<PAGE>
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, 1994
Commission file number 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 40210
LOUISVILLE, KENTUCKY (Zip Code)
(Address of principal executive offices)
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) None
of the Act
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 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, 1994, of the voting stock held by
nonaffiliates of the registrant was $195,947,000.
The number of shares outstanding for each of the registrant's classes of Common
Stock on June 21, 1994 was:
Class A Common Stock (voting) 28,988,091
Class B Common Stock (nonvoting) 40,008,147
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Portions of the Registrant's 1994 Annual Report to Stockholders are incorporated
by reference into Parts I, II, and IV of this report. Portions of the Proxy
Statement of Registrant, dated July 5, 1994 for use in connection with the
Annual Meeting of Stockholders to be held July 28, 1994 are incorporated by
reference into Parts III and IV of this report.
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PART I
Item 1. Business
- - ------- --------
(a) General development of business:
Brown-Forman Corporation 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 Kentucky in 1901. Its principal
executive offices are located at 850 Dixie Highway, Louisville, Kentucky 40210
(mailing address: P.O. Box 1080, Louisville, Kentucky 40201-1080). Except as
the context may otherwise indicate, the terms "Brown-Forman" and "company" refer
to Brown-Forman Corporation and its subsidiaries.
(b) Financial information about industry segments:
Information regarding net sales, operating income, and total assets of each of
the company's business segments is in Note 8 of Notes to Consolidated Financial
Statements on page 34 of the company's 1994 Annual Report to Stockholders, which
information is incorporated herein by reference in response to Item 8.
(c) Narrative description of business:
The following is a description of the operations in the business segments of
Wines and Spirits, Consumer Durables, and Other segments.
Wines and Spirits Segment
- - -------------------------
Wines 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.
Brands are grouped into three categories: North American Spirits, Imported and
Specialty Spirits, and Wines.
North American Spirits consists of the following brands:
Jack Daniel's Tennessee Whiskey
Canadian Mist Canadian Whisky
Jack Daniel's Country Cocktails
Southern Comfort
Early Times Old Style Kentucky Whisky
Old Forester Kentucky Straight Bourbon Whisky
Gentlemen Jack Rare Tennessee Whiskey
Korbel California Brandy
Pepe Lopez Tequila and related products
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 whisky in the
United States, Southern Comfort as the largest selling domestic proprietary
liqueur in the United States, and Early Times as the second largest selling
brand in the bourbon category in the United States.
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Imported and Specialty Spirits consists of the following brands:
Bushmills Irish Whiskey and related products
Glenmorangie Single Highland Malt Scotch Whisky
Usher's Scotch Whisky
Sempe Armagnac
Wines consists of the following brands:
Fetzer Vineyards California Wines
Korbel California Champagnes
Bolla Italian Wines
Jekel Vineyards California Wines
Bel Arbors California Wines
Fontana Candida Italian Wines
Brolio Italian Wines
Carmen Vineyards Chilean Wines
Fontanafredda Italian Wines
Noilly Prat Vermouths
Armstrong Ridge California Champagne
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 imported table wine in the United States. Fetzer
was ranked sixteenth among all table wines.
Brown-Forman believes that statistics used to rank these products are reasonably
accurate.
Brown-Forman's policy with respect to the Wines and Spirits Segment is to market
high quality products that satisfy consumer preferences and 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
Brown-Forman has with many of its distributors have formulas which determine
reimbursement to distributors if Brown-Forman terminates 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
Brown-Forman's 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.
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. Sugar and
spirits are used in the production of specialties. None of these raw materials
are in short supply, and there are adequate sources from which they may be
obtained.
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Production of whiskies 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 business segments.
The industry is highly competitive and there are many brands sold in the
consumer market. Trade information indicates that Brown-Forman is one of the
largest wine and spirit suppliers in the United States in terms of revenues.
The wine 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, whisky must be aged for at least two years to be
designated "straight whisky." The Segment ages its straight whiskies for a
minimum of three to five years. Federal regulations also require that
"Canadian" whisky must be manufactured in Canada in compliance with Canadian
laws and must be aged in Canada for at least three years.
Consumer Durables Segment
- - -------------------------
The Consumer Durables Segment includes the manufacturing and/or marketing of the
following:
Fine China Dinnerware
Contemporary Dinnerware
Crystal Stemware
Crystal Barware
China and Crystal Giftware
China and Crystal Lamps
Collectibles
Sterling Silver, Pewter and Silver-Plated
Giftware and Holloware
Sterling Silver and Stainless Steel Flatware
Fine Table Linens
Luggage and Handbags
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.
The Segment's products are marketed domestically through authorized retail
stores consisting of department stores and jewelry and specialty 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 and/or distributors in selected foreign markets. Specially created
collectible products are distributed both domestically and in selected foreign
markets through the Segment's direct response/mail-order division.
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Fine china and crystal products are marketed under both the Lenox and Gorham
trademarks. Contemporary dinnerware and glassware products are marketed under
the Dansk trademark. Sterling silver is marketed under both the Gorham and Kirk
Stieff trademarks. Kirk Stieff also markets pewter, stainless steel, and
silver-plated giftware, flatware and holloware. Luggage, handbags, business
cases, and personal accessories are marketed under the Hartmann, Wings 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 and Princeton Gallery trademarks.
The Lenox, Dansk, Gorham, and Hartmann brand names hold significant positions in
their industries. The Segment has granted to a producer of high quality table
linens a license for use of the Lenox trademarks on selective fine table linens,
subject to the terms of a licensing agreement.
The Segment believes that it is the largest domestic manufacturer and marketer
of fine china dinnerware, fine crystal stemware, and pewter holloware, 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 competition in the
marketing of its fine china and contemporary dinnerware, crystal stemware and
giftware, and luggage products.
In the Segment's china and crystal businesses, competition is based primarily on
quality, design, brand, style, product appeal, consumer satisfaction and price.
In its luggage, handbag, 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. In its sterling
silver, silver-plated, and stainless steel business, competition is based
primarily on price, with quality, design, brand, style, product appeal, and
consumer satisfaction also being factors. In its pewter business, competition
is based primarily on quality, design, brand, and delivery, with price being a
less significant factor.
Clay is the principal raw material used to manufacture china products and silica
is the principal raw material used to manufacture 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, flatware, and holloware products, and tin is the
principal raw material used to manufacture pewter products. It is anticipated
that raw materials used by the Segment will be in adequate supply. The
acquisition price of fine silver and tin is, however, influenced significantly
by world-wide 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.
Other Segment
- - -------------
The Other business segment included a credit card transaction processing
business and an aquaculture business. For further information, please refer to
Note 8, "Business Segment Information," on page 34 of the company's 1994 Annual
Report to Stockholders, which information is incorporated herein by reference in
response to Item 8. The credit card transaction processing business was sold in
October 1993 and the use of this segment was discontinued effective November 1,
1993.
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Other Information
- - -----------------
As of April 30, 1994, the company employs approximately 7,100 persons, including
900 employed on a part-time basis.
The company is an equal opportunity employer and recruits and places employees
without regard to race, color, national origin, sex, age, religion, disability,
or veteran status.
The company believes its employee relations are good.
For information on the effects of compliance with federal, state, and local
environmental regulations, refer to Note 13, "Environomental," on page 36 of the
company's 1994 Annual Report to Stockholders, which information is incorporated
herein by reference in response to Item 8.
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Item 2. Properties
- - ------- ----------
The corporate offices consist of office buildings, including renovated historic
structures, all located in Louisville, Kentucky.
Significant properties by business segments are as follows:
Wines and Spirits Segment
- - -------------------------
The facilities of the Wines 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
- Frederiksted, St. Croix, U.S. Virgin Islands
- Mendocino County, California
- Monterey County, California
- Oak Barrels:
- Louisville, Kentucky
- Mendocino County, California
- Plastic Closures and Plastic Bottles:
- Louisville, Kentucky
. Bottling facilities:
- Lynchburg, Tennessee
- Louisville, Kentucky
- Frederiksted, St. Croix, U.S. Virgin Islands
- Monterey County, California
. Warehousing facilities:
- Lynchburg, Tennessee
- Louisville, Kentucky
- Collingwood, Ontario
- Shively, Kentucky
- Monterey County, California
- Mendocino County, California
Leased facilities:
. Production and bottling facility in Dublin, Ireland
. Wine production and bottling facility in Mendocino County, California
. Vineyards in Monterey County, California
The company believes that the productive capacities of the Wines and Spirits
Segment are adequate for the business, and such facilities are maintained in a
good state of repair.
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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 headquarters - Lawrenceville, New Jersey
- Headquarters for Lenox Direct Response/Mail Order
Division - 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)
- Gorham - Smithfield, Rhode Island
- Hartmann - Lebanon, Tennessee
. Warehousing facilities:
- Dansk/Gorham - Williamsport, Maryland
Leased facilities:
. Office facilities:
- Lenox China and Crystal Division - Egg Harbor Township, New Jersey
- Dansk subsidiary - Mt. Kisco, New York
. Production/Warehousing/Office facilities:
- Kirk Stieff - Baltimore City, Maryland (includes retail store)
. Warehousing facilities:
- Lenox - South Brunswick, New Jersey (includes retail stores);
Oxford, North Carolina;
Kinston, North Carolina; and Mt. Pleasant, Pennsylvania
- Hartmann - Lebanon, Tennessee
- Lenox Direct Response/Mail Order - Langhorne, Pennsylvania
- Gorham - Woonsocket, Rhode Island
. Retail stores:
The Segment operates 6 first quality Lenox China stores in 5 states and 18
Lenox Outlet stores in 15 states. The Segment also operates 47 Dansk Outlet
stores in 27 states and 10 Gorham Outlet stores in 8 states. In addition, the
Segment operates 4 Crouch & Fitzgerald luggage stores in 4 states and a first
quality store in Connecticut under the Samuel Kirk & Son trade name which
carries Lenox, Gorham, Dansk, Kirk Stieff and other premium tabletop brands.
In the fourth quarter of fiscal 1994, the company recorded a pretax charge of
$8,180,000 ($5,350,000 after-tax) for the closing or reformatting of seven
retail stores.
The lease terms expire at various dates and are generally renewable, except for
the Lenox China store and Crouch & Fitzgerald store leases.
The company is of the opinion that the Segment's facilities are in good
condition and are adequate for the business.
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Item 3. Legal Proceedings
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(a) Brune v. Brown-Forman Corporation (214th District Court, Neuces County,
Texas):
On November 15, 1983, Marie Brinkmeyer, age 18, died of an acute alcohol
overdose after having consumed massive quantities of alcohol including
Pepe Lopez Tequila (a Brown-Forman product). Two years later, her
mother, Joyce Brune, sued Brown-Forman Corporation both on her own behalf
and on behalf of Ms. Brinkmeyer's estate, claiming (1) that the company
was negligent in not labeling Pepe Lopez Tequila to warn Ms. Brinkmeyer
of the risk of acute alcohol overdose or to provide instructions for the
appropriate use of the product and (2) that such failure rendered the
product defective. The plaintiff alleged damages resulting from the
company's advertising and alleged lobbying activities. The company
denied all of the plaintiff's allegations and vigorously contested this
litigation.
Plaintiff asked for actual damages of up to $5 million and punitive
damages of $600 million, plus interest and costs. The case went to trial
before a jury in Corpus Christi on August 31, 1992.
The jury's verdict against Brown-Forman of $525,000 plus interest
resulted from its finding Brown-Forman to be 35% at fault and Marie
Brinkmeyer to be 65% at fault on a total damage award of $1.5 million.
(Texas is a "comparative negligence" state.) The jury refused to award
punitive damages. The company has appealed the decision. Oral argument
was held on February 3, 1994 before the Texas Court of Appeals in Corpus
Christi. The company is awaiting a decision.
(b) Adams, et al. v. Brown-Forman Corporation (U.S. District Court, Middle
District of Florida, Tampa Division):
As previously reported, Brown-Forman Corporation terminated approximately
220 employees in a November 1986 reorganization. All terminated
employees received special compensation packages and signed complete
releases waiving any rights they might have as a result of their
termination. Nonetheless, the company was named as a defendant in four
related lawsuits, filed in 1988 and 1989, alleging violation of the Age
Discrimination in Employment Act (the "ADEA") related to this termination
process.
Three of the suits, collectively referred to as Adams, et al. v. Brown-
Forman Corporation, were filed by or on behalf of the same 44 plaintiffs;
the fourth suit was filed by the U.S. Equal Employment Opportunity
Commission (the "EEOC") on behalf of 104 individuals, including the Adams
plaintiffs. The lawsuits have been consolidated for trial in the U.S.
District Court for the Middle District of Florida. During the course of
this litigation, the EEOC has ceased representation of 19 individuals,
thus reducing the total to 85 individuals.
The 44 Adams plaintiffs have asserted their damages to be approximately
$62 million. The EEOC, using the same expert as that used by the
plaintiffs in the private actions, has determined the EEOC's damage claim
to be $43 million for the individuals on whose behalf it has brought
suit, bringing the total claimed to $105 million. The company and its
legal counsel consider this figure to exceed by far any liability to
which the company might be exposed. The company denies any liability to
the plaintiffs or individuals on whose part the EEOC has brought suit in
these matters and is vigorously contesting the litigation.
On June 17, 1992, the Eleventh Circuit Court of appeals reversed a
decision of the trial court and ruled in the company's favor that
"knowing and voluntary" written releases are valid, even when
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plaintiffs are making ADEA claims. The company filed a motion for summary
judgment on the release and other issues. The magistrate judge heard
oral argument on January 5, 1993, and on September 30, 1993, made a
report and recommendation to the district court that the releases were
valid as to ten of the plaintiffs and recommended that their cases should
be dismissed. The magistrate judge found there were "genuine issues of
material fact" on the release and other issues with respect to the
remaining 75 plaintiffs, and recommended that the motion for summary
judgment be denied as to them.
Both sides filed exceptions to the magistrate judge's report and
recommendation. After the court makes a decision on the recommendation,
a trial date will be set for the remaining plaintiffs, if any.
For additional information on contingencies, see Note 15 in the Notes to
the Consolidated Financial Statements on page 36 of the company's 1994
Annual Report to Stockholders, which information is incorporated herein by
reference in response to Item 8.
Item 4. Submission of Matters to a Vote of Security Holders
------- ---------------------------------------------------
On April 25, 1994, the company solicited written consents to amend the
company's Restated and Amended Certificate of Incorporation to increase the
authorized shares of $.15 par value Class A Common Stock to 30,000,000 from
18,000,000 and $.15 par value Class B Common Stock to 60,000,000 from
36,000,000. The stockholders approved the amendment on May 18, 1994, which
became effective May 20, 1994, with the following pre-split votes cast:
<TABLE>
<CAPTION>
Class A Class B
Common Stock Common Stock
------------ ------------
<S> <C> <C>
For 8,308,814 9,685,642
Against 13,244 26,239
Abstain 1,083 5,758
Broker non-votes -- --
</TABLE>
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<TABLE>
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EXECUTIVE OFFICERS OF THE REGISTRANT
- - ------------------------------------
Principal Occupation
and
Name Age Business Experience Family Relationship
- - ---------------------- --- -------------------- -------------------
<S> <C> <C> <C>
W. L. Lyons Brown, Jr. 57 Chairman of the company Brother to Owsley
since July, 1993. Brown II; Cousin to
Chairman and Chief Owsley Brown Frazier
Executive Officer of the
company from May 1983
to July 1993.
Owsley Brown II 51 President and Chief Brother to W. L. Lyons
Executive Officer Brown, Jr.; Cousin to
of the company since Owsley Brown Frazier
July 1993. President
of the company from
July 1987 to July 1993.
Owsley Brown Frazier 58 Vice Chairman of the Cousin to W. L. Lyons
company since August Brown, Jr. and Owsley
1983. Brown II
William M. Street 55 Vice Chairman of the None
company since
July 1987.
John P. Bridendall 44 Senior Vice President None
and Director of
Corporate Development
since July 1987.
Russell C. Buzby 60 Senior Vice President None
and Executive Director
of Human Resources
and Information Services
since July 1987.
Michael B. Crutcher 50 Senior Vice President, None
General Counsel, and
Secretary since
May 1989.
Malcolm Jozoff /(1)/ 54 Chairman and Chief None
Executive Officer
of Lenox, Incorporated
(a subsidiary of the
company) since
October 1993.
Independent consultant
on marketing and
strategic planning
from June 1992 to
October 1993. Group
Vice President,
The Proctor & Gamble
Company, since 1985,
and President --
Health Care Products,
Procter & Gamble USA,
since 1991.
Lois A. Mateus 47 Senior Vice President None
of Corporate
Communications and
Corporate Services
since January 1988.
</TABLE>
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EXECUTIVE OFFICERS OF THE REGISTRANT
- - ------------------------------------
Clifford G. Rompf, Jr. 63 Senior Vice President None
and Executive Director
of Financial Operations
since July 1987.
/(1)/ In 1993, in connection with a civil proceeding brought by the Securities
and Exchange Commission, Mr. Jozoff consented, without admitting or denying the
allegations, to the entry of an order enjoining him from violating Section 10(b)
of the Securities Exchange Act of 1934.
PART II
Item 5. Market for the Registrant's Common Stock 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 1994 Annual Report to Stockholders, which information
is incorporated herein by reference.
Holders of record of Common Stock at June 15, 1994:
Class A Common Stock (Voting) 2,675
Class B Common Stock (Nonvoting) 4,793
The principal market for Brown-Forman Corporation common shares is the New York
Stock Exchange.
Item 6. Selected Financial Data
- - ------- -----------------------
For the information required by this item, refer to the section entitled
"11-Year Consolidated Selected Financial Data" appearing on pages 24 and 25 of
the 1994 Annual Report to Stockholders, which information is incorporated herein
by reference in response to Item 8.
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
"Financial Review" appearing on pages 20 through 23 of the 1994 Annual Report to
Stockholders, which information is incorporated herein by reference in response
to Item 8.
Item 8. Financial Statements and Supplementary Data
- - ------- -------------------------------------------
For the information required by this item, refer to the Report of Management,
Consolidated Financial Statements, Notes to Consolidated Financial Statements,
and Report of Independent Accountants appearing on pages 17 and 26 through 36 of
the 1994 Annual Report to Stockholders, which information is incorporated herein
by reference. For selected quarterly financial information, refer to the
section entitled "Quarterly Financial Information" appearing on the "Highlights"
page of the 1994 Annual Report to Stockholders, which information is
incorporated herein by reference.
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Item 9. Changes in and Disagreements with Accountants on Accounting and
- - ------- ---------------------------------------------------------------
Financial Disclosure
--------------------
None
PART III
Item 10. Directors and Executive Officers of the Registrant
- - -------- --------------------------------------------------
For the information required by this item, refer to the following sections of
the registrant's definitive proxy statement for the Annual Meeting of
Stockholders to be held July 28, 1994, which information is incorporated herein
by reference: (a) "Election of Directors" on page 1 through the footnote on
page 2 (for information on directors); and (b) the last paragraph on page 4 (for
information on delinquent filings). Also, see the information with respect to
"Executive Officers of the Registrant" under Part I hereof, which information is
incorporated herein by reference.
Item 11. Executive Compensation
- - -------- ----------------------
For the information required by this item, refer to the section entitled
"Executive Compensation" on pages 5 through 13 of the registrant's definitive
proxy statement for the Annual Meeting of Stockholders to be held July 28, 1994,
which information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- - -------- --------------------------------------------------------------
For the information required by this item, refer to the section entitled
"Security Ownership of Certain Beneficial Owners and Management" appearing on
pages 3 and 4 of the registrant's definitive proxy statement for the Annual
Meeting of Stockholders to be held July 28, 1994, which information is
incorporated herein 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 13 of the registrant's
definitive proxy statement for the Annual Meeting of Stockholders to be held
July 28, 1994, which information is incorporated herein by reference.
