current assets 1,067.1 1,077.0
Property, plant and equipment, net 506.1 509.5
Prepaid pension cost 39.2 41.1
Investment in affiliates 41.2 40.8
Trademarks and brand names 235.0 236.2
Goodwill 311.0 313.9
Other assets 64.0 62.1
-------- --------
Total assets $2,263.6 $2,280.6
======== ========
Liabilities
- -----------
Commercial paper $ 167.1 $ 163.2
Accounts payable and accrued expenses 297.2 297.7
Dividends payable -- 22.7
Accrued taxes on income 43.4 48.9
Current portion of long-term debt 40.1 42.0
-------- --------
Total current liabilities 547.8 574.5
Long-term debt 628.7 629.0
Deferred income taxes 77.8 71.8
Accrued pension and other postretirement benefits 142.7 145.4
Other liabilities 26.4 25.7
-------- --------
Total liabilities 1,423.4 1,446.4
Stockholders' Equity
- --------------------
Common stock 10.3 10.3
Retained earnings 1,506.1 1,491.1
Accumulated other comprehensive loss (83.4) (79.5)
Treasury stock (8,429,000 and 8,356,000 common
shares at April 30 and July 31, respectively) (592.8) (587.7)
-------- --------
Total stockholders' equity 840.2 834.2
-------- --------
Total liabilities and stockholders' equity $2,263.6 $2,280.6
======== ========
Note: The balance sheet at April 30, 2003, 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)
Three Months Ended
July 31,
2002 2003
------- -------
Cash flows from operating activities:
Net income $ 36.1 $ 31.1
Adjustments to reconcile net income to net
cash provided by (used for) operations:
Depreciation 13.8 13.1
Deferred income taxes (19.6) (6.0)
Changes in assets and liabilities:
Accounts receivable 24.3 20.0
Inventories (24.1) (28.7)
Other current assets 3.4 (1.3)
Accounts payable and accrued expenses (28.9) 0.5
Accrued taxes on income 33.4 5.5
Noncurrent assets and liabilities 0.5 4.4
------- -------
Cash provided by operating activities 38.9 38.6
Cash flows from investing activities:
Additions to property, plant, and equipment (15.0) (14.5)
Computer software expenditures (0.9) (1.0)
Trademark and patent expenditures (0.2) (0.2)
------- -------
Cash used for investing activities (16.1) (15.7)
Cash flows from financing activities:
Net change in commercial paper 7.1 (3.9)
Proceeds from exercise of stock options 2.2 3.6
Dividends paid (23.9) (22.7)
------- -------
Cash used for financing activities (14.6) (23.0)
------- -------
Net increase (decrease) in
cash and cash equivalents 8.2 (0.1)
Cash and cash equivalents, beginning of period 115.6 72.0
------- -------
Cash and cash equivalents, end of period $ 123.8 $ 71.9
======= =======
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 2003 annual report on Form 10-K
(the "2003 Annual Report"). We made all of the adjustments (which include only
normal, recurring adjustments) needed for a fair statement of this data.
We condensed or omitted 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 2003 Annual Report,
which does conform to GAAP.
2. Inventories
We use the last-in, first-out ("LIFO") method to determine the cost of most of
our inventories. If the LIFO method had not been used, inventories would have
been $130.4 million higher than reported as of April 30, 2003, and $134.6
million higher than reported as of July 31, 2003. Changes in the LIFO valuation
reserve for interim periods are based on a proportionate allocation of the
estimated change for the entire fiscal year.
3. Taxes on Income
Our consolidated effective tax rate may differ from current statutory rates due
to the recognition of amounts for events or transactions that do not have tax
consequences. We use the estimated annual effective tax rate in determining our
interim results.
