UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of
earliest event reported): July 22, 2004
Brown-Forman Corporation
(Exact name of registrant as specified in its charter)
Delaware 002-26821 61-0143150
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
850 Dixie Highway, Louisville, Kentucky 40210
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (502) 585-1100
Item 7. Financial Statements and Exhibits
(a) Not applicable.
(b) Not applicable.
(c) Exhibits
99.1 Letter from Phoebe A. Wood, Executive Vice President and Chief
Financial Officer, to Brown-Forman Corporation Shareholders,
dated July 22, 2004
99.2 Press Release, dated July 22, 2004
Item 9. Regulation FD Disclosure
On July 22, 2004 Brown-Forman Corporation posted on its corporate website a
letter from Phoebe A. Wood, Senior Vice President and Chief Financial Officer,
to Brown-Forman Corporation Shareholders, dated July 22, 2004, containing
information about the index reweighting announced in March 2004 by Standard &
Poor's. A copy of this letter is attached hereto as Exhibit 99.1.
Items 9 and 12. Regulation FD Disclosure and Results of Operations
and Financial Condition
Brown-Forman Corporation issued a press release on July 22, 2004, summarizing
remarks made by the Chairman and Chief Executive Officer at the Company's 2004
Annual Meeting of Stockholders held July 22, 2004, including information
regarding the results of operations for the 2004 fiscal year, and certain
earnings guidance relating to the Company's 2005 fiscal year. A copy of this
press release is attached hereto as Exhibit 99.2.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Brown-Forman Corporation
(Registrant)
Date: July 22, 2004 By: /s/ Michael B. Crutcher
Michael B. Crutcher
Vice Chairman, General Counsel
and Corporate Secretary
Exhibit Index
99.1 Letter from Phoebe A. Wood, Executive Vice President and Chief Financial
Officer, to Brown-Forman Corporation Shareholders, dated July 22, 2004
99.2 Press Release, dated July 22, 2004, issued by Brown-Forman Corporation
Exhibit 99.1
July 22, 2004
To Our Shareholders:
I have received a number of inquiries about the change in the Standard & Poor's
(S&P) indices and how it might affect Brown-Forman shareholders. I thought it
might be helpful to summarize for you background information I have received
from the S&P about this planned change.
Background
S&P creates indices of publicly traded companies (most notably the S&P 500) to
track how the market is doing. The Dow Jones Industrial Average (DJIA), another
commonly quoted index, does this for 30 companies. The S&P 500 Index includes
Brown-Forman, but the DJIA does not. From time to time, S&P or the DJIA changes
which companies it includes in its index and how much weight (i.e. what
percentage of the index) a company represents.
These indices are important because many mutual funds attempt to mimic the S&P
500 companies' stock performance, and purchase shares of all of the companies in
the S&P 500 in the same ratio as the S&P calculates its index. As Brown-Forman
is in the S&P 500, these S&P 500 index mutual funds buy and hold our shares. As
of last month, market professionals estimate that 11% of the shares of our
company are held by S&P related index funds.
Change Ahead
On March 1, 2004, S&P publicly announced that it plans to change how it
calculates its indices. This change appears to be major compared to the numerous
small changes S&P makes from time to time. S&P plans to alter the calculation of
the percentage of each company represented in its indices from total market
capitalization (i.e., total number of shares outstanding multiplied by the share
price) to a free float adjusted market capitalization (publicly traded shares
multiplied by the share price). The S&P change will exclude closely held shares
from the free float calculation.
Because Brown-Forman has a relatively high concentration of family ownership,
our free float is relatively low when compared to the broader market. Therefore,
it is anticipated that as a result of the S&P's change to its weighting
calculation the index funds that attempt to mimic the performance of the S&P
indices will have to sell a sizable number of Brown-Forman shares (they only
hold B shares).
At this time, we do not know the exact number of our shares the funds will
eventually sell or when they will begin making the sales. S&P has said it will
announce details of its new calculation methodology in September 2004 and has
scheduled the transition to take place in two steps in March 2005 and September
2005.
S&P estimates that there will be over $100 billion in total trades to rebalance
the index. The actual turnover in our shares will be in part a function of the
final methodology S&P adopts. Other companies that likely will be affected by
this change include UPS, Wal-Mart, Goldman Sachs, Coca-Cola Enterprises, and
Metlife, Inc.
Institutional investors, mutual fund managers, and stock analysts are very aware
of the situation, and likely will make trades based on this re-balancing change.
As a result, it is logical to predict some disruption to our stock price.
However, a change in stock ownership has no effect on the long term value of the
company.
We will continue to monitor the situation closely and work to develop strategies
to limit potential market disruption.