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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:
<TABLE>
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Reference
------------------------------
Annual
Form 10-K Report to
Annual Report Stockholders
Page Page(s)
------------- ---------------
<S> <C> <C>
Incorporated by reference to the company's
Annual Report to Stockholders for the
year ended April 30, 1994:
Report of Management* -- 17
Consolidated Statement of Income for the
years ended April 30, 1994, 1993, and 1992* -- 26
Consolidated Statement of Cash Flows for the
years ended April 30, 1994, 1993, and 1992* -- 27
Consolidated Balance Sheet at April 30, 1994, 1993, and 1992* -- 28 - 29
Consolidated Statement of Stockholders' Equity
for the years ended April 30, 1994, 1993, and 1992* -- 30
Notes to Consolidated Financial Statements* -- 31 - 36
Report of Independent Accountants 36
Report of Independent Accountants S-1 --
Consolidated Financial Statement Schedules:
VIII - Valuation and Qualifying Accounts S-2 --
IX - Short-Term Borrowings S-3 --
X - Supplementary Income Statement Information S-4 --
</TABLE>
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 herein.
(a) 3 - Exhibits:
Filed Herewith:
Exhibit Index
- - --------------
3(a) Restated Certificate of Incorporation of registrant.
3(b) Certificate of Amendment to Restated Certificate of Incorporation of
registrant.
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3(c) Certificate of Ownership and Merger of Brown-Forman Corporation into
Brown-Forman, Inc.
3(d) Certificate of Amendment to Restated and Amended Certificate of
Incorporation of Brown-Forman Corporation.
10(a) Brown-Forman Management Incentive Compensation Plan.
10(b) Brown-Forman Corporation Restricted Stock Plan.
13 Company's Annual Report to Stockholders for the year ended April 30,
1994, but only to the extent set forth in Items 1, 3, 5, 6, 7, and 8
of the company's Annual Report on Form 10-K for the year ended April
30, 1994.
21 Subsidiaries of the Registrant.
23 Consent of Coopers & Lybrand, independent accountants.
Previously Filed:
Exhibit Index
- - -------------
3(e) The By-Laws of registrant, as amended on May 25, 1988, which is
incorporated herein by reference to Brown-Forman Corporation's 10-K
filed on July 26, 1993.
4(a) The Form of Indenture between the company and Morgan Guaranty Trust
Company of New York, as Trustee, dated as of April 1, 1988, which is
incorporated herein by reference to Brown-Forman Corporation's 10-K
filed on July 26, 1993.
4(b) The Form of Indenture dated as of March 1, 1994 between the company
and The First National Bank of Chicago, as Trustee, which is
incorporated herein by reference to Brown-Forman Corporation's Form
S-3 (Registration No. 33-52551) filed on March 8, 1994.
10(c) Brown-Forman Corporation Supplemental Excess Retirement Plan, which is
incorporated herein by reference to Brown-Forman Corporation's 10-K
filed on July 23, 1990.
10(d) Brown-Forman Corporation Stock Appreciation Rights Plan, which is
incorporated herein by reference to Brown-Forman Corporation's 10-K
filed on July 23, 1990.
10(e) A description of the Brown-Forman Savings Plan is incorporated herein
by reference to page 11 of the registrant's definitive proxy statement
for the Annual Meeting of Stockholders held on July 28, 1994.
10(f) A description of the Brown-Forman Flexible Reimbursement Plan is
incorporated herein by reference to page 11 of the registrant's
definitive proxy statement for the Annual Meeting of Stockholders held
on July 28, 1994.
(b) No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
-15-
<PAGE>
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: June 28, 1994 By: Owsley Brown II
President 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 June 28, 1994 as indicated:
<TABLE>
<CAPTION>
/s/ Owsley Brown Frazier /s/ John S. Speed
- - -------------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
By: Geo. Garvin Brown III By: Owsley Brown Frazier By: John S. Speed
Director Director, Vice Chairman Director
of the Board
/s/ William M. Street /s/ Stephen E. O'Neil /s/ James S. Welch
- - -------------------------- --------------------------- ---------------------------
By: William M. Street By: Stephen E. O'Neil By: James S. Welch
Director, Vice Chairman Director Director
of the Board
/s/ Owsley Brown II /s/ W. L. Lyons Brown, Jr. /s/ Clifford G. Rompf, Jr.
- - -------------------------- --------------------------- ---------------------------
By: Owsley Brown II By: W. L. Lyons Brown, Jr. By: Clifford G. Rompf, Jr.
Director, President and Director and Chairman Senior Vice President
Chief Executive Officer of the Board (Principal Accounting
(Principal Financial Officer) Officer)
</TABLE>
-16-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Brown-Forman Corporation
Louisville, Kentucky
We have audited the consolidated financial statements of Brown-Forman
Corporation and Subsidiaries as of April 30, 1994, 1993, and 1992, and for the
years then ended, which financial statements are included on pages 26 through 36
of the 1994 Annual Report to Stockholders of Brown-Forman Corporation and
incorporated by reference herein. We have also audited the financial statement
schedules listed in the index on page 14 of this Form 10-K. These financial
statements and financial statement schedules are the responsibility of the
company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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 includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our 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, 1994, 1993, and 1992 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 schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
As discussed in Notes 2, 5, and 6 to the consolidated financial statements, in
1994 the company adopted changes in its methods of accounting for postretirement
benefits other than pensions, postemployment benefits, and contributions.
/s/ Coopers & Lybrand
- - ------------------------------
Coopers & Lybrand
Louisville, Kentucky
June 10, 1994
S-1
<PAGE>
BROWN-FORMAN CORPORATION AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended April 30, 1994, 1993, and 1992
(Expressed in thousands)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
------ ------ ------ ------ ------
Additions
---------
Balance at Charged to Balance at
Beginning Costs Charged to End
Description of Period and Expenses Other Accounts Deductions of Period
----------- ---------- ------------ -------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1994
Allowance for Doubtful Accounts $10,432 $10,538 $ -- $8,964(2) $12,006
1993
Allowance for Doubtful Accounts $ 7,970 $ 8,889 $ 307(1) $6,734(2) $10,432
1992
Allowance for Doubtful Accounts $ 5,940 $ 5,741 $3,203(1) $6,914(2) $ 7,970
</TABLE>
(1) Relates to businesses acquired or sold during the year.
(2) Doubtful accounts written off, net of recoveries.
S-2
<PAGE>
BROWN-FORMAN CORPORATION AND SUBSIDIARIES
SCHEDULE IX - SHORT-TERM BORROWINGS
For the Years Ended April 30, 1994, 1993, and 1992
(Expressed in thousands)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E Col. F
------ ------ ------ ------ ------ ------
Category of Maximum Amount Average Amount Weighted Average
Aggregate Balance Weighted Outstanding Outstanding Interest Rate
Short-Term at End of Average During During During
Borrowings Period Interest Rate the Period (1) the Period (2) the Period (3)
- - ----------- --------- ------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
Commercial
paper:
1994 $204,229(4) 3.8% $272,544 $74,351 3.5%
1993 -- -- 101,772 30,801 3.3
1992 20,772 3.9 69,504 22,179 5.2
</TABLE>
Notes:
(1) Represents the maximum amount outstanding at month-end during the period.
(2) Calculated on daily outstanding balances during the year.
(3) Average amount outstanding during the year divided into interest expense
incurred.
(4) At April 30, 1994, $150,000,000 of this commercial paper was classified as
long-term debt in accordance with the company's intent and ability to
refinance obligations on a long-term basis.
S-3
<PAGE>
BROWN-FORMAN CORPORATION AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
For the Years Ended April 30, 1994, 1993, and 1992
(Expressed in thousands)
<TABLE>
<CAPTION>
Col. A Col. B
------ ------
Charged To Costs
Item And Expenses
---- ----------------
<S> <C>
1994:
Taxes, other than payroll and income taxes:
Federal excise taxes $263,693
Advertising costs (a) $202,246
1993:
Taxes, other than payroll and income taxes:
Federal excise taxes $277,152
Advertising costs (a) $204,699
1992:
Taxes, other than payroll and income taxes:
Federal excise taxes $ 259,669
Advertising costs (a) $ 171,791
</TABLE>
Note: (a) Advertising costs include all costs of advertising the company's
brand names and products. Such costs include point of sale displays
which are not practicable to segregate.
S-4
<PAGE>
Exhibit 3(a)
We, the undersigned, being the Chairman of the Board and Chief Executive
Officer, and Secretary, respectively, of Brown-Forman Inc., a corporation
organized under the General Corporation Law of the State of Delaware on October
19, 1933 as Brown-Forman Distillery Company, do hereby certify under seal of the
Corporation as follows:
I. The following Restated Certificate of Incorporation correctly sets forth
without change the corresponding provisions of the Corporation's certificate
of incorporation as heretofore amended, and supersedes the Certificate of
Incorporation and all previous amendments thereto:
RESTATED CERTIFICATE OF INCORPORATION
OF
BROWN-FORMAN INC.
FIRST: The name of this Corporation is BROWN-FORMAN INC.
SECOND: The registered office of the Corporation in the State of Delaware is to
be located at 1209 Orange Street, City of Wilmington, County of New Castle. The
name and post office address of its registered agent in the State of Delaware is
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware, 19801.
THIRD: The nature of the business and the objects and purposes to be transacted,
promoted and carried on by the Corporation are to do, in any part of the world,
any and all things herein mentioned and set forth, as fully and to the same
extent, to all intents and purposes, as natural persons might or could do, viz:
1. To manufacture, distill, compound, blend, rectify, combine, buy, sell,
distribute, deal in, export, import, store and warehouse all kinds of
distilled spirits, whiskey, gin, high wines, alcohol and all kinds of
cereals, grains, beets, yeasts, oils, molasses, and all articles used or
useful in
<PAGE>
connection with the operation of a distillery, and all products or
by-products of such articles;
2. To manufacture, buy, sell, deal in, distribute, store and warehouse such
cooperage as may be used or useful in the operation of a distillery;
3. To manufacture, buy, sell, distribute, grow, import, export, store and
warehouse all materials and supplies and other articles used or useful or
incidental to the operation of a distillery business;
4. To carry on a general distilling, redistilling, compounding, blending,
bottling, cooperage, storage and warehousing business;
5. To issue, register, certify, buy, sell, pledge, assign, transfer, exchange,
guarantee and otherwise deal in storage or warehouse receipts;
6. To acquire by purchase or otherwise, own, mortgage, pledge, sell, assign,
transfer, and otherwise acquire and dispose of and deal in and with goods,
wares and merchandise and real and personal property of every class and
description wheresoever situated;
7. To purchase, acquire, hold, guarantee, sell, assign, transfer, mortgage,
pledge, exchange, or otherwise dispose of shares of the capital stock, bonds,
debentures, evidences of indebtedness and other securities of any corporation
or association, whether foreign or domestic, private or governmental, whether
now or hereafter organized, and to issue in exchange therefore its own
stocks, bonds or other obligations or securities, and while the holder of any
such shares of stock or other securities to exercise all the rights, powers
and privileges of ownership, including the right to vote thereon to the same
extent as a natural person might or could do;
-2-
<PAGE>
8. To sell or in any manner dispose of, mortgage or pledge any stock, bonds or
other obligations or any property, real or personal, which at any time may be
held by the Corporation as and when and upon such terms and conditions as the
Board of Directors shall determine;
9. To acquire all or any part of the good will, rights, property and business of
any person, entity, partnership, association or corporation heretofore or
hereafter engaged in any business similar to any business which the
Corporation has power to conduct, to pay for the same in cash or in stock,
bonds or other obligations of the Corporation or otherwise, to hold, utilize
and in any manner dispose of the whole or any part of the rights and property
so acquired, and to assume in connection therewith any liabilities of any
such person, entity, partnership, association or corporation and conduct in
any lawful manner the whole or any part of the business thus acquired;
10. To acquire, hold, use, sell, assign, lease and grant licenses in respect of,
mortgage or otherwise dispose of, letters patent of the United States, or
any foreign country, patents, patent rights, licenses and privileges,
inventions, improvements and processes, trademarks, and trade-names,
relating to or useful in connection with any business of the Corporation;
11. To enter into, make, perform and carry out contracts of every kind for any
lawful purpose without limit as to amount, with any person, firm,
association or corporation, municipality, country, state, territory,
government or other municipal or governmental sub-division;
12. From time to time, without limit as to amount, to borrow or raise moneys for
any of the purposes of the Corporation and to draw, make, accept, endorse,
execute and issue promissory notes, drafts, bills of exchange, warrants,
bonds, debentures
-3-
<PAGE>
and other negotiable or non-negotiable instruments and evidences of
indebtedness, and to secure the payment thereof and of the interest thereon
by mortgage on, or pledge, conveyance or assignment in trust of, the whole
or any part of the assets of the Corporation, real, personal or fixed,
including contract rights, whether at the time owned or thereafter acquired,
and to sell, pledge or otherwise dispose of such securities or other
obligations of the Corporation for its corporate purposes. To loan its
uninvested funds and/or surplus from time to time to such extent as the
Corporation may deem advisable, with such security, if any, as the Board of
Directors may determine.
13. To purchase, hold, sell, transfer, reissue or cancel the shares of its own
capital stock (subject to the restriction hereinafter set forth with respect
to the reissue of its Preferred Stock) or any securities or other
obligations of the Corporation in the manner and to the extent now or
hereafter permitted by the laws of Delaware;
14. The Corporation may conduct its business in the State of Delaware, in other
states, the District of Columbia, the territories and colonies of the United
States, and in foreign countries, and may hold, own, improve, mortgage,
sell, convey, and otherwise dispose of real and personal property of every
class and description in any of the states, districts, territories or
colonies of the United States, and in all foreign countries, subject to the
laws of such state, district, territory, colony or country;
15. In general, to carry on any other business in connection with the foregoing,
whether manufacturing or otherwise, and to have and to do any and all things
incident to or in connection with the objects and purposes of the
Corporation hereinabove set forth; provided, however, that the Corporation
shall not in any state, territory, district, possession or country carry on
any business, or exercise any powers, which a corporation organized under
the laws thereof could not carry on or exercise.
-4-
<PAGE>
It is the intention that the objects specified in this Third clause shall,
except where otherwise expressed in said clause, be in no wise limited or
restricted by reference to or inference from the terms of any other clause
in this Certificate of Incorporation, but that the several objects specified
in this clause shall be regarded as independent objects, nor shall anything
in this clause be held to limit or restrict, in any manner, the powers of
this Corporation.
FOURTH: The total number of shares of all classes of stock which the Corporation
shall have authority to issue is Fifty-Five Million, One Hundred Seventy-Seven
Thousand, Nine Hundred and Forty-Eight (55,177,948) shares, divided into (a) One
Million, One Hundred Seventy-Seven Thousand, Nine Hundred Forty-Eight)
(1,177,948) shares of Preferred Stock of the par value of Ten Dollars ($10)
each; (b) Eighteen Million (18,000,000) shares of Class A Common Stock of the
par value of Fifteen Cents (15c) each, and (c) Thirty-Six Million (36,000,000)
shares of Class B Common Stock of the par value of Fifteen Cents (15c) each.
RIGHTS OF PREFERRED STOCK:
The holders of the Preferred Stock shall be entitled to receive dividends at the
rate of, but never exceeding Forty Cents (40c) per share per annum, payable
quarterly, on the first days of January, April, July, and October in each year,
such dividends to be paid only out of such surplus or net earnings of the
Corporation as shall be made applicable to the payment of such dividends by the
Board of Directors. Such dividends shall be cumulative from July 1, 1948, and
shall be payable before any dividends shall be paid on, or set apart for, the
Common Stock, so that if in any year dividends amounting to Forty Cents (40c)
per share shall not have been paid on the Preferred Stock, the deficiency shall
be payable before any dividends shall be paid on, or set apart for, the Common
Stock.
In the event of any liquidation, dissolution or winding up of the affairs of the
Corporation, whether voluntary or involuntary, the holders of the Preferred
Stock shall be entitled to be paid in
-5-
<PAGE>
full out of the assets of the Corporation the sum of Ten Dollars ($10) per
share, together with the unpaid dividends accrued thereon, before any amount
shall be paid out of such assets to the holders of the Common Stock, and after
such payment in full to the holders of the Preferred stock, the remaining assets
shall be divided among and paid to the holders of the Common Stock of both
Classes, share and share alike. The consolidation or merger of the Corporation
with or into any other corporation or corporations, in pursuance of the statutes
of Delaware providing for consolidation or merger, shall not be deemed a
liquidation, dissolution or winding up of the affairs of the Corporation within
the meaning of any of the provisions of this Amended Certificate of
Incorporation.
The holders of the Preferred Stock shall have no voting powers in the election
of directors, or on any question, except as otherwise provided by the laws of
Delaware.
CONVERSION OF THE HERETOFORE ISSUED SHARES OF CLASS A COMMON STOCK AND OF CLASS
B COMMON STOCK:
Each of the heretofore issued shares of Class A Common Stock, par value Thirty
Cents (30c) per share, is hereby changed into Two (2) shares of Class A Common
Stock, par value Fifteen Cents (15c) per share, and each of the heretofore
issued shares of Class B Common Stock, par value Thirty Cents (30c) per share,
is hereby changed into Two (2) shares of Class B Common Stock, par value Fifteen
Cents (15c) per share. Each issued stock certificate of the Corporation which
immediately prior to the time this Amendment becomes effective represented one
or more shares of Class A Common Stock, par value Thirty Cents (30c) per share,
shall thereafter represent the same number of shares of Class A Common Stock,
par value Fifteen Cents (15c) per share; and each issued stock certificate of
the Corporation which immediately prior to the time this Amendment becomes
effective represented one or more shares of Class B Common Stock, par value
Thirty Cents (30c) per share, shall thereafter represent the same number of
shares of Class B Common Stock, par value Fifteen Cents (15c) per share. To each
holder of the issued shares of Class A Common Stock of the
-6-
<PAGE>
Corporation of record on its books immediately prior to the time this Amendment
becomes effective, the Corporation shall issue and deliver an additional stock
certificate (or certificates) for a number of shares of its class A Common
Stock, equal in the aggregate, to the number of issued shares of Class A Common
Stock registered in the name of such stockholder at said time; and to each
holder of the issued shares of Class B Common Stock of the Corporation of record
on its books immediately prior to the time this Amendment becomes effective, the
Corporation shall issue and deliver an additional stock certificate (or
certificates) for a number of shares of its Class B Common Stock equal, in the
aggregate, to the number of issued shares of Class B Common Stock registered in
the name of such stockholder at said time.
The remaining authorized but unissued shares of Class A Common Stock and of
Class B Common Stock may be issued and sold from time to time by the Corporation
for such consideration and upon such terms as may from time to time be fixed by
the Board of Directors, without action by the stockholders.
RIGHTS OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK:
Every share of the common stock of both classes, whenever and for whatever
consideration issued, shall be entitled to the same rights as every other share
of common stock in all distributions of earnings or assets of the Corporation
distributable to the holders of the common stock.
Whenever all cumulative dividends on the Preferred Stock for all previous years
shall have been declared and shall have become payable, and the accrued
installments for the current year shall have been declared and the Corporation
shall have paid such cumulative dividends on the Preferred Stock for the
previous years and such accrued installments, or shall have set apart from its
surplus or net profits a sum sufficient for the payment thereof, the Board of
Directors may forthwith, without waiting for the expiration of the current year,
declare dividends on both classes of the common stock, payable then or
thereafter out of any remaining surplus or net profits.
-7-
<PAGE>
Except as herein provided, the holders of the Class A Common Stock shall have
full and exclusive voting powers. The Class B Common Stock shall be in all
respects equal and identical to the Class A Common Stock except that the holders
of the Class B Common Stock shall have no voting powers in the election of
directors, or on any question, except as otherwise provided by the laws of
Delaware.
GENERAL PROVISIONS:
The Corporation, on the sole authority of its Board of Directors, shall have the
right at any time after July 1, 1957, to redeem and retire all or any part of
the shares of the Preferred Stock at such time outstanding upon notice mailed,
at least thirty (30) days before the date of redemption, to the holders of the
shares of Preferred Stock to be so redeemed, at their last known post office
address as shown by the records of the Corporation, by paying Ten Dollars and
Twenty-Five Cents ($10.25) per share of the Preferred Stock to be so redeemed,
and all unpaid accrued dividends due thereon. In case of the redemption of a
part only of the Preferred Stock, the shares to be redeemed shall be selected by
lot or in such other manner as the Board of Directors may determine. If notice
shall be given as aforesaid, and if the Corporation shall have set apart the
funds necessary to effect the redemption of the stock, and any holder of
Preferred Stock shall not present his stock to the Corporation for redemption on
or before the redemption date specified in the notice, thereupon such stock
shall be deemed canceled and retired and shall not thereafter be entitled to
receive any further dividends. The moneys so set apart for the redemption of the
Preferred Stock shall be paid without interest to the proper owners of such
stock upon the surrender to the Corporation of the certificates representing
such stock. None of the Preferred Stock so redeemed shall be reissued, but the
Corporation shall, from time to time and at any convenient time, cause all such
stock to be retired in the manner provided by law and its capital stock to be
reduced accordingly.