4. Earnings Per Share
Basic earnings per share is calculated as net income 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
The following table presents information concerning basic and diluted earnings
per share:
Three Months Ended
July 31,
2002 2003
------ ------
Basic and diluted net income (in millions) $36.1 $31.1
Share data (in thousands):
Basic average common shares outstanding 68,376 60,610
Effect of dilutive stock options 217 245
------ ------
Diluted average common shares outstanding 68,593 60,855
Basic net income per share $0.53 $0.51
Diluted net income per share $0.53 $0.51
5. Environmental Matters
We face environmental claims resulting from the cleanup of several manufacturing
or waste disposal sites in the United States. We accrue for losses associated
with environmental cleanup obligations when such losses are probable and
reasonably estimable. At some sites, there are other potentially responsible
parties who are expected to bear part of the costs, in which cases our accrual
is based on our estimate of our share of the total costs. A portion of the
cleanup costs with respect to certain sites is expected to be paid by insurance.
The estimated recovery of cleanup costs from insurers is recorded as an asset
when receipt is deemed probable.
We do not believe that any additional environmental cleanup costs we incur will
have a material adverse effect on our consolidated financial position, results
of operations, or cash flows.
6. Contingencies
We operate in a litigious environment, and we get sued in the normal course of
business. Sometimes plaintiffs seek substantial damages. Significant judgment is
required in predicting the outcome of these suits and claims, many of which take
years to adjudicate.
In August 2003, we entered into an agreement with Diageo Great Britain Limited
to settle a lawsuit involving the distribution of Jack Daniel's Tennessee
Whiskey in the United Kingdom. The settlement agreement calls for Brown-Forman
to pay Diageo 8.9 million British pounds (approximately $14.3 million) to end
the controversy between the parties. The cost of the settlement was accrued as
of July 31, 2003, and reduced earnings for the three months then ended by $0.11
per share.
7
Diageo distributed Jack Daniel's in the U.K. under a contract that expired on
July 31, 2002. (Brown-Forman now distributes Jack Daniel's and its other spirits
brands under a cost-sharing agreement with Bacardi). Diageo claimed that it had
the right to extend the contract for an additional three years, based on passing
certain required performance standards in the contract. Diageo claimed damages
from Brown-Forman in a range of 35 million to 42 million British pounds
(approximately $56 million to $67 million) for profits it would have earned
during the extension period. We denied that Diageo had met the contract
extension standards and sued Diageo in the U.K. for a legal declaration that we
were not required to extend the contract. A trial had been scheduled for March
2004. The settlement ends the controversy between the parties, with each side to
bear its own litigation costs.
We accrue estimated costs for a contingency when we believe that a loss is
probable, and adjust the accrual as appropriate to reflect changes in facts and
circumstances. In our opinion, based on advice from legal counsel, none of the
suits or claims against us will have a material adverse effect on our
consolidated financial position, results of operations, or cash flows.
7. Business Segment Information
(Dollars in millions) Three Months Ended
July 31,
2002 2003
------ ------
Net sales:
Beverages $360.2 $423.7
Consumer Durables 119.4 108.9
------ ------
Consolidated net sales $479.6 $532.6
====== ======
Operating income (loss):
Beverages $ 61.7 $ 64.0
Consumer Durables (5.6) (11.9)
------ ------
56.1 52.1
Interest expense, net 1.0 5.0
------ ------
Consolidated income before income taxes $ 55.1 $ 47.1
====== ======
Consumer
Beverages Durables Total
--------- -------- ------
Goodwill:
Balance as of April 30, 2003 $180.7 $130.3 $311.0
Additions related to
Distillerie Tuoni e Canepa:
Purchase accounting adjustment 1.6 -- 1.6
Foreign currency translation
adjustment 1.3 -- 1.3
------ ------ ------
Balance as of July 31, 2003 $183.6 $130.3 $313.9
====== ====== ======
8
8. Comprehensive Income
Comprehensive income is a broad measure of the effects of all transactions and
events (other than investments by or distributions to shareholders) that are
recognized in stockholders' equity, regardless of whether those transactions and
events are included in net income. The following table adjusts the company's net