Sincerely yours,
Phoebe A. Wood
Exhibit 99.2
BROWN-FORMAN REITERATES FISCAL 2005 EARNINGS GUIDANCE
Chairman Owsley Brown II Addresses Annual Shareholders' Meeting
Louisville, KY, July 22, 2004 -- Brown-Forman Corporation Chairman and
Chief Executive Officer Owsley Brown II reaffirmed today the company's
previously stated guidance regarding fiscal 2005 earnings. Addressing
shareholders at Brown-Forman's annual meeting, Brown stated, "We believe that we
will have another year of solid growth in fiscal 2005. While we are experiencing
a very strong start to the fiscal year, our current earnings forecast for fiscal
2005 remains unchanged at $2.32-$2.42 per share, which represents 10-15% growth
over last year. But given the strength of our leadership team, the quality of
the strategies we're pursuing, the favorable environment for our leading spirits
brands, and the first quarter's encouraging prospects, we will be striving to
attain the upper end of this range."
In discussing preliminary results for the first quarter, which ends July 31, and
prospects for the entire year, Brown told shareholders the company's leading
spirits brands -- Jack Daniel's, Southern Comfort, and Finlandia -- have
significant momentum and excellent opportunities around the world. He said the
environment for premium spirits in the U.S. continues to be very promising, and
although the outlook in some international markets is more mixed, many of
Brown-Forman's most important markets, including the U.K., Australia, South
Africa, and China, are doing very well.
Brown informed shareholders that while the company is expecting some improvement
in operating results for both Hartmann and Lenox, the tough economic
environments in which these segments operate suggest a cautious outlook for the
full year. Additionally, Brown said although the company is guarded about
prospects for its wine business, "We can't fail to note the results of the May
introduction of our new low carbohydrate One.6 Chardonnay and One.9 Merlot wine,
as the benefits of pipeline distribution are coming through in our first quarter
results.
"Putting this information together, along with noting the absence of the
one-time cost of our settlement with Diageo that we recorded in last year's
first quarter, we expect our first quarter this year to be very strong," Brown
told shareholders.
At the annual meeting, Brown-Forman shareholders celebrated a record fiscal 2004
for the company, as earnings per share increased 16% to $2.11, the largest
percentage gain in nine years; dividends per share were increased by more than
13%; the company paid down $150 million in debt; beverage sales grew to two
billion dollars, an increase of 11%, and the company generated more than $1
billion in beverage gross profit, both records for the company. This success
enabled the company to increase in global advertising investment by 15% in
fiscal 2004.
"The single most important factor in our earnings last year was the exceptional
growth of Jack Daniel's," Brown stated. "The brand passed seven million cases in
depletions, which we grew at 6%, a nice increase from the 4% growth we achieved
in fiscal 2003 and the 2% growth of the previous year."
In formal action, Brown-Forman's shareholders re-elected all 12 members of the
company's Board of Directors: Ina Brown Bond; Barry D. Bramley; George 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; Dace Brown
Stubbs; and Paul C. Varga. Stockholders also approved the Brown-Forman 2004
Omnibus Compensation Plan.
Brown-Forman Corporation is a diversified producer and marketer of fine quality
consumer products, including Jack Daniel's, Canadian Mist, Southern Comfort,
Finlandia Vodka, Fetzer and Bolla wines, Korbel California Champagnes, Lenox,
Dansk, and Gorham tableware and giftware, and Hartmann Luggage.
IMPORTANT INFORMATION ON FORWARD-LOOKING STATEMENTS
This news release contains statements, estimates, or projections that constitute
"forward-looking statements" as defined under U.S. federal securities laws.
Generally, the words "expect," "believe," "intend," "estimate," "will,"
"anticipate," and "project," and similar expressions 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.
We believe that the expectations and assumptions with respect to our
forward-looking statements are reasonable. But by their nature, forward-looking
statements involve known and unknown risks, uncertainties and other factors that
in some cases are out of our control. These factors could cause our actual
results to differ materially from Brown-Forman"s historical experience or our
present expectations or projections. Here is a non-exclusive list of such risks
and uncertainties:
- changes in general economic conditions, particularly in the United States
where we earn the majority of our profits;
- a strengthening U.S. dollar against foreign currencies, especially the
British Pound;
- reduced bar, restaurant, hotel and travel business in wake of other terrorist
attacks, such as occurred on 9/11;
- developments in the class action lawsuits filed against Brown-Forman and
other spirits, beer and wine manufacturers alleging that our advertising
causes illegal consumption of alcohol by those under the legal drinking age,
or other attempts to limit alcohol marketing, through either litigation or
regulation;
- a dramatic change in consumer preferences, social trends or cultural trends
that results in the reduced consumption of our premium spirits brands;
- tax increases, whether at the federal or state level;
- increases in the price of grain and grapes;
- continued depressed retail prices and margins in our wine business because
of our excess wine inventories, existing grape contract obligations, and a
world-wide oversupply of grapes; and
- the effects on our Consumer Durables business of the general economy,
department store business, response rates in our direct marketing business,
and profitability of mall outlet operations.