-8-
<PAGE>
No holder of any stock of the Corporation as such shall be entitled an of right
to purchase or subscribe for any part of any stock of the Corporation authorized
by this Amended Certificate of Incorporation or of any additional stock of any
class to be issued by reason of any increase of the authorized stock of the
Corporation or of any bonds, certificates of indebtedness, debentures, or other
securities convertible into stock of the Corporation, but any stock authorized
by this Amended Certificate of Incorporation, or any such additional authorized
issue of stock or of securities convertible into stock, may be issued and
disposed of by the Board of Directors to such persons, firms, corporations, or
associations, and upon such terms as the Board of Directors may in its
discretion determine, without offering any thereof on the same terms or on any
terms to the stockholders then of record or to any class of stockholders.
FIFTH: This Corporation is to have perpetual existence.
SIXTH: The private property of the stockholders shall not be subject to the
payment of corporate debts to any extent whatever. Stock of the Corporation
which has been declared by the Board of Directors to be full paid stock in
accordance with the existing laws of the State of Delaware in such case made and
provided shall not be liable to any further assessment or call thereon, nor
shall the holder thereof be liable for any further payment thereon or in respect
thereto, anything herein or in the constitution or law of any other state,
territory or dependency or country now in force or hereafter enacted to the
contrary notwithstanding.
SEVENTH: The number of Directors of the Corporation shall be fixed by the By-
laws and may be altered from time to time as may be provided therein, but shall
never be less than three (3). In case of any increase in the number of
Directors, the additional Directors may be elected by the Directors then in
office or by the Stockholders at any annual or special meeting, as shall be
provided in the By-Laws. It shall not be necessary to be a stockholder in order
to be a Director.
-9-
<PAGE>
EIGHTH: All corporate powers shall be exercised by the Board of Directors except
as otherwise provided by statute or by this Certificate of Incorporation.
In furtherance, and not in limitation of the powers conferred by statute, the
Board of Directors is expressly authorized:
To make, alter and amend the By-Laws of the Corporation;
To set apart out of any funds of the Corporation available for dividends, a
reserve or reserves for any proper purpose and to abolish any such reserve in
the manner in which it was created;
To authorize the payment of compensation to the Directors for services to the
Corporation, including fees for attendance at meetings of the Board of
Directors, and to determine the amounts of such compensation and fees;
The Board of Directors may from time to time create and issue, whether or not in
connection with the issue and sale of any shares of stock or other securities of
the Corporation, rights or options entitling the holders thereof to purchase
from the Corporation any shares of its capital stock, such rights or options to
be evidenced by or in such instrument or instruments as shall be approved by the
Board of Directors. The terms upon which, the time or times, which may be
limited or unlimited in duration, at or within which, and the price or prices at
which any such shares may be purchased from the Corporation upon the exercise of
any such rights or options shall be such as shall be fixed and stated in a
resolution or resolutions adopted by the Board of Directors providing for the
creation and issue of such rights or options, and, in every case, set forth or
incorporated by reference in the instrument or instruments evidencing such
rights or options;
To procure the Corporation to be licensed or recognized in any state, county,
city or other municipality of the United States, the District of Columbia, and
in any foreign country and in any
-10-
<PAGE>
town, city or municipality thereof, to conduct its business and to have one or
more offices therein.
From time to time to determine whether and to what extent, and at what times and
places, and under what conditions and regulations, the accounts and books of the
Corporation (other than the stock ledger), or any of them, shall be open to the
inspection of the Stockholders, and no Stockholder shall have any right to
inspect any account or book or document of this Corporation, except as permitted
by statute or authorized by the Board of Directors, or by a resolution of the
Stockholders;
If the By-Laws so provide, to designate three (3) or more of their number to
constitute an Executive Committee, which Committee shall, for the time being, as
provided in the By-Laws of the Corporation, have and exercise any or all of the
powers of the Board of Directors in the management of the business and affairs
of this Corporation, and have power to authorize the seal of this Corporation to
be affixed to all papers which may require it;
Both Stockholders and Directors shall have power, if the By-Laws so provide, to
hold their meetings, either within or without the State of Delaware, and to have
one or more offices outside the State of Delaware, in addition to the principal
office in Delaware; and the books of the Corporation may (subject to the
provisions of the statute) be kept outside of the State of Delaware, at such
places as may be, from time to time, designated by the Board of Directors;
Pursuant to the affirmative vote of the holders of at least a majority of the
shares of stock issued and outstanding and entitled to vote, given at a
stockholders' meeting duly called for that purpose, or when authorized by the
written consent of the holders of a majority of the shares of stock issued and
outstanding and entitled to vote, the Board of Directors shall have power and
authority at any meeting, to sell, lease or exchange all of the property and
assets of this Corporation, including its good will and its corporate
franchises, upon such terms and conditions
-11-
<PAGE>
as its Board of Directors deems expedient and for the best interests of the
Corporation;
This Corporation may, in its By-Laws, confer powers, additional to the
foregoing, upon the Directors, in addition to the powers and authorities
expressly conferred upon them by statute.
NINTH: A Director of this Corporation shall not be disqualified by his office
from dealing or contracting with this Corporation either as vendor, purchaser,
or otherwise nor shall any transaction or contract of this Corporation be void
or voidable by reason of the fact that any director or any firm of which any
director is a member or any corporation of which any director is a shareholder,
officer or director, is in any way interested in such transaction or contract,
provided that such transaction or contract is or shall be authorized, ratified
or approved, either (1) by a vote of a majority of a quorum of the Board of
Directors without counting in such majority or quorum any director so interested
or member of a firm so interested or a shareholder, officer or director of a
corporation so interested, or (2) by the written consent or by vote at a
stockholders' meeting of the stockholders of record of a majority in number of
all the outstanding shares of capital stock of this Corporation entitled to
vote; nor shall any director be liable to account to this Corporation for any
profits realized by and from or through any such transaction, or contract of
this Corporation authorized, ratified or approved as aforesaid by reason of the
fact that he or any firm of which he is a member or any corporation of which he
is a shareholder, officer or director was interested in such transaction or
contract. Nothing herein contained shall create any liability in the events
above described or the authorization, ratification or approval of such contracts
in any other manner provided by law.
TENTH: Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them and/or between this Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of
-12-
<PAGE>
Delaware may, on the application in a summary way of this Corporation or of any
creditor or stockholder thereof, or on the application of any receiver or
receivers appointed for this Corporation under the provisions of Section 3883 of
the Revised Code of 1915 of said State, or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation under
the provisions of Section 43 of the General Corporation Law of the State of
Delaware, order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
this Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the Court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this Corporation, as the case may be, and also on this
Corporation.
ELEVENTH: Subject in all respects to the provisions and restrictions hereof
relating to the Preferred Stock, the Corporation reserves the right to amend,
alter, change, or repeal any provisions contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred on Stockholders herein are granted, subject to this
reservation.
II. The Capital of the Corporation will not be reduced under or by reason of
this Restated Certificate.
III. In accordance with Section 245(b) of the General Corporation Law of the
State of Delaware, the Restated Certificate of Incorporation of Brown-
Forman Inc. was duly approved by the Board of Directors of the Corporation
at a meeting duly held on January 29, 1987.
-13-
<PAGE>
IV. The Restated Certificate of Incorporation of Brown-Forman Inc. set forth
above only restates and integrates and does not further amend the
Certificate of Incorporation of Brown-Forman Inc. as heretofore amended,
and there is no discrepancy between those provisions and the provisions of
the restated certificate.
IN WITNESS WHEREOF, this Certificate is made under the seal of said Brown-Forman
Inc. and signed by W.L. Lyons Brown, Jr., its Chairman of the Board and Chief
Executive Officer, and by John S. Moremen, its Secretary, this 29th day of
January, 1987.
/s/ W.L. Lyons Brown, Jr.
W.L. Lyons Brown, Jr.
Chairman of the Board and
Chief Executive Officer
/s/ John S. Moremen
John S. Moremen
Secretary
Attest:
/s/ John S. Moremen
John S. Moremen
Secretary
-14-
<PAGE>
State of Kentucky )
) ss:
County of Jefferson )
BE IT REMEMBERED that on this 29th day of January, 1987, personally came before
me, a Notary Public in and for the State and County aforesaid, W.L. Lyons Brown,
Jr., Chairman of the Board and Chief Executive Officer of Brown-Forman Inc., a
corporation of the State of Delaware, the corporation described in, and the seal
of which is affixed to, the foregoing Restated Certificate of Incorporation
known to me personally to be such, and he, the said W.L. Lyons Brown, Jr., as
such Chairman of the Board and Chief Executive Officer, duly executed said
certificate before me and acknowledged said Restated Certificate of
Incorporation to be his act and deed and the act and deed of such Corporation;
that the signatures of the said Chairman of the Board and Chief Executive
Officer, and of John S. Moremen, Secretary of said Corporation, to said
foregoing certificate are in the handwriting of said Chairman of the Board and
Chief Executive Officer and Secretary of said Corporation, respectively, and the
seal affixed to said Restated Certificate of Incorporation is the seal of said
Corporation.
IN WITNESS WHEREOF, I have hereto set my hand and seal of office the day and
year aforesaid.
/s/ Wanda L. Welch
Notary Public, Jefferson County, Kentucky
My Commission Expires: June 22, 1988
This instrument prepared by:
/s/ James S. Welch
James S. Welch
Ogden & Robertson
1200 One Riverfront Plaza
Louisville, Kentucky 40202
(502)582-1601
-15-
<PAGE>
Exhibit 3(b)
CERTIFICATE OF AMENDMENT TO
RESTATED CERTIFICATE OF INCORPORATION OF
BROWN-FORMAN INC.
We, the undersigned, being chairman of the Board and Chief Executive
officer and Secretary, respectively, of Brown-Forman Inc. (hereinafter called
the "Corporation"), a corporation organized and existing under and by virtue of
the provisions of the Delaware Code, do hereby certify under the seal of the
corporation as follows:
FIRST: That at a meeting of the Board of Directors of the Corporation
duly called and held on May 22, 1987, at which meeting a quorum of the directors
was present and acting throughout, a resolution was duly adopted by said Board
of Directors (1) setting forth, and declaring the advisability of, a proposed
amendment to the Restated Certificate of Incorporation, amending said Restated
Certificate of Incorporation, by adding an additional paragraph to Article Ninth
thereof; and (2) directing that the proposed amendment be submitted to the
stockholders for approval at the annual meeting of stockholders of Class A
Common Stock of the Corporation to be held on July 23, 1987. The said new
paragraph to Article Ninth, proposed and set forth in the aforesaid resolution,
is in words and figures as follows:
"A director shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a
director, except that he may be liable (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived
an improper personal benefit."
SECOND: That thereafter, pursuant to the aforesaid resolution of said
Board of Directors, said amendment was presented to the stockholders of the
Corporation, entitled to vote thereon, for their consideration at the annual
meeting of stockholders of Class A Common Stock of the Corporation duly called
and held at 850 Dixie Highway, Louisville, Kentucky, on July 23, 1967, at 10:00
a.m., EDT, notice of which meeting was duly mailed to each holder of Class A
Common Stock of the Corporation, said notice setting forth the changes to be
effected by said proposed amendment; that at said meeting there were present in
person or represented by proxy persons or bodies corporate holding or entitled
to vote 10,428,475.036 outstanding shares of Class A Common Stock of the
corporation; that at said meeting a vote of the
<PAGE>
stockholders so entitled to vote, by ballot, in person or by proxy, was taken
for and against said amendment, which vote was conducted by three inspectors
appointed for the purpose by said meeting; that at said meeting said inspectors
decided upon the qualifications of the voters, took and accepted their vote,
and, when the vote was completed, counted and ascertained the number of shares
of each class voted respectively for and against the amendment and declared that
persons or bodies corporate holding or entitled to vote 10,349,961.363 shares of
Class A Common Stock of the Corporation, being more than a majority of the
10,428,475.036 outstanding shares of Class A Common Stock of the Corporation,
had voted for said amendment and that 68,474.405 shares of Class A Common Stock
were voted against said amendment; that said Inspectors made a certificate
accordingly stating the number of shares of stock, issued and outstanding and
entitled to vote on said amendment, and the number of shares voted for, and the
number of shares voted against, the amendment respectively and subscribed and
delivered said certificate to the Secretary of the Corporation; and that said
amendment was duly adopted in accordance with the provisions of Section 242 of
the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, this Certificate is made under the seal of said
Brown-Forman Inc. and signed by W. L. Lyons Brown, Jr., its Chairman of the
Board and Chief Executive officer, and by John S. Moremen, its Secretary, this
23rd day of July, 1987.
/s/ W. L. Lyons Brown, Jr.
---------------------------
W. L. Lyons Brown, Jr.,
Chairman of the Board and
Chief Executive Officer
/s/ John S. Moremen
---------------------------
John S. Moremen,
Secretary
Attest:
/s/ John S. Moremen
- - -------------------
John S. Moremen,
Secretary
-2-
<PAGE>
COMMONWEALTH OF KENTUCKY )
) SS
COUNTY OF JEFFERSON )
Be it remembered that on this 23rd day of July, 1987, personally came
before me, a Notary Public in and for the Commonwealth and county aforesaid, W.
L. Lyons Brown, Jr., Chairman of the Board and Chief Executive Officer of Brown-
Forman Inc., a corporation of the State of Delaware, the Corporation described
in, and the seal of which is affixed to, the foregoing Certificate, known to me
personally to be such, and he, the said W. L. Lyons Brown, Jr., as such Chairman
of the Board and Chief Executive Officer, duly executed said Certificate before
me and acknowledged said certificate to be his act and deed and the act and dead
of such Corporation; that the facts stated therein are true; and that the
signatures of the said Chairman of the Board and Chief Executive Officer and of
John S. Moremen, Secretary of said Corporation, to said foregoing Certificate
are in the handwriting of the said Chairman of the Board and Chief Executive
Officer and Secretary of said Corporation, respectively, and the seal affixed to
said Certificate is the seal of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal of office the
day and year aforesaid.
My commission expires: June 22, 1988.
Wanda L. Welch
------------------------------
Notary Public
This instrument prepared by:
/s/ James S. Welch
- - ------------------
James S. Welch
OGDEN & ROBERTSON
200 One Riverfront Plaza
Louisville, KY 40202
(502) 582-1601
-3-
<PAGE>
Exhibit 3(c)
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
BROWN-FORMAN CORPORATION
INTO
BROWN-FORMAN INC.
Brown-Forman Inc., a corporation organized and existing under the laws of
Delaware,
DOES HEREBY CERTIFY:
FIRST: That this corporation was incorporated on the 19th day of October,
1933, pursuant to the General Corporation Law of the State of Delaware.
SECOND: That this corporation owns all the outstanding shares of the
stock of Brown-Forman Corporation, a corporation incorporated on the 25th day of
August, 1956, pursuant to the laws of the State of Tennessee.
THIRD: That this corporation, by the following resolutions of its Board
of Directors, duly adopted at a meeting held on the 22nd of May, 1987,
determined to merge into itself said Brown- Forman Corporation:
RESOLVED; WHEREAS, This corporation owns all the issued and outstanding
shares of Brown-Forman Corporation, a Tennessee corporation, and
WHEREAS, The Board of Directors deems it in the best interests of this
corporation to merge into itself Brown-Forman Corporation;
IT IS HEREBY RESOLVED, That Brown-Forman Inc. merge with its subsidiary,
Brown-Forman Corporation, and assume all of said subsidiary's liabilities
and obligations, effective as of July 21, 1987 (the "Effective Date"); and
<PAGE>
FURTHER RESOLVED, That, as part of such merger, Brown-Forman Inc. shall
be the surviving corporation; and
FURTHER RESOLVED, Brown-Forman Inc. shall change its name to Brown-Forman
Corporation as of the Effective Date; and
FURTHER RESOLVED, That the officers of Brown- Forman Inc. be and hereby
are directed to execute, file and record all documents including a
Certificate of Ownership and Merger and take all other actions necessary to
effect the foregoing resolutions so that they shall be effective on the
Effective Date.
IN WITNESS WHEREOF, said Brown-Forman Inc. has caused this certificate to
be signed by W. L. Lyons Brown, Jr., its Chairman of the Board of Directors, and
attested by John S. Moremen, its Secretary, this 23d day of July, 1987.
BROWN-FORMAN INC.
By /s/ W.L. Lyons Brown, Jr.
-------------------------------
Chairman of the Board
of Directors
ATTEST:
By: /s/ John S. Moremen
---------------------------
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT TO
RESTATED AND AMENDED
CERTIFICATE OF INCORPORATION
OF
BROWN-FORMAN CORPORATION
The undersigned (i) President and Chief Executive Officer, and (ii)
Secretary, respectively, of Brown-Forman Corporation (the "Corporation") hereby
certify that the amendment to the Corporation's Restated and Amended Certificate
of Incorporation set forth below has been duly adopted in accordance with the
provisions of Section 242(b) of the Delaware General Corporation Law:
The first paragraph of Article Fourth of the Corporation's Restated and
Amended Certificate of Incorporation is amended in its entirety to read as
follows:
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is Ninety-One Million, One
Hundred Seventy-Seven Thousand, Nine Hundred Forty-Eight (91,177,948)
shares, divided into (a) One Million, One Hundred Seventy-Seven Thousand,
Nine Hundred Forty-Eight (1,177,948) shares of Preferred Stock of the par
value of Ten Dollars ($10) each; (b) Thirty Million (30,000,000) shares of
Class A Common Stock of the par value of Fifteen Cents (15c) each; and (c)
Sixty Million (60,000,000) shares of Class B Common Stock of the par value
of Fifteen Cents (15c) each.
The amendment set forth above was adopted by the Corporation's Board of
Directors at a regular meeting thereof on March 31, 1994 as provided in the
Delaware General Corporation Law.
<PAGE>
The amendment set forth above was adopted as of May 18, 1994 by written
consent of the holders of a majority of stock entitled to vote thereon as
provided in the Delaware General Corporation Law.
Dated: May 19, 1994
By: /s/ Oswley Brown II
------------------------
Owsley Brown II
President and Chief Executive Officer
By: /s/ Michael B. Crutcher
-------------------------
Michael B. Crutcher
Secretary
COMMONWEALTH OF KENTUCKY )
) SS.
COUNTY OF JEFFERSON )
I, Notary Public in and for the Commonwealth and County aforesaid, do
hereby certify that on this day there personally appeared before me, Owsley
Brown II and Michael B. Crutcher, who, being by me first duly sworn, declared
that they are (i) President and Chief Executive Officer, and (ii) Secretary,
respectively, of Brown-Forman Corporation, that they signed the foregoing
document in their capacities as such and that the statements contained therein
are true and correct.
IN TESTIMONY WHEREOF, witness my signature and
notarial seal this 19th day of May, 1994.
(SEAL) /s/ Bonita B. Cress
-----------------------------
Notary Public
My Commission Expires: 8/31/96
2
<PAGE>
Exhibit 10(a)
BROWN-FORMAN CORPORATION
MANAGEMENT INCENTIVE COMPENSATION PLAN
Revisions effective: May 1, 1993
DEFINITIONS
Board: the Company's Board of Directors.
Company: Brown-Forman Corporation, a Delaware corporation.
Fiscal Year: the Company's operating year which begins May 1 and ends on April
30.
Participant: a participant in the Plan. See Section III for eligibility.
Plan: the Company's Management Incentive Compensation Plan.
Plan Administrator: the administrator of the Plan, as defined in Section II.
Step: a move of one salary grade in the same bonus group or a move of one bonus
group in the same salary grade.
Subsidiary: a corporation, a majority of the outstanding shares of voting stock
of which the Company owns, directly or indirectly.
I. OBJECTIVES
The objectives of the Company's Management Incentive Compensation Plan are:
A. To optimize the profitability and growth of the Company through
incentives, consistent with the other goals of the organization;
B. To promote teamwork among members of management staffs, as well as to
encourage excellence in the performance of individual responsibilities;
C. To provide significant incentive opportunity for those members of
management who make significant contributions to the Company's success;
D. To allow participants in the Plan to share in the success of the
Company.