income for the other items included in comprehensive income:
(Dollars in millions) Three Months Ended
July 31,
2002 2003
------ ------
Net income $ 36.1 $ 31.1
Other comprehensive income (loss):
Net gain (loss) on cash flow hedges (3.9) 0.8
Net gain on securities 0.1 0.3
Pension liability adjustment (0.4) --
Foreign currency translation adjustment 5.3 2.8
------ ------
Other comprehensive income 1.1 3.9
------ ------
Comprehensive income $ 37.2 $ 35.0
====== ======
Accumulated other comprehensive loss (income) consisted of the following:
(Dollars in millions) April 30, July 31,
2003 2003
------ ------
Pension liability adjustment $ 79.1 $ 79.1
Cumulative translation adjustment 2.8 --
Unrealized loss on cash flow hedge contracts 1.6 0.8
Unrealized gain on securities (0.1) (0.4)
------ ------
$ 83.4 $ 79.5
====== ======
9. Stock Options
Under our Omnibus Compensation Plan, we can grant stock options and other
stock-based incentive awards for a total of 3,400,000 shares of common stock to
eligible employees until April 30, 2005. We apply Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations in accounting for stock options. Accordingly, no stock-based
employee compensation cost is reflected in net income, as no options granted
under those plans had an exercise price below the market value of the underlying
stock on the grant date. The following table illustrates the effect on net
income and earnings per share if we had instead recognized compensation expense
for stock options based on their fair value at their grant dates consistent with
the methodology prescribed under Financial Accounting Standards Board Statement
No. 123, "Accounting for Stock-Based Compensation."
9
(Dollars in millions, except per share amounts)
Three Months Ended
July 31,
2002 2003
------ ------
Net income, as reported $ 36.1 $ 31.1
Stock-based employee compensation
expense determined under fair
value based method, net of tax (0.9) (0.7)
------ ------
Pro forma net income $ 35.2 $ 30.4
====== ======
Earnings per share:
Basic and diluted - as reported $ 0.53 $ 0.51
Basic and diluted - pro forma $ 0.51 $ 0.50
The plan requires that we purchase shares to satisfy stock option requirements,
thereby avoiding future dilution of earnings that would occur from issuing
additional shares. We acquire treasury shares from time to time in anticipation
of these requirements. We intend to hold enough treasury stock so that the
number of diluted shares is always less than the original number of shares
outstanding at inception of the stock option plan (as adjusted for any share
repurchases or issuances unrelated to the plan). The extent to which diluted
shares exceed the number of basic shares is determined by how much our stock
price has appreciated since options were granted, irrespective of how many
treasury shares we have acquired.
10. Reclassifications
Certain prior year amounts have been reclassified to conform with the current
year presentation.
10
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 2003 Annual
Report. Note that the results of operations for the three months ended July 31,
2003, 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.
Important Note on Forward-Looking Statements:
This report contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Words like "believe,"
"expect," "anticipate," and "project" identify a forward-looking statement,
which speaks only as of the date the statement is made. Except as required by
law, we do not intend to update or revise any forward-looking statements,
whether as a result of new information, future events, or otherwise. These
statements are subject to a number of important risks and uncertainties that
could cause our actual results and experience to differ materially from the
anticipated results or other expectations expressed. Such risks and
uncertainties include changes in general economic conditions, political and
social trends, and the uncertainties of litigation.
Our projections for our domestic beverage business assume that U.S. economic
activity will continue at about the same pace as currently, and our earnings
will be hurt if the economy weakens. Federal or state excise tax increases on
spirits and wine would also depress our domestic beverage business. Profits from
our international beverage business may be adversely affected if the U.S. dollar
strengthens against other currencies or if economic conditions deteriorate in
our principal export markets. As a leading exporter of American spirits brands,
our foreign sales could be hurt as a result of anti-Americanism in response to
the Iraq war or other international developments.