II. PLAN ADMINISTRATOR
The Management Incentive Compensation Plan will be administered by the
Compensation Committee of the Board for Participants in Group I, as defined
in Section V, and by the Management Salary Committee for all other
Participants. The Plan Administrator shall have the authority to construe,
interpret, and administer the Plan subject to the limitations set forth
herein. The Plan Administrator may designate officers of the Company or a
Subsidiary to implement administration.
<PAGE>
III. ELIGIBILITY
A. Key Members of Management
Participation in this Plan shall include those officers and employees of
the Company or a Subsidiary who because of their position and
responsibilities comprise, in the opinion of the Plan Administrator as
discussed in Section II above, key members of management of the Company.
B. Directors
Directors of the Company who are also employees of the Company or a
Subsidiary shall be eligible to participate. Members of the Board who
are not also employees of the Company or a Subsidiary shall, however, be
ineligible for awards under this Plan.
C. A person who is compensated on the basis of a fee or retainer, as
distinguished from salary, shall not be eligible, nor shall any employee
or officer who is a current participant in any other Company or
individual incentive program.
IV. EFFECTIVE DATE
This Plan shall be effective starting with the fiscal year beginning May 1,
1980, and shall remain in effect until terminated by the Board.
V. INCENTIVE AWARD POTENTIALS
A. Bonus Groups
Participants shall be classified into one of four incentive groups
designated by Roman numerals I through IV, and into one of two incentive
subgroups designated by the letters A through B. The incentive groups
are defined by their level of decision-making:
Group I: Top decision makers
Group II: Other key senior management decision makers
Group III: Other key executives and managers
Group IV: All other Participants
These incentive group designations, used in conjunction with the
subgroups A through B, comprise bonus groups specifying levels of
targeted incentive award ("Target Award"). The Target Award for a
Participant in a fiscal year shall be determined by multiplying the
midpoint of the Participant's salary grade for the fiscal year by the
percentage applicable to the Participant's bonus group, as set forth in
Exhibit A. Exhibit A also defines the level of maximum incentive award
per Participant.
B. Prorations
The Plan Administrator may add a Participant to the Plan, or change the
award potentials of a Participant, due to a Participant's hiring,
transfer, promotion or demotion during the fiscal year. A Participant
who is hired or has a change of grade during the fiscal year will
receive a prorated award potential for time spent in each grade. A
newly hired Participant's length of service, for proration purposes,
will be calculated based on the date of employment rounded to the
nearest one-half month. A demoted
<PAGE>
Participant, or a Participant promoted one or more steps, will have his
or her award potential prorated based on the date of demotion or
promotion rounded to the nearest one-half month.
Should a change in grade produce a change of more than two steps, the
bonus potential will also be prorated at 50% of the new potential and
50% of the old potential for a period of one year from the date of the
change. This is in addition to any applicable proration for part-year
coverage by one or both bonus potentials.
A Participant who works during a fiscal year in more than one group or
Subsidiary with different plan goals and payment determination will
receive a prorated award potential for time spent in each group or
Subsidiary.
C. Neither Plan eligibility, participation in this Plan, the granting of
any incentive award potential, nor the receipt of any incentive payment
shall give any employee any right to a subsequent award or payment, or
to continued employment by the Company or a Subsidiary for any period
of time. The Company specifically reserves the right and authority to
dismiss or discharge any employee.
VI. PERFORMANCE GOALS AND DETERMINATION OF PAYMENT
Because the Plan includes Participants from multiple groups and divisions
of the Company, performance goals and determination of payment will vary
across organizational units and/or bonus groups. Those exhibits following
Exhibit A comprise group-by-group summaries of performance goals and
payment determinations.
Incentive payments granted to a Participant for a fiscal year shall be paid
in cash within 90 days after the close of that fiscal year. However, no
employee or officer has any vested interest or right to any award unless
and until such award is actually paid.
VII. TERMINATION
If a Participant terminates from the employ of the Company before the end
of the fiscal year, such Participant may, at the discretion of the Plan
Administrator, be eligible to receive a pro rata award based upon the
Participant's Target Award, the level of achievement in relation to
targeted goals, and the amount of time worked. The Plan Administrator will
determine the payment date for a pro rata award.
VIII. LEAVE OF ABSENCE OR DISABILITY
A Participant who becomes disabled or who is granted a leave of absence
during a fiscal year may, at the discretion of the Plan Administrator, be
eligible to receive a pro rata award based upon the Participant's Target
Award, the level of achievement in relation to targeted goals, and the
amount of time worked. The Plan Administrator will determine the payment
date for a pro rata award.
<PAGE>
IX. DEATH
If a Participant dies before the end of the fiscal year, his or her estate
may, at the discretion of the Plan Administrator, be eligible to receive a
pro rata award based upon the Participant's Target Award, the level of
achievement in relation to targeted goals, and the amount of time worked.
The Participant's estate will be paid the full value of the award if the
entire fiscal year was completed but death occurred prior to payment. The
Plan Administrator will determine the payment date for a pro rata bonus
award.
X. NORMAL OR EARLY RETIREMENT
A Participant who retires before a fiscal year end may, at the discretion
of the Plan Administrator, be eligible to receive a pro rata award based
upon the Participant's Target Award, the level of achievement in relation
to targeted goals, and the amount of time worked. The Plan Administrator
will determine the payment date for a pro rata award.
XI. WITHHOLDING OF TAXES
The Plan Administrator may make such provisions and take such steps as it
may deem necessary or appropriate for the withholding of any taxes which
the Company is required by any law or regulation of any governmental
authority, whether Federal, state, or local, domestic or foreign, to
withhold in connection with any incentive payment under the provisions of
this Plan; including, but not limited to, the withholding of payment of all
or any portion of such award until the Participant reimburses the Company
for the amount the Company is required to withhold with respect to such
taxes, or cancelling any portion of such award in an amount sufficient to
reimburse itself for the amount it is required to so withhold, or selling
any property contingently credited by the Company for the purpose of paying
such award, in order to withhold or reimburse itself for the amount it is
required to so withhold.
XII. AMENDMENTS
The Board reserves the right to modify or terminate this Plan, with or
without notice, in whole or in part, at any time.
<PAGE>
EXHIBIT A:
POTENTIAL INCENTIVE AWARD LEVELS
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------
AWARDS AS % OF SALARY GRADE MIDPOINT
------------------------------------------------
BONUS GROUP THRESHOLD TARGET MAXIMUM
- - ------------------------------------------------------------------
<S> <C> <C> <C>
I As approved annually by the Plan Administrator
- - ------------------------------------------------------------------
II-A 11.2% 37.3%
- - --------------------------------------------------
II-B 9.4% 31.3%
- - --------------------------------------------------
III-A 9.2% 30.7%
- - -------------------------------------------------- See Note 2
III-B 7.5% 24.7%
- - --------------------------------------------------
IV-A 4.6% 15.2%
- - --------------------------------------------------
IV-B 2.3% 7.6%
- - ------------------------------------------------------------------
</TABLE>
Notes:
1. Market pay levels may dictate that awards be made at less than these
target amounts, but greater amounts will not be granted.
2. There is no set maximum on an individual's incentive award. Instead,
each business unit has an aggregate maximum incentive award equal to
170% of the sum of the target incentives for which all participants in
that business unit are eligible, as shown.
<PAGE>
EXHIBIT B:
FISCAL 1994 PERFORMANCE GOALS AND PAYMENT DETERMINATION FOR
BFBC PARTICIPANTS
1. The Management Salary Committee of the Company will annually set a
threshold level and a maximum level of Brown-Forman Beverage Company income
for calculation of the bonus pool available for award to BFBC Participants.
2. The size of the bonus pool available for award to BFBC Participants will
vary with the level of BFBC capital employed during the fiscal year, and
with the level of BFBC income achieved for such year in excess of the
threshold level, but will in no case exceed the total of awards at maximum
as provided in Exhibit A.
3. Ninety-three percent (93%) of the bonus pool will be awarded to BFBC
Participants based upon each BFBC Participant's Target Award as a
percentage of the total of all BFBC Participants' Target Awards.
4. Two percent (2%) of the bonus pool will be distributed by the Chairman and
the President of BFBC to BFBC Participants whose fiscal year performance
has been extraordinary, upon recommendation of a Group Executive.
5. Five percent (5%) of the bonus pool will be distributed by Group Executives
to BFBC Participants on a discretionary basis, based upon the Group
Executive's evaluation of the BFBC Participant's fiscal year performance.
6. A Group Executive may withhold all or any portion of a BFBC Participant's
award if the BFBC Participant's fiscal year performance has been
significantly below job standards, as defined in the BFBC Participant's
position description. Any amount so withheld must be distributed by the
Group Executive to other BFBC Participants on a discretionary basis, based
upon the Group Executive's evaluation of those BFBC Participants' fiscal
year performance.
<PAGE>
EXHIBIT C:
FISCAL 1994 PERFORMANCE GOALS AND PAYMENT DETERMINATION FOR
PARTICIPANTS IN GROUP I
1. As soon as is practical for each fiscal year, the Board of Directors, in
its absolute discretion, shall establish Earnings Per Share goals for the
said fiscal year, which shall reflect what the Board of Directors deems to
be, in light of all existing and foreseen circumstances, appropriate
Earnings Per Share goals.
2. The term "Earnings Per Share" as used herein shall mean the audited
Earnings Per Share as presented in the Company's Annual Report adjusted for
the after-tax effect of incentive payments. Adjustments due to changes in
the accounting principles during the fiscal year, the impact of
acquisitions during the fiscal year, and extraordinary or unusual items may
be made at the discretion of the Plan Administrator.
3. Incentive compensation funds for Group I Participants will be generated by
actual performance based upon Earnings Per Share of the Company as approved
by the Board of Directors. Incentive payments will be earned pursuant to a
schedule set for each fiscal year by the Plan Administrator.
4. Upon the attainment of minimal goals as approved by the Board of Directors,
a Group I Participant will accrue 100% of the appropriate incentive
compensation amount computed as soon as practical after the certification
of results by the Company's independent auditors.
<PAGE>
EXHIBIT D:
FISCAL 1994 PERFORMANCE GOALS AND PAYMENT DETERMINATION FOR
NON-BFBC PARTICIPANTS IN GROUP II
1. Incentive compensation funds for non-BFBC Participants in Group II will be
generated by actual performance against the corporate and/or divisional
operating plans for which the Participant primarily works. Incentive
payments will be earned pursuant to a schedule set for each fiscal year by
the Plan Administrator (Exhibit A). The schedule will be based on an
annual plan and will be established as soon as practical for each fiscal
year.
2. Upon attainment of minimal goals as approved by the Executive Committee, a
non-BFBC Participant in Group II will automatically accrue 100% of the
appropriate incentive compensation amount computed in accordance with
corporate and/or divisional performance results.
<PAGE>
EXHIBIT E:
FISCAL 1994 PERFORMANCE GOALS AND PAYMENT DETERMINATION FOR
NON-BFBC PARTICIPANTS IN GROUP III
1. Incentive compensation funds for non-BFBC Participants in Group III will be
generated by actual performance against the corporate and/or divisional
operating plans for which the Participant primarily works. Incentive
payments will be earned pursuant to a schedule set for each fiscal year by
the Plan Administrator (Exhibit A). The schedule will be based on an
annual plan and will be established as soon as practical for each fiscal
year.
2. Upon attainment of minimal goals as approved by the Executive Committee, a
non-BFBC Participant in Group III-A will automatically accrue 100% of the
appropriate incentive compensation amount computed in accordance with
corporate and/or divisional performance results, and 50% against these
targets if a non-BFBC Participant is in Group III-B.
3. The remaining 50% of the accrued incentive compensation amount for non-BFBC
Participants in Group III-B will be distributed in whole or in part on a
discretionary basis. The discretionary awards will be based on the
manager's evaluation of individual performance, upon approval by the Group
Executive.
<PAGE>
EXHIBIT F:
FISCAL 1994 PERFORMANCE GOALS AND PAYMENT DETERMINATION FOR
NON-BFBC PARTICIPANTS IN GROUP IV
1. Incentive compensation funds for non-BFBC Participants in Group IV will be
generated by actual performance against the corporate and/or divisional
operating plans for which the Participant primarily works. Incentive
payments will be earned pursuant to a schedule set for each fiscal year by
the Plan Administrator (Exhibit A). The schedule will be based on an
annual plan and will be established as soon as practical for each fiscal
year.
2. Upon attainment of minimal goals as approved by the Executive Committee, a
non-BFBC Participant in Group IV will automatically accrue 50% of the
appropriate incentive compensation amount computed in accordance with
corporate and/or divisional performance results.
3. The remaining 50% of the accrued incentive compensation amount for non-BFBC
Participants in Group IV will be distributed in whole or in part on a
discretionary basis. The discretionary awards will be based on the
manager's evaluation of individual performance, upon approval by the Group
Executive.
<PAGE>
Exhibit 10(b)
BROWN-FORMAN CORPORATION
RESTRICTED STOCK PLAN
DEFINITIONS
BOARD: the Company's Board of Directors.
COMPANY: Brown-Forman Corporation, a Delaware corporation.
EARNINGS PER SHARE: the Company's audited earnings per share as presented in
the Company's Annual Report, as adjusted for the after-tax effect of incentive
awards under incentive plans maintained by the Company. The Plan Administrator
may adjust Earnings Per Share for the purposes of this Plan to account for
changes in the accounting principles during the Fiscal Year, the impact of
acquisitions during the Fiscal Year, and extraordinary or unusual items.
ESCROW AGENT: National City Trust (formerly First Kentucky Trust Company).
FISCAL YEAR: a year beginning May 1 and ending April 30.
PARTICIPANTS: participants in the Plan. (See Section 3 for eligibility.)
PLAN: the Brown-Forman Corporation Restricted Stock Plan.
PLAN ADMINISTRATOR: the Compensation Committee of the Board.
RESTRICTED STOCK: Class A Common Stock and/or Class B Common Stock of the
Company, restricted as set forth below, which is purchased and held by the
Escrow Agent in the name of the Plan's Participants.
SALARY: the straight-time annualized amount (before deferrals) paid to a
Participant for work performed, excluding seasonal supplement, bonus, long-term
incentive, and expense reimbursement payments of all kinds.
SALARY GRADE MIDPOINT: the middle value of the range of salary levels typically
permitted for a given grade or rank assigned to a Participant.
STEP: a move of one salary grade in the same bonus group or a move of one bonus
group in the same salary grade.
SUBSIDIARY: a corporation, a majority of the outstanding shares of voting stock
of which the Company owns, directly or indirectly.
WINDOW PERIOD: a period beginning on the third business day following the
public release of the Company's quarterly or annual sales and earnings
information, and ending on the twelfth business day following such public
release.
1. OBJECTIVES: The Plan's objectives are to:
(a) optimize the Company's profitability and growth through long-term stock
incentives, consistent with the Company's other goals;
(b) encourage teamwork among members of management staffs and excellence in
the performance of individual responsibilities;
(c) provide significant rewards for those members of management who make
significant contributions to the Company's success; and
(d) allow Participants to share in the Company's long-term success.
2. PLAN ADMINISTRATOR: The Plan Administrator shall construe, interpret, and
administer the Plan subject to the limitations set forth below.
<PAGE>
3. ELIGIBILITY:
(a) Participation in this Plan is limited to those employees of the Company
and its Subsidiaries who, because of their position and responsibilities,
constitute (in the opinion of the Plan Administrator) key members of the
Company's management.
(b) Members of the Board who are also employees of the Company or a
Subsidiary may participate in the Plan; other Board members may not.
(c) A person compensated on a fee or retainer basis, as distinguished from
salary, may not participate in the Plan.
4. EFFECTIVE DATE: This Plan shall be effective starting with Fiscal Year 1989,
and shall remain in effect until the Board terminates it.
5. PARTICIPATION:
(a) (1) Five groups are eligible to participate in the Plan:
Group I-A: Chief Executive Officer
Group I-B: Other top decision makers
Groups II-A and II-B: Other key senior management decision makers
Group III-A: Other key executives and managers
(2) During a Fiscal Year, the Plan Administrator may add a Participant
to a group or change a Participant's eligibility in the Plan due to a
Participant's hiring or promotion. Changes in eligibility due to a
promotion of three or more steps for a twelve month period will be based
on 50% of the old bonus award eligibility plus 50% of the new bonus
award eligibility. A newly hired Participant's length of service, for
proration purposes, will be calculated based on the Participant's date
of employment (rounded to the nearest one-half month). Awards to
promoted Participants will be prorated based on the date of promotion
(rounded to the nearest one-half month).
(b) Awards will be determined for Participants within each group as follows:
(1) Groups I-A and I-B - Top Decision Makers: For each Fiscal Year, the
Plan Administrator will establish Earnings Per Share goals (threshold,
plan, and maximum) upon which the awards for Group I-A and I-B
Participants will be based. Awards will be calculated as a percentage
of each Participant's Salary as of the first day of the Fiscal Year for
which the award is being made.
(2) Groups II-A and II-B - Other Key Senior Management Decision Makers:
For each Fiscal Year, the Plan Administrator will establish Earnings Per
Share goals and/or divisional operating goals (threshold, plan, and
maximum) for which the Participant works, and upon which the awards for
Group II-A and II-B Participants will be based. Awards will be
calculated as a percentage of each Participant's Salary Grade Midpoint
as of the first day of the Fiscal Year for which the award is being
made.
(3) Group III-A - Other Key Executives and Managers: For each Fiscal
Year, the Plan Administrator will establish the divisional or corporate
operating goals (threshold, plan, and maximum) for which the Participant
works and upon which the awards for Group III-A Participants will be
based. Awards will be calculated as a percentage of each Participant's
Salary Grade Midpoint as of the first day of the Fiscal Year for which
the award is being made.
6. OTHER TERMS AND CONDITIONS OF INCENTIVE AWARDS: Receiving an award under
this Plan shall not give a Participant any right to a later award or to
continued employment by the Company or a Subsidiary for any period of time,
nor shall granting an award give the Company or a Subsidiary any right to a
Participant's continued services for any period of time.
-2-
<PAGE>
7. GRANT OF AWARDS:
(a) Timing: As soon as practical after the certification of financial
results by the Company's independent auditors (and subject to adjustment
by the Plan Administrator), awards as determined under Section 5 shall be
payable in shares of Restricted Stock to be held in escrow for the
Participant by the Escrow Agent until such time as restrictions lapse.
(b) Calculation of Awards; Adjustments:
(1) The number of shares of Restricted Stock awarded to a Participant for
a Fiscal Year shall be determined by dividing the dollar value of the
award for such Fiscal Year, as determined under Subsection 5(b) above,
by the weighted average of the closing price of the Company's Class A
Common Stock and/or Class B Common Stock for the last five trading
days of the previous Fiscal Year, rounded up to the next whole share.
(2) The total number of shares of Restricted Stock which the Plan
Administrator may award to all Participants during a Fiscal Year shall
be limited to 1% of the number of shares of Class A and Class B Common
Stock outstanding on the date that the Plan Administrator determines
awards.
(3) The Plan Administrator may, subject to Paragraph 7(b)(2), in its sole
discretion, adjust awards of Restricted Stock to account for: stock
dividends or stock splits; a recapitalization, reorganization, merger,
consolidation, or other change in capitalization; the Company's sale
of all or a significant part of its assets; any distribution to
stockholders other than a cash dividend; securities of the Company or
another entity's being exchanged for or received in lieu of the
Company's Class A or Class B Common Stock; or new, different, or
additional shares or other securities of the Company or of any other
corporation's being received by the holders of outstanding shares of
the Company's Class A Common Stock or Class B Common Stock. Any such
adjustment by the Plan Administrator, and any determination by the
Plan Administrator that an adjustment is not appropriate, shall be
effective and binding for all purposes of this Plan and of all shares
of Restricted Stock then outstanding.
8. RESTRICTIONS:
(a) Except as provided below, a Participant may not sell, exchange, transfer,
pledge, hypothecate, or otherwise dispose of shares of Restricted Stock.
(b) The restrictions set forth in Subsection 8(a) on the shares of Restricted
Stock constituting a Fiscal Year's award shall lapse as to one-third of
such shares at the end of each of the second, third, and fourth Fiscal
Years succeeding the Fiscal Year for which the award is granted.
(c) Participants will receive dividends on Restricted Stock as declared and
paid by the Company, commencing with the receipt of Restricted Stock.
(d) If the Company decides to undergo a consolidation or merger, or to sell,
lease, or convey all or substantially all the assets of the Company, the
restrictions on Restricted Stock may be waived at the discretion of the
Plan Administrator.
(e) If a Participant sells any shares of stock of the Company which were
acquired under this Plan within 60 days after the date when the
restrictions on such shares lapse, the Company will bear the
Participant's cost of selling such shares.
(f) If a Participant leaves the employ of the Company because of death,
permanent disability, retirement, or early retirement under the Company's
Salaried Employee Retirement Plan, or at the request of the Company
(other than for "cause"), the Participant will receive shares of
Restricted Stock as specified in Sections 9, 10, 11, or 12 of this Plan.
-3-
<PAGE>
(g) Each certificate evidencing shares of Restricted Stock shall bear an
appropriate legend referring to the restrictions applicable to such
shares.
9. RESIGNATION OR TERMINATION: If a Participant voluntarily leaves the employ
of the Company or is terminated for cause (for example, acts of dishonesty or
gross misconduct), the Participant shall forfeit any and all interest in the
Plan and any Restricted Stock. Exceptions may be granted at the discretion
of the Plan Administrator. Participants terminated by the Company for any
other reasons will receive all Restricted Stock free from restrictions and
will be granted a pro-rata award for the Fiscal Year in which they were
terminated. These awards will be free of restrictions at a time determined
by the Plan Administrator but in no event later than described in Subsection
8(b) above.
10. DISABILITY: A Participant eligible for an award of Restricted Stock who
becomes totally and permanently disabled during a Fiscal Year may, at the
discretion of the Plan Administrator, be granted a pro-rata Restricted Stock
award based on salary grade midpoint, level of achievement in relation to
targets, and amount of time worked. This award and any Restricted Stock
previously granted shall be released from all restrictions as soon as
possible after the determination of total and permanent disability.
11. DEATH: A Participant who was eligible for an award of Restricted Stock and
dies during the Fiscal Year may, at the discretion of the Plan
Administrator, have granted to his or her estate a pro-rata Restricted Stock
award based on salary grade midpoint, level of achievement in relation to
targets, and amount of time worked. This award and any Restricted Stock
previously granted shall be released from all restrictions as soon as
possible after the date of death.
12. NORMAL OR EARLY RETIREMENT: A Participant who is eligible for an award of
Restricted Stock and retires during a Fiscal Year may, at the discretion of
the Plan Administrator, be awarded a pro-rata Restricted Stock award based
on salary grade midpoint, level of achievement in relation to targets, and
the amount of time worked. Participants who retire at the end of the Fiscal
Year will be awarded the full number of Restricted Stock shares. These
awards and any Restricted Stock previously granted shall be released from
all restrictions at a time determined by the Plan Administrator, but in no
event later than described in Subsection 8(b) above.
13. SHARE WITHHOLDING: Participants may elect, subject to the approval of the
Plan Administrator, to satisfy, in whole or in part, the tax liability
arising upon the vesting of the Restricted Stock by one of the methods set
forth below. The maximum value of the shares which may be withheld pursuant
to Subsections (a) or (b) below, or the value of the shares which may be
surrendered pursuant to Subsection (c) below, is limited to the sum of the
maximum federal, state, and local income tax rates in the state in which the
Participant is resident times the value of the vesting shares of Restricted
Stock.
(a) A Participant may deliver to the Plan Administrator, more than six months
before the vesting of Restricted Stock, a written election to have shares
withheld. Any modification or revocation of such an election shall be
effective no earlier than six months following the date it is delivered
to the Plan Administrator.
(b) A Participant may deliver to the Plan Administrator, during a Window
Period, a written election to have shares withheld. Any modification or
revocation of such an election may be made only during a Window Period.
(c) A Participant may deliver to the Company, within 60 business days before
or after the vesting of Restricted Stock, previously owned shares.
-4-
<PAGE>
14. AMENDMENTS: The Plan Administrator has full power and final authority to
construe, interpret and administer the Plan. The Board has the right to
change, modify, or terminate the Plan, with or without notice, in whole or
in part, at any time.
-5-
<PAGE>
Exhibit 13
HIGHLIGHTS
<TABLE>
<CAPTION>
(Expressed in thousands, except per share amounts and ratios)
- - ----------------------------------------------------------------------------------------------------
1994 1993 % CHANGE
<S> <C> <C> <C>
- - ----------------------------------------------------------------------------------------------------
EXCLUDING UNUSUAL ITEMS
- - ----------------------------------------------------------------------------------------------------
Net Sales $1,665,120 $1,691,683 (2%)
- - ----------------------------------------------------------------------------------------------------
Operating Income $ 248,541 $ 259,212 (4%)
- - ----------------------------------------------------------------------------------------------------
Net Income $ 151,649 $ 158,690 (4%)
- - ----------------------------------------------------------------------------------------------------
Earnings Per Share $ 1.92 $ 1.91 1%
- - ----------------------------------------------------------------------------------------------------
Return on Average Invested Capital 17.8% 18.2%
- - ----------------------------------------------------------------------------------------------------
Return on Average Common Stockholders' Equity 23.6% 20.7%
- - ----------------------------------------------------------------------------------------------------
INCLUDING UNUSUAL ITEMS
- - ----------------------------------------------------------------------------------------------------
Net Sales $1,665,120 $1,691,683 (2%)
- - ----------------------------------------------------------------------------------------------------
Operating Income $ 240,361 $ 255,382 (6%)
- - ----------------------------------------------------------------------------------------------------
Net Income $ 128,527 $ 156,190 (18%)
- - ----------------------------------------------------------------------------------------------------
Earnings Per Share $ 1.63 $ 1.88 (13%)
- - ----------------------------------------------------------------------------------------------------
Cash Dividends Per Share $ .93 $ .86 8%
- - ----------------------------------------------------------------------------------------------------
Return on Average Invested Capital 15.4% 18.0%
- - ----------------------------------------------------------------------------------------------------
Return on Average Common Stockholders' Equity 20.4% 20.4%
- - ----------------------------------------------------------------------------------------------------
</TABLE>
Fiscal 1994 and 1993 were affected by unusual items discussed on page 18.
Regular cash dividends have been paid for the forty-ninth consecutive year.
QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
(Expressed in thousands, except per share amounts)
- - ----------------------------------------------------------------------------------------------------------------------------
Per Share of Common Stock
----------------------------------------------------
Cash Market Price (High-Low)
Net Gross Net Net Dividends -------------------------------
Sales Profit Income Income Paid Class A Class B
- - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Fiscal 1994 $1,665,120 $826,883 $128,527 $1.63 $.9267 $29.92 -$23.21 $30.50 -$24.33
- - ----------------------------------------------------------------------------------------------------------------------------
Quarters
- - ----------------------------------------------------------------------------------------------------------------------------
Fourth 396,428 198,100 30,327 .44 .2367 29.88 - 28.00 30.50 - 27.83
- - ----------------------------------------------------------------------------------------------------------------------------
Third 413,312 203,522 38,773 .48 .2367 29.92 - 23.21 29.79 - 24.33
- - ----------------------------------------------------------------------------------------------------------------------------
Second 465,725 230,588 62,515 .76 .2267 25.58 - 24.58 27.21 - 25.67
- - ----------------------------------------------------------------------------------------------------------------------------
First 389,655 194,673 (3,088) (.04) .2267 28.25 - 24.83 29.58 - 26.63
---------------------------------------------------------------------------------------------------------------------------
Fiscal 1993 $1,691,683 $824,747 $156,190 $1.88 $.8600 $29.08 -$24.92 $29.50 -$24.25
- - ----------------------------------------------------------------------------------------------------------------------------
Quarters
- - ----------------------------------------------------------------------------------------------------------------------------
Fourth 403,384 200,318 32,520 .39 .2267 26.92 - 24.92 28.58 - 25.25
- - ----------------------------------------------------------------------------------------------------------------------------
Third 426,267 200,983 37,240 .45 .2267 28.17 - 25.33 29.17 - 26.00
- - ----------------------------------------------------------------------------------------------------------------------------
Second 464,918 229,922 51,232 .62 .2033 29.08 - 27.67 29.50 - 27.08
- - ----------------------------------------------------------------------------------------------------------------------------
First 397,114 193,524 35,198 .42 .2033 28.17 - 26.33 28.00 - 24.25
- - ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. All per common share data reflect the three-for-one stock split on May 20,
1994.
2. On May 1, 1993, the company adopted Statements of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," and No. 112, "Employers' Accounting for
Postemployment Benefits." In the third quarter of 1994, the company adopted
Statement of Financial Accounting Standards No. 116, "Accounting for
Contributions Received and Contributions Made," and restated the first
quarter as if adoption had occurred May 1, 1993. The cumulative effect of
these accounting changes reduced net income in the first quarter of 1994 by
$32,542,000 or $.39 per share.
3. Quarterly earnings per share amounts do not add to year-to-date earnings per
share for fiscal 1994 because of changes in the number of outstanding shares
during the year.
<PAGE>
FINANCIAL TABLE OF CONTENTS
17
Report of Management
18
Financial Review Charts
20
Financial Review
24
11-Year Consolidated Selected Financial Data
26
Consolidated Statement of Income
27
Consolidated Statement of Cash Flows
28
Consolidated Balance Sheet
30
Consolidated Statement of Stockholders' Equity
31
Notes to Consolidated Financial Statements
36
Report of Independent Accountants
<PAGE>
REPORT OF MANAGEMENT
We are responsible for the presentation of the information contained in the
consolidated financial statements and for its integrity and objectivity. Our
statements have been prepared in accordance with generally accepted accounting
principles and include amounts based on our best estimates and judgments with
appropriate consideration given to materiality. We also prepared the related
financial information and are responsible for its accuracy and consistency with
the financial statements.
The consolidated financial statements have been audited by Coopers & Lybrand,
independent certified public accountants. We have made available to Coopers &
Lybrand all the company's financial records and related data, as well as the
minutes of stockholders', directors', and other appropriate meetings.
Furthermore, we believe that all representations made to Coopers & Lybrand
during the audit were valid and appropriate.
We are responsible for establishing and maintaining a system of internal
control designed to provide reasonable assurance at reasonable costs that
financial records are reliable for preparing financial statements. The company
has an internal audit function that is intended to provide a review and
monitoring process that allows the company to be reasonably sure that the system
of internal control operates effectively. In addition, as part of the audit of
the financial statements, Coopers & Lybrand completed a study and evaluation of
selected internal accounting controls to establish a basis for reliance thereon
in determining the nature, timing, and extent of audit tests to be applied. We
have considered the internal auditors' and Coopers & Lybrand's recommendations
concerning the system of internal control and have taken actions that we believe
are cost-effective in the circumstances to respond appropriately to these
recommendations. We believe that as of April 30, 1994, the system of internal
control is adequate to accomplish the objectives discussed herein.
We also recognize our responsibility for fostering a strong ethical climate so
that the company's affairs are conducted according to the highest standards of
personal and corporate conduct. This responsibility is characterized and
reflected in the company's Code of Conduct, which is publicized throughout the
company. The Code of Conduct addresses, among other things, the necessity of
ensuring open communication within the company; disclosure of potential
conflicts of interests; compliance with all applicable domestic and foreign
laws, including those relating to financial disclosure; and maintaining the
confidentiality of proprietary information. The company has a systematic
program to assess compliance with the Code of Conduct.
The Board of Directors, through its Audit Committee, comprised solely of
directors who are not employees of the company, meets with management, the
internal auditors and the independent certified public accountants to ensure
that each is properly discharging its respective responsibilities. Both the
independent certified public accountants and the internal auditors have free
access to the Audit Committee, without management present, to discuss the
results of their work, including internal accounting controls and the quality of
financial reporting.
/s/ Owsley Brown II
- - -----------------------------
Owsley Brown II
President and Chief
Executive Officer
/s/ Clifford G. Rompf, Jr.
- - -----------------------------
Clifford G. Rompf, Jr.
Senior Vice President
17
<PAGE>
FINANCIAL REVIEW
This section supplements the consolidated financial statements beginning on
page 24 and will assist the reader in evaluating Brown-Forman's fiscal 1994
results of operations and financial condition.
UNUSUAL ITEMS: Net income for fiscal 1994 contains unusual income and expense
items. Notes 2, 5, and 6, on pages 31 and 32, discuss a $33 million charge
resulting from the adoption of Statements of Financial Accounting Standards
No. 106, No. 112, and No. 116. The charge to net income from adopting these
accounting standards was recorded as the cumulative effect of changes in
accounting principles. Note 8, on page 34, discusses a $5 million charge
associated with the consumer durables segment for the closing or reformatting of
certain retail stores. Note 10, on page 35, discusses an unusual charge of $3
million for the retroactive effect of a higher tax rate on earnings from January
1, 1993 to April 30, 1993, and a noncash charge to restate the deferred tax
liability at the new corporate tax rate. Note 3, on page 32, discusses an $18
million gain from the sale of the company's credit card processing business. The
fiscal 1994 unusual items reflect a net $23 million reduction to net income.
Net income for fiscal 1993 was reduced $3 million from a write-down of assets
in the consumer durables segment.
The following table is included to assist the reader in understanding unusual
items:
<TABLE>
<CAPTION>
(Expressed in earnings per share)
- - ------------------------------------------------------------
Post-Split Pre-Split
- - ------------------------------------------------------------
1994 1993 1994 1993
============================================================
<S> <C> <C> <C> <C>
As reported $1.63 $1.88 $4.88 $5.65
- - ------------------------------------------------------------
Adjustments for
unusual items:
Gain on sale of business (23) -- (.70) --
- - ------------------------------------------------------------
Adoption of new
accounting standards .41 -- 1.24 --
- - ------------------------------------------------------------
Higher tax legislation (1) .04 -- .14 --
- - ------------------------------------------------------------
Consumer durables charges .07 .03 .21 .09
- - ------------------------------------------------------------
Adjusted Earnings Per Share $1.92 $1.91 $5.77 $5.74
- - -------------------------------=============================
</TABLE>
(1) In addition, fiscal 1994 earnings per share were affected by a 1% higher tax
rate on current earnings. Adjusted to reflect the lower statutory rate
effective in fiscal 1993, fiscal 1994 EPS would have been $1.94 ($5.83 on a
pre-split basis).
STOCKHOLDERS' EQUITY: On January 14, 1994, the company concluded a Dutch
auction tender offer, acquiring 2,734,452 shares of Class A and 10,933,518
shares of Class B common stock at a total cost of $408 million. While interest
costs associated with the share purchase lowered net income, the purchase had a
positive effect on earnings per share, adding $.07 to fiscal 1994 results. The
company expects future earnings per share to benefit significantly by the
purchase. This benefit will be affected as the company expects to pursue several
investment strategies in fiscal 1995 that will moderate near-term earnings
growth, but help achieve greater long-term results.
The company recorded a three-for-one stock split for all shares of Class A and
Class B common stock, paid in the form of a stock dividend. The stock dividend
was distributed on May 20, 1994. All per share amounts have been retroactively
restated to reflect the stock split.
The company retired its treasury stock in 1994. The Consolidated Statement of
Stockholders' Equity details the effect of this retirement.
RESULTS OF CONSOLIDATED OPERATIONS
SALES: Net sales decreased slightly in fiscal 1994 due to lower first-half
sales of Jack Daniel's Country Cocktails and lower sales of consumer durables.
The reduction in sales was partially offset by the full year effect of Fetzer
Vineyards and increased international wines and spirits sales. Overseas sales
increased from the prior year due to double-digit growth of both Jack Daniel's
and Early Times. Consumer durables net sales declined due to significant
reductions in sales at Lenox Collections. Excluding brands acquired, developed
internally, sold, or eliminated, consolidated net sales were unchanged in fiscal
1994, increased 3% in fiscal 1993, and increased 2% in fiscal 1992.
OPERATING INCOME: Operating income during fiscal 1994 decreased largely due to
lower shipments of Jack Daniel's Country Cocktails in the first half of the
year. The consumer durables segment also contributed to the decrease. Partially
offsetting these decreases was a $2 million improvements in operating income
from venture businesses.
EARNINGS: Fiscal 1994 earnings were reduced by higher net interest expense
resulting from the above mentioned stock purchase. On October 15, 1993, the
company sold substantially all the assets of its credit card processing
operations. The sale resulted in a pretax gain of $30 million ($18 million or
$.23 per share after tax). Additional tax expense of $3 million, or $.04 per
share, resulted from tax legislation signed into law August 10, 1993. This
increase recognizes the retroactive effect of a higher tax rate on earnings from
January 1, 1993 through April 30, 1993, and the recording of a noncash charge to
restate the company's deferred tax liability at the new corporate tax rate. In
addition, tax expense, compared to prior years, increased $2 million, or $.02
per share, from a higher statutory tax rate on fiscal 1994 earnings. Future
earnings will also be negatively affected by these higher statutory rates. The
company expects the effective tax rate in fiscal 1995 to be approximately 39%.
Fiscal 1994, 1993, and 1992 effective tax rates also contain benefits from
adjustment of prior years' tax accruals.
Excluding unusual items, earnings per share reached a record level in fiscal
1994. Earnings per share computations were positively affected by a reduction in
the average number of common shares outstanding due to the company's purchase of
2,734,452 Class A common shares and 10,933,518 Class B common shares for $408
million in fiscal 1994 and 268,500 Class B common shares for $7 million in
fiscal 1992.
20
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF CONSOLIDATED OPERATING PERFORMANCE
(Expressed in thousands, except percentage amounts and earnings per common share)
- - ---------------------------------------------------------------------------------------------
1994 1993 1992
- - ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $1,665,120 $1,691,683 $1,519,787
- - ---------------------------------------------------------------------------------------------
% Change (1.6%) 11.3% 9.5%
- - ---------------------------------------------------------------------------------------------
OPERATING INCOME
- - ---------------------------------------------------------------------------------------------
As Reported $ 240,361 $ 255,382 $233,818
- - ---------------------------------------------------------------------------------------------
% Change (5.9%) 9.2% 4.6%
- - ---------------------------------------------------------------------------------------------
Excluding Unusual Items $ 248,541 $ 259,212 $233,818
- - ---------------------------------------------------------------------------------------------
% Change (4.1%) 10.9% 4.6%
- - ---------------------------------------------------------------------------------------------
NET INCOME
- - ---------------------------------------------------------------------------------------------
As Reported $ 128,527 $ 156,190 $146,353
- - ---------------------------------------------------------------------------------------------
% Change (17.7%) 6.7% .8%
- - ---------------------------------------------------------------------------------------------
Excluding Unusual Items $ 151,649 $ 158,690 $146,353
- - ---------------------------------------------------------------------------------------------
% Change (4.4%) 8.4% .8%
- - ---------------------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE
- - ---------------------------------------------------------------------------------------------
As Reported $ 1.63 $ 1.88 $ 1.76
- - ---------------------------------------------------------------------------------------------
% Change (13.3%) 6.8% 1.1%
- - ---------------------------------------------------------------------------------------------
Excluding Unusual Items $ 1.92 $ 1.91 $ 1.76
- - ---------------------------------------------------------------------------------------------
% Change .5% 8.5% 1.1%
- - ---------------------------------------------------------------------------------------------
EFFECTIVE TAX RATE
- - ---------------------------------------------------------------------------------------------
As Reported 37.4% 35.6% 34.6%
- - ---------------------------------------------------------------------------------------------
Excluding Unusual Items 35.6% 35.6% 34.6%
- - ---------------------------------------------------------------------------------------------
RETURNS ON INVESTED CAPITAL AND EQUITY
- - ---------------------------------------------------------------------------------------------
1994 1993 1992
- - ---------------------------------------------------------------------------------------------
RETURN ON AVERAGE INVESTED CAPITAL
- - ---------------------------------------------------------------------------------------------
As Reported 15.4% 18.0% 18.8%
- - ---------------------------------------------------------------------------------------------
Five-Year Average 17.5% 19.1% 18.7%
- - ---------------------------------------------------------------------------------------------
Excluding Unusual Items 17.8% 18.2% 18.8%
- - ---------------------------------------------------------------------------------------------
Five-Year Average 19.2% 19.9% 19.6%
- - ---------------------------------------------------------------------------------------------
RETURN ON AVERAGE COMMON STOCKHOLDERS' EQUITY
- - ---------------------------------------------------------------------------------------------
As Reported 20.4% 20.4% 21.3%
- - ---------------------------------------------------------------------------------------------
Five-Year Average 20.4% 22.1% 22.1%
- - ---------------------------------------------------------------------------------------------
Excluding Unusual Items 23.6% 20.7% 21.3%
- - ---------------------------------------------------------------------------------------------
Five-Year Average 22.5% 23.1% 23.2%
- - ---------------------------------------------------------------------------------------------
</TABLE>
In 1994 the company experienced an increase in its return on average common
stockholders' equity, excluding unusual items, due to the purchase of its common
stock.