The long-term outlook for our beverage business is based in part on favorable
demographic trends in the U.S. and many international markets for the sale of
spirits and wine. We may not meet current expectations for our global beverage
business if these demographic trends do not translate into corresponding sales
increases. Profits could also be hurt by increases in the price of grain,
grapes, or energy. Margins for our wine business are likely to stay low so long
as the current oversupply of grapes continues. Legal or regulatory measures
against beverage alcohol (including its advertising and promotion) could
adversely affect sales.
Earnings from our consumer durables segment depend heavily on the state of the
U.S. economy, as purchases of fine china and luggage are discretionary. The
performance of our fine china dinnerware business depends on the health of major
department stores, the primary distribution channel for these products, as well
as further department store consolidation, a soft retail environment at outlet
malls, and consumer response to direct mail. The Hartmann luggage business
continues to be adversely affected by reduced travel in the U.S.
11
Results of Operations:
First Quarter Fiscal 2004 Compared to First Quarter Fiscal 2003
Here is a summary of our operating performance (expressed in millions,
except percentage and per share amounts):
Three Months Ended
July 31,
2002 2003 Change
------ ------ ------
Net Sales:
Beverages $360.2 $423.7 18%
Consumer Durables 119.4 108.9 (9%)
------ ------
Total $479.6 $532.6 11%
Gross Profit:
Beverages $191.5 $222.3 16%
Consumer Durables 55.9 50.0 (10%)
------ ------
Total $247.4 $272.3 10%
Operating Income (Loss):
Beverages $ 61.7 $ 64.0 4%
Consumer Durables (5.6) (11.9) N/M
------ ------
Total $ 56.1 $ 52.1 (7%)
Net Income $ 36.1 $ 31.1 (14%)
Earnings per Share - Basic and Diluted $ 0.53 $ 0.51 (3%)
Effective Tax Rate 34.5% 34.0%
Earnings per share for the first quarter ended July 31, 2003 was $0.51, down
from the $0.53 earned last year. Included in first quarter earnings was a $0.02
per share benefit from a March 2003 share repurchase. As we announced on August
14, 2003, quarterly earnings were reduced $0.11 per share due to the settlement
of a lawsuit with Diageo Great Britain Limited involving the distribution of
Jack Daniel's in the United Kingdom. The performance of our core spirits brands
remained solid during the quarter, while the environment for both wines and
Consumer Durables remains challenging.
Excluding the one-time charge for the settlement with Diageo, earnings were
$0.62 per share, up $0.09 from last year. We believe that disclosure of this
quarter's earnings per share excluding this litigation settlement is informative
because it reflects the underlying operations of the company.
12
Beverages:
Global volume and profit trends in the quarter remained solid for both Jack
Daniel's and Southern Comfort. Results in both the United States and United
Kingdom were robust, although volumes in both Japan and much of Continental
Europe were soft. Profits for Finlandia continued to grow in Europe as we added
new markets to our distribution agreement, but earnings in the U.S. were down,
as we increased our marketing investments behind the brand. Results for our wine
brands remained disappointing, as the retail price environment has not improved
in the United States.
Beverage revenue and gross profit increased by 18% and 16%, respectively, in the
quarter. Growth was driven largely by our new distribution arrangement in the
U.K. In the first quarter of fiscal 2003, we had a one-time reduction in trade
inventories as we began selling our spirits brands directly to the trade through
a cost sharing arrangement with Bacardi. As a result, revenues improved by $13
million during fiscal 2004 due to the resumption of a normal shipment pattern
into the U.K., as well as the higher profit margin earned in that market via the
new distribution agreement. Additionally, we now record excise taxes for our
U.K. spirits sales in both sales and cost of sales. This change had the effect
of boosting segment revenue by $20 million, or 6%, while lowering the segment
gross margin by 2.6 percentage points. Beverage results also benefited from a
weakening of the U.S. dollar. Changes in key foreign exchange rates increased
first quarter revenues and operating income by $12 million and $4 million,
respectively.