21
<PAGE>
FINANCIAL REVIEW
WINES AND SPIRITS SEGMENT
Summary of Operating Performance
(Expressed in thousands, except percentage amounts)
<TABLE>
<CAPTION>
- - -----------------------------------------------------------
1994 1993 1992
===========================================================
<S> <C> <C> <C>
NET SALES $1,141,455 $1,154,549 $1,015,043
- - -----------------------------------------------------------
% Change (1.1%) 13.7% (0.3%)
- - -----------------------------------------------------------
NET SALES LESS
EXCISE TAXES $ 877,762 $ 877,397 $ 755,374
- - -----------------------------------------------------------
% Change -- 16.2% 0.8%
- - -----------------------------------------------------------
OPERATING INCOME $ 235,004 $ 245,693 $ 220,967
- - -----------------------------------------------------------
% Change (4.4%) 11.2% 4.4%
- - -----------------------------------------------------------
</TABLE>
The wines and spirits business is Brown-Forman's largest segment representing
69% of net sales in 1994, 68% in 1993, and 67% in 1992. Net sales, excluding
brands which have been sold, discontinued, acquired, or developed internally
during the periods reported, increased 1% in fiscal 1994, 3% in fiscal 1993, and
decreased 1% in fiscal 1992.
SALES: Sales outside the U.S. continued to grow to record levels. Jack
Daniel's and Early Times experienced double-digit sales volume growth with
increases registered in most major overseas markets. Southern Comfort sales
volume overseas was unchanged from last year.
Sales in fiscal 1994 were lower due to the very successful introduction of
Jack Daniel's Country Cocktails in fiscal 1993. Typical of most successful new
products, introductory sales of Country Cocktails in 1993 were enhanced by high
rates of initial consumer trial and the establishment of trade inventory levels.
Although volumes for Country Cocktails moderated in fiscal 1994, it continues to
provide high margins, while broadening the consumer franchise for Jack Daniel's
Tennessee Whiskey. Sales for the segment were increased by the full-year effect
of Fetzer Vineyards acquired in August 1992. Canadian Mist, Southern Comfort,
and Early Times all experienced sales volume declines in the U.S. market in
fiscal 1994, following growth in fiscal 1993. The declines in volume primarily
reflect consumption trends as well as a reduction of trade inventory levels.
OPERATING INCOME: Wines and spirits operating income declined in 1994 due
primarily to lower shipments of Country Cocktails in the first half of the year.
The decrease was partially offset by the full-year effect of Fetzer Vineyards
and increased worldwide sales of Jack Daniel's. In 1993 the increase in
operating income was due to the successful introduction of Jack Daniel's Country
Cocktails, overseas results, and the acquisition of Fetzer Vineyards. In 1992
the increase in operating income was due primarily to price increases taken on
major brands as well as international volume growth.
ORGANIZATION: The company announced in May 1994, the creation of Brown-Forman
Beverages Worldwide, a new global beverage organization designed to accelerate
overseas growth for the company's beverage brands. Investments required to
realize the full potential of this new company will moderate near-term earnings
growth. However, these investments are expected to help the company achieve even
greater long-term results.
BUSINESS ENVIRONMENT: Concern over alcoholic beverage consumption and the
adverse societal effects of alcohol abuse has risen during the past several
years, both domestically and abroad. it is not clear how the vigorous debate
will be resolved between those who seek to preserve the traditional freedom of
adults to consume beverage alcohol responsibly and those who would restrict
consumption by various means. Despite a gradual but steady decline in alcohol
consumption by Americans over time, Brown-Forman has increased its market share,
profits and dividends by strong brand building, concentrating on premium
products, introducing new products and diversification.
There are periodic efforts at both the federal and state levels to raise the
already high tax rates on beverage alcohol. Recent attention has focused on the
possibility of higher federal taxes on spirits as a possible source for funding
health care reform. While there are no federal governmental proposals at the
time of this writing to increase beverage alcohol taxes, if such taxes were
imposed they would adversely affect the U.S. wines and spirits business.
CONSUMER DURABLES SEGMENT
Summary of Operating Performance
(Expressed in thousands, except percentage amounts)
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------
1994 1993 1992
================================================================
<S> <C> <C> <C>
NET SALES $513,612 $519,038 $492,189
- - ----------------------------------------------------------------
% Change (1.0%) 5.5% 35.6%
- - ----------------------------------------------------------------
OPERATING INCOME
- - ----------------------------------------------------------------
As Reported $ 18,953 $ 24,454 $ 40,365
- - ----------------------------------------------------------------
% Change (22.5%) (39.4%) 26.6%
- - ----------------------------------------------------------------
Excluding
Unusual Items $ 27,133 $ 28,284 $ 40,365
- - ----------------------------------------------------------------
% Change (4.1%) (29.9%) 26.6%
- - ----------------------------------------------------------------
</TABLE>
The consumer durables segment represented 31% of net sales in 1994, 31% in
1993, and 32% in 1992. This segment includes combined results for the domestic
and international consumer durables businesses.
SALES: Excluding divisions acquired or divested, net sales decreased 1% in
fiscal 1994, increased 2% in fiscal 1993, and increased 9% in fiscal 1992. Net
sales for fiscal 1994 decreased due primarily to significantly lower sales at
Lenox Collections, partially offset by increased sales at Lenox China and
Hartmann Luggage. Net sales for fiscal 1993 increased primarily from the full
year effect of the acquisition of Dansk and sales increases at Lenox Collections
and Lenox China. The increase in fiscal 1992 sales was driven by
growth at Lenox
Collections and the acquisition of Dansk in July 1991.
OPERATING INCOME: Operating income for fiscal 1994 was reduced $8.2 million
for charges associated with closing or reformatting certain retail stores, which
will allow future efforts to concentrate on retail formats that have shown the
most promise. Excluding unusual items, operating income decreased slightly due
largely to lower sales at Lenox Collections and investments to improve
communications and logistics at Lenox.
22
<PAGE>
Operating income for fiscal 1993, excluding the $3.8 million write-off of
assets associated with slow-moving and obsolete assets, decreased significantly
from 1992 due to weakened demand related to economic conditions, intense
competitive activity, higher per-unit manufacturing costs at the china
production facilities, and a diminished success rate for new product
introductions at Lenox Collections. During 1992, the segment experienced mixed
results. Lenox China and Lenox Collections achieved growth, which was partially
offset by start-up costs associated with opening new domestic retail leather
goods stores and expansion of china and leather products outside the U.S.
<TABLE>
<CAPTION>
OTHER SEGMENT
Summary Operating Performance
(Expressed in thousands, except percentage amounts)
- - ------------------------------------------------------------------------------------
<S> <C> <C> <C>
1994 1993 1992
- - ------------------------------------------------------------------------------------
NET SALES $10,053 $18,096 $ 12,555
- - ------------------------------------------------------------------------------------
% Change (44.4%) 44.1% 89.5%
- - ------------------------------------------------------------------------------------
OPERATING INCOME/(LOSS) $ 453 $(1,917) $(14,779)
- - ------------------------------------------------------------------------------------
% Change (N/A) 87.0% (79.9%)
- - ------------------------------------------------------------------------------------
</TABLE>
The increase in operating income in fiscal 1994 and the significant decline in
the operating loss for fiscal 1993 was primarily due to a reduction in the scope
of the company's aquaculture business and increased operating revenues from the
company's credit card processing business. Fiscal 1992 contained a $3.5 million
write-down of aquaculture assets.
See Note 3, on page 32, for information related to the sale of the company's
credit card processing business during fiscal 1994. Effective November 1, 1993,
the company discontinued the use of this segment.
CONSOLIDATED FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES
Brown-Forman's cash flow continues to provide more than adequate capital to
meet operating and capital expenditure requirements, to pay record dividends,
and to fund acquisition opportunities. See Consolidated Statement of Cash Flows
on page 27.
Cash generated from operating activities for the combined three-year period of
1992, 1993 and 1994 has been higher than amounts needed for ongoing capital
expenditure requirements, dividends, and debt repayments. Cash requirements
have increased over the past three years reflecting the purchase of
approximately $408 million of the company's common stock, acquisition activity,
and increases in dividend payments, partially offset by reductions in working
capital, principally inventory and accounts payable. Cash generated by
operations increased 15%, 23%, and 16% in fiscal 1994, 1993, and 1992,
respectively.
Net working capital excluding the sale of the company's credit card processing
business, decreased $160 million in fiscal 1994 reflecting a reduction in cash
and cash equivalents resulting from the stock purchase, lower finished goods
inventory due to successful inventory reductions in the consumer durables
segment and lower case goods of Jack Daniel's Country Cocktails, and increased
accounts payable and commercial paper. These reductions were partially offset
by an increase in barreled whisky. Fiscal 1993 net working capital, excluding
acquisitions of businesses, increased $92 million, reflecting an increase in
cash and cash equivalents, higher accounts receivable, a reduction in short-term
debt and accrued taxes on income, partially offset by a reduction in
inventories. Fiscal 1992 net working capital, excluding acquisitions of
businesses, decreased $5 million primarily from a decrease in cash and cash
equivalents, partially offset by higher accounts receivables due to increased
sales, and a reduction of accrued liabilities.
The company has a $150 million revolving credit agreement that expires in
fiscal 1998 and $130 million in revolving credit agreements that expire in
fiscal 1995. At April 30, 1994, the company had no outstanding borrowings under
these agreements. At April 30, 1994, the company also had available for
issuance $250 million of debt securities under a shelf registration filing with
the Securities and Exchange Commission.
The company expects to retire $100
million of 9.375% debt on April 1, 1995. However, due to a previously arranged
option to swap interest rates, the company does not expect this transaction to
result in a change in interest expense. See Note 9 on page 34.
CAPITAL EXPENDITURES
Brown-Forman invested $27 million in property, plant, and equipment in fiscal
1994, $34 million in fiscal 1993, and $52 million in fiscal 1992. Capital
expenditures are expected to be approximately $45 to $50 million in fiscal 1995
primarily for upgrading and expansion of production facilities in the wines and
spirits segment, and improving the effectiveness of Lenox operations. Fiscal
1993 and fiscal 1992 expenditures reflect the modernization of production
facilities and projects to expand the capacity at Lenox China. In fiscal 1995,
capital expenditure requirements are expected to be met with internally
generated funds.
DIVIDENDS
Fiscal 1994 dividends per common share were at record levels and increased 8%
to $.927 from $.86 in fiscal 1993. The increase is based on the expectations of
continued strong and stable cash flow. Quarterly dividends were increased in
fiscal 1994 from $.227 to $.237, which results in an indicated annual dividend
of $.947 per common share. Cash dividends per common share increased from $.78
in 1992 to $.86 in 1993, an increase of 10%. The percent of cash dividends paid
to net income was 58% in fiscal 1994, compared to 46% and 44% for fiscal 1993
and fiscal 1992, respectively. Brown-Forman has paid regular cash dividends for
49 consecutive years.
ENVIRONMENTAL
Note 13, on page 36, discusses the effects of environmental issues on Brown-
Forman's financial statements.
23
<PAGE>
<TABLE>
<CAPTION>
11-YEAR CONSOLIDATED SELECTED FINANCIAL DATA
For Fiscal Year Ended April 30,
(Expressed in thousands, except per share amounts and ratios)
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS 1994 1993 1992
======================================================================================================================
Net Sales $1,665,120 1,691,683 1,519,787
- - ----------------------------------------------------------------------------------------------------------------------
Excise Taxes $ 263,693 277,152 259,669
- - ----------------------------------------------------------------------------------------------------------------------
Net Sales Less Excise Taxes $1,401,427 1,414,531 1,260,118
- - ----------------------------------------------------------------------------------------------------------------------
Gross Profit $ 826,883 824,747 743,578
- - ----------------------------------------------------------------------------------------------------------------------
Operating Income $ 240,361 255,382 233,818
- - ----------------------------------------------------------------------------------------------------------------------
Interest Income $ 3,984 3,113 3,656
- - ----------------------------------------------------------------------------------------------------------------------
Interest Expense $ 17,195 15,918 13,782
- - ----------------------------------------------------------------------------------------------------------------------
Income Before Cumulative Effect of Accounting Changes $ 161,069 156,190 146,353
- - ----------------------------------------------------------------------------------------------------------------------
Cumulative Effect of Accounting Changes $ (32,542) -- --
- - ----------------------------------------------------------------------------------------------------------------------
Net Income $ 128,527 156,190 146,353
- - ----------------------------------------------------------------------------------------------------------------------
Weighted Average Common Shares Outstanding 78,657 82,664 82,721
- - ----------------------------------------------------------------------------------------------------------------------
Earnings Per Common Share:
- - ----------------------------------------------------------------------------------------------------------------------
Income Before Cumulative Effect of Accounting Changes $ 2.04 1.88 1.76
- - ----------------------------------------------------------------------------------------------------------------------
Cumulative Effect of Account Changes $ (.41) -- --
- - ----------------------------------------------------------------------------------------------------------------------
Net Income $ 1.63 1.88 1.76
- - ----------------------------------------------------------------------------------------------------------------------
Cash Dividends Per Common Share $ .93 .86 .78
- - ----------------------------------------------------------------------------------------------------------------------
Common Stock Splits 3-FOR-1
- - ----------------------------------------------------------------------------------------------------------------------
INVESTED CAPITAL IN THE BUSINESS
- - ----------------------------------------------------------------------------------------------------------------------
Current Debt $ 59,096 6,389 20,845
- - ----------------------------------------------------------------------------------------------------------------------
Long-Term Debt $ 299,061 154,408 114,191
- - ----------------------------------------------------------------------------------------------------------------------
Preferred Stock $ 11,779 11,779 11,779
- - ----------------------------------------------------------------------------------------------------------------------
Common Stockholders' Equity $ 451,908 806,334 723,379
- - ----------------------------------------------------------------------------------------------------------------------
Invested Capital $ 821,844 978,920 870,194
- - ----------------------------------------------------------------------------------------------------------------------
Average Invested Capital $ 900,382 924,557 822,638
- - ----------------------------------------------------------------------------------------------------------------------
Average Common Stockholders' Equity $ 629,126 764,862 686,084
- - ----------------------------------------------------------------------------------------------------------------------
New Working Capital $ 368,850 509,894 437,333
- - ----------------------------------------------------------------------------------------------------------------------
Total Assets $1,233,849 1,310,998 1,193,522
- - ----------------------------------------------------------------------------------------------------------------------
RATIOS
- - ----------------------------------------------------------------------------------------------------------------------
Return on Average Invested Capital 15.4% 18.0% 18.8%
- - ----------------------------------------------------------------------------------------------------------------------
Return on Average Common Stockholders' Equity 20.4% 20.4% 21.3%
- - ----------------------------------------------------------------------------------------------------------------------
Total Long-Term Debt to Total Long-Term Capital 39.2% 15.9% 13.4%
- - ----------------------------------------------------------------------------------------------------------------------
Total Cash Dividends Paid to Net Income 57.5% 45.8% 44.4%
- - ----------------------------------------------------------------------------------------------------------------------
Current Assets to Current Liabilities 2.3:1 3.4:1 3.0:1
- - ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
1. Average invested capital, return on average invested capital, return on
average common stockholders' equity, and total long-term debt to total
long-term capital are defined on page 19.
2. Includes the operations of Fetzer Vineyards, Dansk International Designs
Ltd., and California Cooler Co., since their acquisitions on August 31, 1992,
July 2, 1991, and September 5, 1985 respectively.
3. On October 15, 1993, the company sold Brown-Forman Enterprises, its credit
card processing operations, resulting in an after-tax gain of $18,350,000.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
- - -------------------------------------------------------------------------------------------------------
1991 1990 1989 1988 1987 1986 1985 1984
- - -------------------------------------------------------------------------------------------------------
1,387,780 1,303,985 1,293,991 1,360,282 1,405,846 1,288,808 1,208,113 1,146,343
- - -------------------------------------------------------------------------------------------------------
268,930 276,006 281,298 288,010 306,355 293,944 279,721 282,550
- - -------------------------------------------------------------------------------------------------------
1,118,850 1,027,979 1,012,693 1,072,272 1,099,491 994,864 928,392 863,793
- - -------------------------------------------------------------------------------------------------------
666,444 609,196 578,739 561,509 564,802 519,471 470,705 426,075
- - -------------------------------------------------------------------------------------------------------
223,467 224,944 208,480 191,684 182,126 190,080 188,088 175,448
- - -------------------------------------------------------------------------------------------------------
7,154 7,250 6,172 1,513 1,814 1,309 1,945 2,975
- - -------------------------------------------------------------------------------------------------------
11,075 16,654 24,821 18,399 22,125 28,145 35,749 34,969
- - -------------------------------------------------------------------------------------------------------
145,233 80,979 144,497 103,399 89,584 86,376 81,684 73,554
- - -------------------------------------------------------------------------------------------------------
- 11,526 - - - - - -
- - -------------------------------------------------------------------------------------------------------
145,233 92,505 144,497 103,399 89,584 86,376 81,684 73,554
- - -------------------------------------------------------------------------------------------------------
83,303 83,933 83,933 95,060 96,249 96,211 106,524 113,271
- - -------------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------------
1.74 .96 1.72 1.08 .93 .89 .76 .65
- - -------------------------------------------------------------------------------------------------------
- .14 - - - - - -
- - -------------------------------------------------------------------------------------------------------
1.74 1.10 1.72 1.08 .93 .89 .76 .65
- - -------------------------------------------------------------------------------------------------------
.72 .63 .51 .41 .30 .22 .20 .20
- - -------------------------------------------------------------------------------------------------------
3-for-2
- - -------------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------------
2,236 827 25,830 790 19,544 30,490 28,214 43,597
- - -------------------------------------------------------------------------------------------------------
112,278 114,484 115,281 190,973 199,454 235,919 266,162 264,411
- - -------------------------------------------------------------------------------------------------------
11,779 11,779 11,779 11,779 11,779 11,779 11,779 11,779
- - -------------------------------------------------------------------------------------------------------
648,788 583,521 543,900 442,601 577,938 516,365 454,053 506,521
- - -------------------------------------------------------------------------------------------------------
775,081 710,611 696,790 646,143 808,715 794,553 760,208 826,308
- - -------------------------------------------------------------------------------------------------------
742,846 703,701 671,467 727,429 801,634 777,381 793,258 680,131
- - -------------------------------------------------------------------------------------------------------
616,155 563,711 493,251 510,270 547,152 485,209 480,287 481,147
- - -------------------------------------------------------------------------------------------------------
431,347 388,197 313,153 287,371 336,657 309,894 325,845 356,535
- - -------------------------------------------------------------------------------------------------------
1,082,597 1,020,984 1,003,272 932,284 1,056,699 1,037,799 935,383 982,827
- - -------------------------------------------------------------------------------------------------------
20.5% 14.6% 23.8% 15.7% 12.6% 12.9% 12.6% 13.4%
- - -------------------------------------------------------------------------------------------------------
23.5% 16.3% 29.2% 20.2% 16.3% 17.7% 16.9% 15.2%
- - -------------------------------------------------------------------------------------------------------
14.5% 16.1% 17.2% 29.5% 25.3% 30.9% 36.4% 33.8%
- - -------------------------------------------------------------------------------------------------------
41.7% 57.4% 29.8% 38.9% 32.8% 25.3% 26.2% 30.8%
- - -------------------------------------------------------------------------------------------------------
3.3:1 3.0:1 2.5:1 2.7:1 2.8:1 2.5:1 3.0:1 3.1:1
- - -------------------------------------------------------------------------------------------------------
</TABLE>
4. On January 31, 1989, the company sold the U.S. marketing rights for Martell
Cognacs resulting in an after-tax gain of $22,300,000.