Advertising expenses were down $1 million during the quarter, as increased
investments behind our core spirits brands were more than offset by a reduction
in advertising for our wine brands. SG&A expenses were up approximately $15
million, as we incurred $3 million in beverage reorganization costs, added sales
and marketing people in the U.K. to support the new distribution arrangement and
recognized pension costs. SG&A expenses were also higher in Continental Europe
due to the consolidation of financial results from both Finlandia Vodka
Worldwide and Distillerie Tuoni e Canepa, following these acquisitions in the
second half of last fiscal year.
Consumer Durables:
Net sales for Consumer Durables were down 9% and gross profit decreased 10%.
Sales to department stores remained sluggish and revenues through our retail
outlets declined in the first quarter. In addition, results in the
direct-to-consumer channel have declined significantly in recent months due to
lower than expected consumer response rates. Consumer Durables is a seasonal
business that typically reports a loss in the first quarter. The segment
reported an operating loss of $12 million this quarter, including $1 million in
restructuring costs, compared to a $6 million loss during the same period last
year.
Outlook:
Our previous fiscal 2004 guidance of $4.10 to $4.30 per share did not fully
anticipate the $0.11 per share cost of the litigation settlement with Diageo,
nor the extent of the weakness in Consumer Durables. However, continued growth
for our core spirits brands, anticipated improved financial performance from
wines, and benefits from a weaker U.S. dollar are supporting our outlook for the
rest of the fiscal year. As a result, we still expect to see earnings in the
range of $4.10 to $4.30 per share for fiscal 2004, consistent with previous
guidance.
13
Liquidity and Financial Condition
Cash and cash equivalents declined by $0.1 million during the three months ended
July 31, 2003, compared to an increase of $8.2 million during the same period
last year. The year-over-year change mainly reflects an $11.0 million increase
in net repayments of commercial paper. There was essentially no change in the
amounts of cash provided by operations and cash used for investing activities
between years.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We hold debt obligations, foreign currency forward and option contracts, and
commodity futures contracts that are exposed to risk from changes in interest
rates, foreign currency exchange rates, and commodity prices, respectively.
Established procedures and internal processes govern the management of these
market risks. As of July 31, 2003, we do not consider the exposure to these
market risks to be material.
Item 4. Controls and Procedures
Within 90 days prior to the date of this report, we carried out an evaluation,
under the supervision and with the participation of our Chief Executive Officer
("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of the design
and operation of our disclosure controls and procedures. Based on this
evaluation, our CEO and CFO concluded that our disclosure controls and
procedures are effective in timely alerting them to material information
required to be included in our periodic SEC reports. It should be noted that the
design of any system of controls is based in part upon certain assumptions about
the likelihood of future events, and there can be no assurance that any design
will succeed in achieving its stated goals under all potential future
conditions.
In addition, we reviewed our internal controls, and there have been no
significant changes in our internal controls or in other factors that could
significantly affect those controls subsequent to the date of their last
evaluation.
14
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 24, 2003, the
following matter was voted upon:
Election of Ina Brown Bond, Barry D. Bramley, Geo. Garvin Brown III,
Owsley Brown II, Donald G. Calder, Owsley Brown Frazier, Richard P. Mayer,
Stephen E. O'Neil, Matthew R. Simmons, William M. Street, and Dace Brown
Stubbs to serve as directors until the next annual election of directors,
or until a successor has been elected and qualified.
For Withheld
---------- ---------
Ina Brown Bond 26,083,957 290,398
Barry D. Bramley 24,497,296 1,877,059
Geo. Garvin Brown III 26,083,707 290,648
Owsley Brown II 24,322,598 2,051,757
Donald G. Calder 24,646,057 1,728,298
Owsley Brown Frazier 24,485,361 1,888,994
Richard P. Mayer 24,646,231 1,728,124
Stephen E. O'Neil 24,645,918 1,728,437
Matthew R. Simmons 24,646,076 1,728,279
William M. Street 24,491,369 1,882,986
Dace Brown Stubbs 26,096,806 277,549
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
99.1 Certificate of Periodic Financial Report by Chief Executive Officer
(not considered to be filed)
99.2 Certificate of Periodic Financial Report by Chief Financial Officer
(not considered to be filed)
15
(b) Reports on Form 8-K:
On May 27, 2003, Brown-Forman Corporation filed a report on Form 8-K
announcing the resignation of Larry Probus, senior vice president and
director of finance, effective May 30, 2003.
On May 30, 2003, Brown-Forman Corporation filed a report on Form 8-K
announcing (1) fourth quarter and 2003 fiscal year earnings, and (2) the
approval of an amendment to Section 2.1 of the Registrant's by-laws to
permit directors to serve on its Board through their 70th year of age,
and, if requested by two-thirds of the other directors, through age 72.
On June 2, 2003, Brown-Forman Corporation filed a report on Form 8-K
announcing the extension until June 5, 2003, of its offer to exchange
$250 million of its 2-1/8% senior notes due 2006 and $350 million of its
3% senior notes due 2008.
On June 6, 2003, Brown-Forman Corporation filed a report on Form 8-K
announcing the extension until June 10, 2003, of its offer to exchange
$250 million of its 2-1/8% senior notes due 2006 and $350 million of its
3% senior notes due 2008.
On June 23, 2003, Brown-Forman Corporation filed a report on Form 8-K
announcing certain executive promotions.
On August 14, 2003, Brown-Forman Corporation filed a report on Form 8-K
announcing the resolution of certain litigation between itself and Diageo
Great Britain Limited relating to the distribution of Jack Daniel's
Tennessee Whiskey in the United Kingdom.
On August 27, 2003, Brown-Forman Corporation filed a report on Form 8-K
announcing the results of its operations for the quarter ended July 31,
2003.
16
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: September 12, 2003 By: /s/ Phoebe A. Wood
Phoebe A. Wood
Executive Vice President and
Chief Financial Officer
(On behalf of the Registrant and
as Principal Financial Officer)
17
CERTIFICATIONS
I, Owsley Brown II, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Brown-Forman
Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report.
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
report (the "Evaluation Date"); and
c) presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
report whether or not there were significant changes in internal controls or
in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: September 12, 2003 By: /s/ Owsley Brown II
Owsley Brown II
Chief Executive Officer
18
I, Phoebe A. Wood, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Brown-Forman
Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report.
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
report (the "Evaluation Date"); and
c) presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
report whether or not there were significant changes in internal controls or
in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: September 12, 2003 By: /s/ Phoebe A. Wood
Phoebe A. Wood
Chief Financial Officer
19
Exhibit 99.1
CERTIFICATE OF PERIODIC FINANCIAL REPORT
I, Owsley Brown II, Chairman and Chief Executive Officer of Brown-Forman
Corporation, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that:
(1) the Quarterly Report on Form 10-Q for the period ended July 31, 2003 (the
"Periodic Report") which this statement accompanies fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934 (15 U.S.C. 78m or 78o(d)) and
(2) information contained in the Periodic Report fairly presents, in all
material respects, the financial condition and results of operations of
Brown-Forman Corporation.
This certificate is being furnished solely for purposes of Section 906 and is
not being filed as part of the Periodic Report.
Date: September 12, 2003 By: /s/ Owsley Brown II
Owsley Brown II
Chief Executive Officer
and Chairman
Exhibit 99.2
CERTIFICATE OF PERIODIC FINANCIAL REPORT
I, Phoebe A. Wood, Executive Vice President and Chief Financial Officer of
Brown-Forman Corporation, certify, pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:
(1) the Quarterly Report on Form 10-Q for the period ended July 31, 2003 (the
"Periodic Report") which this statement accompanies fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934 (15 U.S.C. 78m or 78o(d)) and
(2) information contained in the Periodic Report fairly presents, in all
material respects, the financial condition and results of operations of
Brown-Forman Corporation.
This certificate is being furnished solely for purposes of Section 906 and is
not being filed as part of the Periodic Report.
Date: September 12, 2003 By: /s/ Phoebe A. Wood
Phoebe A. Wood
Executive Vice President
and Chief Financial Officer