5. On April 27, 1988, the company sold the ArtCarved jewelry division resulting
in an after-tax gain of $16,700,000.
6. Net income was reduced $59,900,000 and $33,000,000 to reflect the write-off
of the intangible assets of California Cooler in 1990 and 1988,
respectively.
7. Earnings per common share are based on the weighted average number of common
shares outstanding during each year; both earnings and cash dividends per
common share have been appropriately adjusted for the 3-for-1 and 3-for-2
stock splits in fiscal 1994 and 1987, respectively.
25
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
(Expressed in thousands, except per share amounts)
- - -----------------------------------------------------------------------------------------------------------------------------
Year Ended April 30, 1994 1993 1992
=============================================================================================================================
<S> <C> <C> <C>
Net sales $1,665,120 $1,691,683 $1,519,787
- - -----------------------------------------------------------------------------------------------------------------------------
Excise taxes 263,693 277,152 259,669
- - -----------------------------------------------------------------------------------------------------------------------------
Cost of sales 574,544 589,784 516,540
- - ------------------------------------------------------------------------------------=========================================
- - -----------------------------------------------------------------------------------------------------------------------------
Gross profit 826,883 824,747 743,578
- - -----------------------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------------------------------------
Selling, general, and administrative expenses 384,276 364,666 337,969
- - -----------------------------------------------------------------------------------------------------------------------------
Advertising expenses 202,246 204,699 171,791
- - ------------------------------------------------------------------------------------=========================================
Operating income 240,361 255,382 233,818
- - -----------------------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------------------------------------
Gain on sale of business before income taxes 30,077 -- --
- - -----------------------------------------------------------------------------------------------------------------------------
Interest income 3,984 3,113 3,656
- - -----------------------------------------------------------------------------------------------------------------------------
Interest expense 17,195 15,918 13,782
- - ------------------------------------------------------------------------------------=========================================
- - -----------------------------------------------------------------------------------------------------------------------------
Income before income taxes and cumulative effect of accounting changes 257,227 242,577 223,692
- - -----------------------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------------------------------------
Taxes on income 96,158 86,387 77,339
- - ------------------------------------------------------------------------------------=========================================
- - -----------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of accounting changes 161,069 156,190 146,353
- - -----------------------------------------------------------------------------------------------------------------------------
Cumulative effect of accounting changes (32,542) -- --
- - ------------------------------------------------------------------------------------=========================================
Net income $ 128,527 $ 156,190 $ 146,353
- - ------------------------------------------------------------------------------------=========================================
- - -----------------------------------------------------------------------------------------------------------------------------
Earnings per common share:
- - -----------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of accounting changes $ 2.04 $ 1.88 $ 1.76
- - -----------------------------------------------------------------------------------------------------------------------------
Cumulative effect of accounting changes (.41) -- --
- - ------------------------------------------------------------------------------------=========================================
Net income $ 1.63 $ 1.88 $ 1.76
- - ------------------------------------------------------------------------------------=========================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
26
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(Expressed in thousands; amounts in brackets are reductions of cash)
- - ----------------------------------------------------------------------------------------------------------------------------
Year Ended April 30, 1994 1993 1992
- - -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- - -----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
- - -----------------------------------------------------------------------------------------------------------------------------
Net income $ 128,527 $ 156,190 $ 146,353
- - -----------------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net cash provided by (used for) operations:
- - -----------------------------------------------------------------------------------------------------------------------------
Cumulative effect of changes in accounting principles 32,542 --
- - -----------------------------------------------------------------------------------------------------------------------------
Depreciation 36,588 35,114 29,559
- - -----------------------------------------------------------------------------------------------------------------------------
Amortization of intangible assets 9,435 8,641 7,694
- - -----------------------------------------------------------------------------------------------------------------------------
Deferred income taxes 6,405 587 5,132
- - -----------------------------------------------------------------------------------------------------------------------------
Gain on sale of business, net of income taxes (18,350) -- --
- - -----------------------------------------------------------------------------------------------------------------------------
Other 384 (3,510) (3,686)
- - -----------------------------------------------------------------------------------------------------------------------------
Change in assets and liabilities, excluding the effects of businesses acquired and sold:
- - -----------------------------------------------------------------------------------------------------------------------------
Accounts receivable (1,659) (21,033) (23,133)
- - -----------------------------------------------------------------------------------------------------------------------------
Inventories 7,073 18,234 (6,491)
- - -----------------------------------------------------------------------------------------------------------------------------
Other current assets 3,715 1,419 8,755
- - -----------------------------------------------------------------------------------------------------------------------------
Accounts payable and accrued expenses 31,528 6,491 (3,337)
- - -----------------------------------------------------------------------------------------------------------------------------
Accrued taxes on income (15,335) (9,278) (4,640)
- - -----------------------------------------------------------------------------------------------------------------------------
Cash provided by operating activities 220,853 192,855 156,206
- - -----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
- - -----------------------------------------------------------------------------------------------------------------------------
Proceeds from sale of business 31,837 -- --
- - -----------------------------------------------------------------------------------------------------------------------------
Acquisition of businesses, net of cash acquired of $3,999 in 1992 -- (4,613) (71,357)
- - -----------------------------------------------------------------------------------------------------------------------------
Equity investment -- (9,512) --
- - -----------------------------------------------------------------------------------------------------------------------------
Additions to property, plant, and equipment (27,433) (33,616) (52,141)
- - -----------------------------------------------------------------------------------------------------------------------------
Disposals of property, plant, and equipment 1,788 2,045 2,664
- - -----------------------------------------------------------------------------------------------------------------------------
Net sales (purchases) of short-term investments 18,146 (1,241) (2,537)
- - -----------------------------------------------------------------------------------------------------------------------------
Other (5,426) (396) (171)
- - -----------------------------------------------------------------------------------------------------------------------------
Cash provided by (used for) investing activities 18,912 (47,333) (123,542)
- - -----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
- - -----------------------------------------------------------------------------------------------------------------------------
Commercial paper 204,229 (20,772) 20,772
- - -----------------------------------------------------------------------------------------------------------------------------
Proceeds from long-term debt -- 2,744 11,640
- - -----------------------------------------------------------------------------------------------------------------------------
Reduction of long-term debt (6,869) (5,317) (11,890)
- - -----------------------------------------------------------------------------------------------------------------------------
Reduction of debt assumed in acquisition of businesses -- (17,708) (24,903)
- - -----------------------------------------------------------------------------------------------------------------------------
Retirement of notes payable -- (8,025) --
- - -----------------------------------------------------------------------------------------------------------------------------
Acquisition of treasury stock (407,659) -- (6,999)
- - -----------------------------------------------------------------------------------------------------------------------------
Dividends paid (73,838) (71,562) (64,999)
- - -----------------------------------------------------------------------------------------------------------------------------
Cash (used for) financing activities (284,137) (120,640) (76,379)
- - -----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (44,372) 24,882 (43,715)
- - -----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, beginning of year 74,912 50,030 93,745
- - -----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 30,540 $ 74,912 $ 50,030
- - -----------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial statements.
27
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEEET
(Expressed in thousands, except per share amounts)
- - -------------------------------------------------------------------------------
April 30, 1994 1993 1992
===============================================================================
<S> <C> <C> <C>
ASSETS
- - -------------------------------------------------------------------------------
Cash and cash equivalents $ 30,540 $ 74,912 $ 50,030
- - -------------------------------------------------------------------------------
Short-term investments -- 18,146 16,905
- - -------------------------------------------------------------------------------
Accounts receivable, less allowance for
doubtful accounts
of $12,006 in 1994, $10,432 in 1993,
and $7,970 in 1992 240,580 238,921 208,271
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Inventories:
- - -------------------------------------------------------------------------------
Barreled whiskey 143,785 137,880 144,538
- - -------------------------------------------------------------------------------
Finished goods 122,976 142,640 147,777
- - -------------------------------------------------------------------------------
Work in progress 59,984 56,857 29,238
- - -------------------------------------------------------------------------------
Raw materials and supplies 31,697 28,139 30,869
- - ------------------------------------------=====================================
Total inventories 358,442 365,516 352,422
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Other current assets 20,344 22,759 23,850
- - ------------------------------------------=====================================
TOTAL CURRENT ASSETS 649,906 720,254 651,478
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Property, plant, and equipment, at no cost:
- - -------------------------------------------------------------------------------
Land 17,604 17,466 14,924
- - -------------------------------------------------------------------------------
Buildings 167,500 164,134 148,496
- - -------------------------------------------------------------------------------
Equipment 325,271 309,647 284,487
- - ------------------------------------------=====================================
510,375 491,247 447,907
- - -------------------------------------------------------------------------------
Less accumulated depreciation (264,397) (233,807) (204,631)
- - ------------------------------------------=====================================
Net property, plant, and equipment 245,978 257,440 243,276
- - -------------------------------------------------------------------------------
Intangible assets, less accumulated
amortization of $89,471 in 1994,
$80,036 in 1993, and $71,395 in 1992 276,358 279,681 245,235
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Other assets 61,607 53,623 53,533
- - ------------------------------------------=====================================
TOTAL ASSETS $1,233,849 $1,310,998 $1,193,522
- - ------------------------------------------=====================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
28
<PAGE>
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------
April 30, 1994 1993 1992
===================================================================================================
<S> <C> <C> <C>
LIABILITIES
- - ---------------------------------------------------------------------------------------------------
Commercial paper $ 54,229 - $ 20,772
- - ---------------------------------------------------------------------------------------------------
Accounts payable and accrued expenses 216,175 $ 180,664 159,258
- - ---------------------------------------------------------------------------------------------------
Current portion of long-term debt 4,867 6,389 73
- - ---------------------------------------------------------------------------------------------------
Accrued taxes on income 3,815 7,424 16,702
- - ---------------------------------------------------------------------------------------------------
Deferred income taxes 1,970 15,883 17,340
===================================================================================================
TOTAL CURRENT LIABILITIES 281,056 210,360 214,145
- - ---------------------------------------------------------------------------------------------------
Long-term debt 299,061 154,408 114,191
- - ---------------------------------------------------------------------------------------------------
Deferred income taxes 102,267 108,971 106,545
- - ---------------------------------------------------------------------------------------------------
Accrued postretirement benefits 47,223 - -
- - ---------------------------------------------------------------------------------------------------
Other liabilities and deferred income 40,555 19,136 23,483
===================================================================================================
TOTAL LIABILITIES 770,162 492,875 458,364
- - ---------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
- - ---------------------------------------------------------------------------------------------------
Capital Stock:
- - ---------------------------------------------------------------------------------------------------
Preferred $.40 cumulative, $10 par value,
redeemable at company's option at $10.25
per share plus unpaid accrued dividends;
1,177,948 shares authorized and outstanding 11,779 11,779 11,779
===================================================================================================
Class A common stock, voting, $.15 par value;
authorized shares, 30,000,000; issued shares, 28,988,091 4,348 1,809 1,809
- - ---------------------------------------------------------------------------------------------------
Class B common stock, nonvoting, $.15 par value;
authorized shares, 60,000,000; issued shares, 40,008,147 6,001 4,000 4,000
- - ---------------------------------------------------------------------------------------------------
Capital in excess of par value of common stock - 89,735 89,717
- - ---------------------------------------------------------------------------------------------------
Retained earnings 445,643 1,057,461 972,833
- - ---------------------------------------------------------------------------------------------------
Cumulative translation adjustment (4,084) (2,421) (740)
- - ---------------------------------------------------------------------------------------------------
Less common treasury stock, at cost:
(1993 and 1992: Class A, 4,463,163 shares; Class B,
29,051,280 shares) - (344,240) (344,240)
===================================================================================================
COMMON STOCKHOLDERS' EQUITY 451,908 806,344 723,379
===================================================================================================
TOTAL STOCKHOLDERS' EQUITY 463,687 818,123 735,158
===================================================================================================
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,233,849 $1,310,998 $1,193,522
===================================================================================================
29
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Years Ended April 30, 1994, 1993, and 1992 (Expressed in thousands,
except share amounts)
- - ------------------------------------------------------------------------------------------------------------------------------
Common Stock
--------------- Capital in Cumulative
Preferred Class Class Excess of Retained Translation Treasury
Total Stock A B Par Value Earnings Adjustment Stock
- - ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, April 30, 1991 $ 660,567 $11,779 $1,809 $ 4,000 $89,748 $ 891,479 $(1,007) $(337,241)
- - -------------------------------------------------------------------------------------------------------------------------------
Net income 146,353 146,353
- - ------------------------------------------------------------------------------------------------------------------------------
Cash dividends
Preferred, per share $.40 (471) (471)
Common, per share $.78 (64,528) (64,528)
- - ------------------------------------------------------------------------------------------------------------------------------
Acquisition of treasury stock
(Class B, 268,500 shares) (6,999) (6,999)
- - ------------------------------------------------------------------------------------------------------------------------------
Foreign currency translation
adjustment 267 267
- - ------------------------------------------------------------------------------------------------------------------------------
Other (31) (31)
==============================================================================================================================
Balance, April 30, 1992 735,158 11,779 1,809 4,000 89,717 972,833 (740) (344,240)
- - ------------------------------------------------------------------------------------------------------------------------------
Net income 156,190 156,190
- - ------------------------------------------------------------------------------------------------------------------------------
Cash dividends
Preferred, per share $.40 (471) (471)
Common, per share $.86 (71,091) (71,091)
- - ------------------------------------------------------------------------------------------------------------------------------
Foreign currency translation
adjustment (1,681) (1,681)
- - ------------------------------------------------------------------------------------------------------------------------------
Other 18 18
==============================================================================================================================
Balance, April 30, 1993 818,123 11,779 1,809 4,000 89,735 1,057,461 (2,421) (344,240)
- - ------------------------------------------------------------------------------------------------------------------------------
Net income 128,527 128,527
- - ------------------------------------------------------------------------------------------------------------------------------
Cash dividends
Preferred, per share $.40 (471) (471)
Common, per share $.93 (73,367) (73,367)
- - ------------------------------------------------------------------------------------------------------------------------------
Acquisition of treasury stock
(Class A, 2,734,452 shares and
Class B, 10,933,518 shares) (407,659) (407,659)
- - ------------------------------------------------------------------------------------------------------------------------------
Retirement of treasury stock
(Class A, 7,197,615 shares and
Class B, 39,984,798 shares) -- (360) (1,999) (89,822) (659,718) 715,899
- - ------------------------------------------------------------------------------------------------------------------------------
Issuance of shares in connection
with 3-for-1 stock split -- 2,899 4,000 (6,899)
- - ------------------------------------------------------------------------------------------------------------------------------
Foreign currency translation
adjustment (1,663) (1,663)
- - ------------------------------------------------------------------------------------------------------------------------------
Other 197 87 110
==============================================================================================================================
Balance, April 30, 1994 $463,687 $11,779 $4,348 $6,001 $ -- $ 445,643 $(4,084) $ --
==============================================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
30
<PAGE>
1. ACCOUNTING POLICIES
A brief description of the principal accounting methods and policies follows:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of all subsidiaries.
CASH EQUIVALENTS
Cash equivalents include demand deposits with banks and all highly liquid
investments with original maturities of three months or less.
SHORT-TERM INVESTMENTS
Short-term interest bearing 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.
INVENTORIES
Inventories are stated at the lower of cost or market. Approximately 84% at
April 30, 1994, 83% at April 30, 1993, and 80% at April 30, 1992 of the total
amount of consolidated inventories are stated on the basis of the last-in,
first-out (LIFO) method. All remaining inventories generally are valued using
the first-in, first-out and average cost methods.
If the LIFO method had not been used, inventories would have been $71,626,000,
$62,347,000, and $45,326,000 higher than reported at April 30, 1994, 1993, and
1992, respectively.
A substantial portion of barreled whisky will not be sold within one year
because of the duration of the aging process. All barreled whisky is classified
in current assets in accordance with industry practice. Bulk wine inventories
are classified as work in process.
Warehousing, insurance, ad valorem taxes, and other carrying charges
applicable to barreled whisky held for aging are included in inventory costs.
DEPRECIATION
Provision for depreciation is made on the basis of estimated useful lives of
depreciable assets, principally using the straight-line method.
INTANGIBLE ASSETS
Intangible assets, principally the excess of purchase price over the fair value
of identifiable net assets of acquired businesses, are stated at cost less
accumulated amortization. These assets are amortized using the straight-line
method over their estimated useful lives, not exceeding forty years.
Intangible assets are carried at an amount not exceeding estimated
recoverability. The company assesses the recoverability of the carrying value of
intangible assets based primarily on forecasted profitability and cash flows of
the related business.
DEFERRED INCOME
Deferred income represents proceeds received from a multi-year agreement for the
distribution rights of certain of the company's spirits brands in the export
market. These proceeds are being recognized over a ten-year period.
REVENUE RECOGNITION
The company recognizes revenue when goods are shipped or services are performed.
Interchange fees, which are amounts collected for credit card issuing
organizations, are not included in revenues. These fees were $21,094,000,
$33,324,000, and $20,326,000 for 1994, 1993, and 1992, respectively.
EARNINGS PER COMMON SHARE
Earnings per common share are based upon the weighted average common shares
outstanding of 78,657,432 in 1994, 82,664,208 in 1993, and 82,720,695 in 1992,
after recognition of dividend requirements on preferred stock. All common share
and per share information have been retroactively restated to reflect the three-
for-one stock split on May 20, 1994.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the current
year's presentation.
2. ACCOUNTING CHANGES
On May 1, 1993, the company adopted Statements of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," and Statement of Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits." See Postretirement Benefits Other Than
Pensions and Postemployment Benefits on page 32. In the third quarter of 1994,
the company adopted Statement of Financial Accounting Standards No. 116,
"Accounting for Contributions Received and Contributions Made," and restated the
first quarter as if adoption had occurred May 1, 1993. Accordingly, the company
recorded a liability for charitable contributions unconditionally pledged but
not yet paid.
The cumulative effect of these changes in accounting principles are as follows
(in thousands).
<TABLE>
<CAPTION>
FAS Statement No.
- - --------------------------------------------------
<S> <C> <C> <C> <C>
106 112 116 Total
- - --------------------------------------------------
Pretax charge $43,684 $2,817 $6,721 $53,222
- - --------------------------------------------------
Income taxes 16,955 1,104 2,621 20,680
- - --------------------------------------------------
Net charge $26,729 $1,713 $4,100 $32,542
- - --------------------------------------------------
Net charge per
common share $ .34 $ .02 $ .05 $ .41
- - --------------------------------------------------
</TABLE>
Effective January 31, 1994, the company adopted Statement of Position 93-7,
"Reporting on Advertising Costs." This statement was issued by the American
Institute of Certified Public Accountants and requires the company to
prospectively capitalize and amortize direct-response advertising to better
match revenues with expenses. The company continues to expense other
advertising costs as incurred.
On May 1, 1993, the company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes."
The adoption of these standards did not materially affect 1994 earnings before
the cumulative effect of accounting changes.
31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. CHANGES IN OPERATIONS
SALE OF CREDIT CARD OPERATIONS
On October 15, 1993, the company sold substantially all the assets of its
credit card processing operations. The sale resulted in a pretax gain of
approximately $30,077,000 ($18,350,000 or $.23 per share after-tax).
ACQUISITION OF FETZER VINEYARDS
On August 31, 1993, the company purchased the outstanding stock of Fetzer
Vineyards of Mendocino County, California. The cost of acquiring the stock was
approximately $64,200,000 and included, among other costs, $4,600,000 in cash,
$47,500,000 in notes to the previous owners and four annual payments of
$2,800,000 per year beginning fiscal 1996. In addition, the company assumed
approximately $27,000,000 of Fetzer Vineyards debt. The acquisition has been
accounted for as a purchase, and accordingly, the operating results of Fetzer
have been consolidated with the company since the acquisition date. The excess
of the acquisition cost over the fair value of the net assets acquired is
approximately $47,000,000 which is being amortized over forty years.
ACQUISITION OF DANSK
The company acquired Dansk International Designs Ltd. ("Dansk") on July 2, 1991.
The total capital invested in Dansk was approximately $87,400,000, made up of
the purchase price of acquiring all the outstanding stock for approximately
$65,500,000, net of $2,000,000 of excess cash acquired, and the assumption of
$21,900,000 of Dansk debt. The acquisition has been accounted for as a purchase,
and accordingly, the operating results of Dansk have been consolidated with the
company since the acquisition date. The excess of the acquisition cost over the
fair value of the identifiable net assets acquired is approximately $45,800,000
which is being amortized over forty years.
OTHER ACQUISITIONS
During 1993, the company acquired a 20% interest in Swift and Moore Pty.
Limited, an importer and marketer of spirits and wines in Australia for
$9,512,000.
During 1992, the company acquired certain assets of Jekel Vineyards and Wings
Luggage. Jekel Vineyards is a Monterey County, California winery which produces
super-premium, estate-bottled wines. These acquisitions were accounted for as
purchases.
4. COMMITMENTS
Rentals of real estate, office and data processing equipment, vehicles, and
manufacturing equipment under operating leases amounted to approximately
$20,700,000, $19,200,000, and $19,000,000 for 1994, 1993, and 1992,
respectively. The company has commitments related primarily to minimum lease
payments totaling $22,700,000 in 1995; $16,300,000 in 1996; $13,100,000 in 1997;
$10,300,000 in 1998; $8,100,000 in 1999; and $10,100,000 after 1999.
5. POSTEMPLOYMENT BENEFITS
The company provides postemployment benefits to certain former or inactive
employees. Effective May 1, 1993, the company adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits," which requires accrual accounting for those benefits. The cumulative
effect of adopting this accounting standard resulted in a one-time pretax charge
of $2,817,000 ($1,713,000 or $.02 per share after tax).
6. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The company provides certain health care and life insurance benefits for
eligible retirees. Effective May 1, 1993, the company adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." Under SFAS No. 106, the company
accrues the cost of these benefits over employers' active service periods.
The company elected to recognize this change in accounting on the immediately
recognition basis. The adoption of this standard resulted in a one-time pretax
charge totaling $43,684,000 ($26,729,000 or $.34 per share after tax).
The postretirement benefit expense for 1994 includes the following components
(in thousands):
<TABLE>
<CAPTION>
<S> <C>
Service cost of benefits earned $1,898
- - --------------------------------------------------------
Interest cost on accumulated postretirement
benefit obligation 3,495
- - --------------------------------------------------------
Postretirement benefit expense $5,393
- - --------------------------------------------------------
</TABLE>
Prior to May 1, 1993, retiree health care and life insurance benefits were
expensed as paid and totaled $1,950,000 in 1993 and $2,073,000 in 1992.
The 1994 postretirement benefit liability includes the following components
(in thousands):
<TABLE>
<CAPTION>
Actuarial present value of accumulated postretirement obligation:
<S> <C>
- - ------------------------------------------------------------
Retirees $25,525
- - ------------------------------------------------------------
Fully eligible active plan participants 3,878
- - ------------------------------------------------------------
Other active plan participants 20,040
- - ------------------------------------------------------------
49,443
- - ------------------------------------------------------------
Unrecognized net loss 2,220
- - ------------------------------------------------------------
Accrued postretirement benefit liability $47,223
- - ------------------------------------------------------------
</TABLE>
The assumed discount rate used to determine the accumulated postretirement
benefit obligation for April 30, 1994 was 7%. As of April 30, 1994, the assumed
health care cost trend rate for participants under age 65 was 13.5%, for
participants age 65 and over, the rate was 12.5%. The health care cost trend
rate was assumed to decline gradually to 5% over 10 years. A one-percentage
point increase in the assumed health care cost trend rate would have increased
the accumulated postretirement benefit obligation as of April 30, 1994 by
$6,123,000 and the postretirement benefit expense by $834,000.
32
<PAGE>
7. PENSION PLANS
The company has defined benefit pension plans covering certain employees. The
benefits for these plans are based primarily on years of service and employees
pay near retirement for the salaried employees and stated amounts for each year
of service for the union and hourly employees. The company also has unfunded
plans that provide retirement benefits in excess of qualified plan formulas or
regulatory limitations for certain employees.
Pension income (expense) was $(1,096,000) for 1994, $347,000 for 1993, and
$1,096,000 for 1992. Net pension income (expense) for 1994, 1993, and 1992
includes the following components (in thousands):
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------
1994 1993 1992
- - ----------------------------------------------------------------
<S> <C> <C> <C>
- - ----------------------------------------------------------------
Benefit cost for
service during the year $ (7,775) $ (6,187) $ (6,011)
- - ----------------------------------------------------------------
Interest cost on projected
benefit obligation (14,555) (13,668) (12,735)
- - ----------------------------------------------------------------
Actual return on plan assets 33,580 23,293 40,983
- - ----------------------------------------------------------------
Net amortization and deferral (12,346) (3,091) (21,141)
- - ----------------------------------------------------------------
Net pension income (expense) $ (1,096) $ 347 $ 1,096
- - ----------------------------------------------------------------
</TABLE>
The amounts included in the accompanying consolidated balance sheet were based
on the funded status of the plans at January 31, 1994, and 1993 and are as
follows (in thousands):
<TABLE>
<CAPTION>
1994 1993
- - -----------------------------------------------------------------------------------------------------------------------------------
Plan Assets Obligations Plan Assets Obligations
Exceed Exceed Exceed Exceed
Obligations Plan Assets Obligations Plan Assets
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- - -----------------------------------------------------------------------------------------------------------------------------------
Actuarial present value of benefit obligations:
- - -----------------------------------------------------------------------------------------------------------------------------------
Vested benefit obligations $152,849 $ 16,280 $131,047 $ 10,341
- - -----------------------------------------------------------------------------------------------------------------------------------
Nonvested benefit obligations 10,243 1,475 9,495 1,023
- - -----------------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligations 163,092 17,755 140,542 11,364
- - -----------------------------------------------------------------------------------------------------------------------------------
Additional amounts related to assumed pay increases 29,123 2,944 30,919 3,873
- - -----------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligations 192,215 20,699 171,461 15,237
- - -----------------------------------------------------------------------------------------------------------------------------------
Plan assets at fair value 246,793 2,873 222,957 2,105
- - -----------------------------------------------------------------------------------------------------------------------------------
Plan assets in excess of (less than) benefit obligations 54,578 (17,826) 51,496 (13,132)
- - -----------------------------------------------------------------------------------------------------------------------------------
Unamortized net (assets) obligations at date of adoption (31,900) 3,462 (35,490) 3,879
- - -----------------------------------------------------------------------------------------------------------------------------------
Unrecognized net (gain) loss resulting from experience
different from that assumed and changes in actuarial assumptions 13,888 (1,484) 14,395 (925)
- - -----------------------------------------------------------------------------------------------------------------------------------
Unrecognized prior service cost 2,879 5,684 7,867 1,248
- - -----------------------------------------------------------------------------------------------------------------------------------
Adjustment required to recognize minimum liability -- (5,458) -- (2,910)
- - -----------------------------------------------------------------------------------------------------------------------------------
Contributions subsequent to measurement date -- 270 -- 220
- - -----------------------------------------------------------------------------------------------------------------------------------
Prepaid (accrued) pension cost $ 39,445 $(15,352) $ 38,268 $(11,620)
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The projected benefit obligation was determined using a weighted average
discount rate of 7% for 1994, 8% for 1993, and 8.5% for 1992. The weighted
average rate of future compensation increases was 4% for 1994, 5% for 1993, and
5.5% for 1992. The expected rate of return on plan assets was 9.5% for these
years. The plans' assets consist primarily of stocks and bonds.
The company's policy for funded plans is to make contributions equal to or
greater than the requirements prescribed by the Employee Retirement Income
Security Act (ERISA).
33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. BUSINESS SEGMENT INFORMATION
The company's operations have been classified into three business segments:
wines and spirits, consumer durables, and other. The wines and spirits segment
includes the production, importing, and marketing of wines and distilled
spirits. The consumer durables segment includes the manufacture and sale of
china, crystal, ceramic and crystal collectibles, silver, pewter, and luggage.
Through October 1993, the other segment included a credit card transaction
processing business and an aquaculture business. The credit card transaction
processing business was sold in October 1993 and the use of this segment was
discontinued.
Summarized financial information by business segment for 1994, 1993, and
1992 is as follows (in thousands):
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------
1994 1993 1992
======================================================================
<S> <C> <C> <C>
Net sales:
- - ----------------------------------------------------------------------
Wines and Spirits $1,141,455 $1,154,549 $1,015,043
- - ----------------------------------------------------------------------
Consumer Durables 513,612 519,038 492,189
- - ----------------------------------------------------------------------
Other 10,053 18,096 12,555
======================================================================
$1,665,120 $1,691,683 $1,519,787
======================================================================
Operating income:
- - ----------------------------------------------------------------------
Wines and Spirits $ 235,004 $ 245,693 $ 220,967
- - ----------------------------------------------------------------------
Consumer Durables 18,953 24,454 40,365
- - ----------------------------------------------------------------------
Other 453 (1,917) (14,779)
- - ----------------------------------------------------------------------
Corporate (14,049) (12,848) (12,735)
======================================================================
$ 240,361 $ 255,382 $ 233,818
======================================================================
Total assets:
- - ----------------------------------------------------------------------
Wines and Spirits $ 676,086 $ 659,911 $ 555,316
- - ----------------------------------------------------------------------
Consumer Durables 500,707 539,682 559,688
- - ----------------------------------------------------------------------
Other -- 8,536 6,635
- - ----------------------------------------------------------------------
Corporate 57,056 102,869 71,883
======================================================================
$1,233,849 $1,310,998 $1,193,522
======================================================================
Depreciation and amortization:
- - ----------------------------------------------------------------------
Wines and Spirits $ 22,108 $ 19,981 $ 17,131
- - ----------------------------------------------------------------------
Consumer Durables 23,436 22,982 19,492
- - ----------------------------------------------------------------------
Other 271 597 459
- - ----------------------------------------------------------------------
Corporate 208 195 171
======================================================================
$ 46,023 $ 43,755 $ 37,253
======================================================================
Capital expenditures:
- - ----------------------------------------------------------------------
Wines and Spirits $ 19,699 $ 15,968 $ 13,194
- - ----------------------------------------------------------------------
Consumer Durables 7,464 17,148 32,931
- - ----------------------------------------------------------------------
Other 168 355 5,611
- - ----------------------------------------------------------------------
Corporate 102 145 405
======================================================================
$ 27,433 $ 33,616 $ 52,141
======================================================================
</TABLE>
Consumer durables' operating income was reduced by $8,180,000 ($5,350,000
after-tax) for the closing or reformatting of seven retail stores in 1994 and
reduced by $3,830,000 ($2,500,000 after-tax) for the write-down of slow-moving
and obsolete assets in 1993.
There were no significant intersegment sales or transfers during 1994,
1993, and 1992. Operating income by business segment excludes interest income,
interest expense, and net unallocated corporate expenses. Corporate assets
consist principally of cash and cash equivalents, short-term investments,
certain corporate receivables, and other assets.
9. FINANCIAL INSTRUMENTS
The company has sold an option to swap interest rates that effectively
eliminates the call feature and establishes a fixed interest rate on the
$100,000,000 of notes through their maturity date, April 1, 1998. The carrying
amount of the option represents deferred income, which will reduce interest
expense over the term of the option.
The carrying amount of cash and cash equivalents, short-term investments,
and commercial paper approximates fair value due to the short maturities of
these instruments. The value of long-term debt and the option to swap are based
on quoted market prices, discounted cash flows, and estimates of the cost to
terminate or otherwise settle. A comparison of the carrying value and fair value
of these instruments is as follows (in thousands):
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
1994 1993
=========================================================================
Carrying Fair Carrying Fair
Amount Value Amount Value
=========================================================================
<S> <C> <C> <C> <C>
Assets:
- - -------------------------------------------------------------------------
Cash and
cash equivalents $ 30,540 $ 30,540 $ 74,912 $ 74,912
- - -------------------------------------------------------------------------
Short-term investments -- -- 18,146 18,146
- - -------------------------------------------------------------------------
Liabilities:
- - -------------------------------------------------------------------------
Commercial paper 54,229 54,229 -- --
- - -------------------------------------------------------------------------
Long-term debt 303,928 308,248 160,797 167,016
- - -------------------------------------------------------------------------
Option to swap
interest rates 913 5,650 1,146 8,000
- - -------------------------------------------------------------------------
</TABLE>
The company has entered into foreign exchange forward contracts to reduce
its exposure to fluctuations in foreign exchange rates. While these instruments
are subject to the risk of loss from changes in exchange rates, these losses
would generally be offset by related gains. The company's foreign exchange
forward contracts on hand at April 30, 1994 and 1993 totaled $26,500,000 and
$16,400,000, respectively. The carrying value of these financial instruments
approximates fair value.
34
<PAGE>
10. TAXES ON INCOME
Taxes on income for fiscal 1994 includes a $5,300,000 charge resulting from an
increase in the corporate income tax rate. Included in this amount is a charge
of $3,580,000 for the retroactive effect of a higher tax rate on earnings from
January 1, 1993 to April 30, 1993, and a noncash charge to restate the deferred
tax liability at the new corporate tax rate.
The provision for taxes on income is composed of the following (in thousands):
<TABLE>
<CAPTION>
- - -------------------------------------------------------
1994 1993 1992
=======================================================
<S> <C> <C> <C>
Currently payable:
- - -------------------------------------------------------
Federal $69,539 $64,667 $54,095
- - -------------------------------------------------------
Foreign 3,877 4,222 4,451
- - -------------------------------------------------------
State and Local 16,594 14,688 13,661
- - -------------------------------------------------------
90,010 83,577 72,207
- - -------------------------------------------------------
- - -------------------------------------------------------
Deferred:
- - -------------------------------------------------------
Federal 6,401 3,659 5,280
- - -------------------------------------------------------
Foreign (27) (699) (576)
- - -------------------------------------------------------
State and Local (226) (150) 428
- - -------------------------------------------------------
6,148 2,810 5,132
- - -------------------------------------------------------
$96,158 $86,387 $77,339
- - -------------------------------------------------------
</TABLE>
United States and foreign components of income before income taxes and
the cumulative effect of accounting changes are as follows (in thousands):
<TABLE>
<CAPTION>
- - ---------------------------------------------------------
1994 1993 1992
=========================================================
<S> <C> <C> <C>
United States $220,880 $211,777 $189,108
- - ---------------------------------------------------------
Foreign 36,347 30,800 34,584
- - ---------------------------------------------------------
$257,227 $242,577 $223,692
- - ---------------------------------------------------------
</TABLE>
The following is a reconciliation of the effective tax rates with the United
States statutory rates:
<TABLE>
<CAPTION>
Percent of Income Before Taxes
- - ------------------------------------------------------------------
1994 1993 1992
==================================================================
<S> <C> <C> <C>
Statutory rate 35.0% 34.0% 34.0%
- - ------------------------------------------------------------------
State taxes, net of U.S.
Federal tax benefit 4.1 4.0 4.2
- - ------------------------------------------------------------------
Income taxed at other than U.S.
Federal statutory rate (1.5) (1.2) (1.9)
- - ------------------------------------------------------------------
Tax benefit of Foreign Sales
Corporation (1.3) (.9) (.8)
- - ------------------------------------------------------------------
Nondeductible amortization 1.1 1.2 1.1
- - ------------------------------------------------------------------
Adjustment of prior years' accruals (2.1) (1.7) (2.2)
- - ------------------------------------------------------------------
Adjustment of prior years' rate 1.2 -- --
- - ------------------------------------------------------------------
Other, net .9 .2 .2
- - ------------------------------------------------------------------
37.4% 35.6% 34.6%
- - ------------------------------------------------------------------
</TABLE>
Deferred tax assets and liabilities for 1994 are composed of the following
(in thousands):
<TABLE>
<CAPTION>
Deferred Tax
- - --------------------------------------------------------------
Assets Liabilities
- - --------------------------------------------------------------
<S> <C> <C>
Postretirement and other benefits $30,527 --
- - --------------------------------------------------------------
Various accrued liabilities
and other 31,400 --
- - --------------------------------------------------------------
Intercompany transactions -- $112,116
- - --------------------------------------------------------------
Depreciation -- 22,068
- - --------------------------------------------------------------
Undistributed foreign earnings -- 17,318
- - --------------------------------------------------------------
Pension plans -- 13,857
- - --------------------------------------------------------------
Other -- 805
- - --------------------------------------------------------------
$61,927 $166,164
- - --------------------------------------------------------------
</TABLE>
The 1993 deferred provision arose principally from $3,473,000 related to
undistributed foreign earnings, $677,000 related to deferred income, partially
offset by $2,396,000 related to intercompany transactions. The 1992 deferred
provision arose principally from $3,284,000 related to undistributed foreign
earnings, $2,196,000 related to deferred income, and $3,671,000 related to
intercompany transactions. Deferred income taxes were not provided on certain
undistributed earnings ($58,854,000 at April 30, 1994) of certain foreign
subsidiaries because such undistributed earnings are expected to be reinvested
indefinitely overseas. If these amounts were not considered permanently
reinvested, additional deferred taxes of approximately $20,128,000 would have
been provided.
Cash paid for income taxes was $93,618,000 in 1994, $73,055,000 in 1993, and
$67,255,000 in 1992.
11. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses are composed of the following (in
thousands):
<TABLE>
<CAPTION>
April 30, 1994 1993 1992
=============================================================
<S> <C> <C> <C>
Accounts payable, trade $ 55,084 $ 38,725 $ 35,838
- - -------------------------------------------------------------
Accrued expenses:
- - -------------------------------------------------------------
Compensation and
commissions 37,840 35,453 36,904
- - -------------------------------------------------------------
Excise and other non-
income taxes 16,183 17,576 14,604
- - -------------------------------------------------------------
Interest 9,042 8,476 10,330
- - -------------------------------------------------------------
Advertising 39,356 35,401 20,988
- - -------------------------------------------------------------
Other 58,670 45,033 40,594
- - -------------------------------------------------------------
161,091 141,939 123,420
- - -------------------------------------------------------------
$216,175 $180,664 $159,258
- - -------------------------------------------------------------
</TABLE>
35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. LONG-TERM DEBT
At April 30, the company's long-term debt consisted of the following (in
thousands, except percentage amounts):
<TABLE>
<CAPTION>
April 30, 1994 1993 1992
=====================================================================
<S> <C> <C> <C>
Commercial paper, 3.6% to 4.0% $150,000 -- --
- - ---------------------------------------------------------------------
9.375% notes,
9.421% effective rate due 1998 99,880 $ 99,850 $ 99,820
- - ---------------------------------------------------------------------
11.25% notes, due through 1999 38,753 44,632 --
- - ---------------------------------------------------------------------
Variable rate industrial
revenue bonds 13,840 13,840 13,840
- - ---------------------------------------------------------------------
Other 1,455 2,475 604
- - -----------------------------------==================================
303,928 160,797 114,264
- - ---------------------------------------------------------------------
Less current portion 4,867 6,389 73
- - -----------------------------------==================================
$299,061 $154,408 $114,191
- - -----------------------------------==================================
</TABLE>
The $100,000.00 of 9.375% notes are due in 1998 and callable at par in 1995.
See Note 9 on page 34 for a related financial instrument. The variable rate
industrial revenue bonds are due through 2026 at rates varying from 3.3% to
3.5%.
At April 30, 1994, $150,000,000 of commercial paper is classified as long-term
debt in accordance with the company's intent and ability to refinance
obligations on a long-term basis. Long-term debt payment requirements for the
five fiscal years after April 30, 1994 are as follows: 1995 - $4,867,000; 1996 -
$5,414,000; 1997 - $6,023,000; 1998 - $256,581,000; 1999 - $7,455,000. Cash paid
for interest was $16,629,000 in 1994, $17,771,000 in 1993, and $12,283,000 in
1992.
13. ENVIRONMENTAL
The company, along with other responsible parties, faces environmental claims
resulting from the cleanup of several waste deposit sites. The company has
accrued $2,800,000 to cover its portion of these cleanup costs. The company
currently anticipates that all other costs of remediating these sites, estimated
at $8,200,000, are expected to be paid by other responsible parties or insurance
coverage. The company believes that any additional costs incurred by the company
will not have a material adverse effect on the company's financial condition or
results of operations.
14. CREDIT FACILITIES
The company has a $150,000,000 revolving credit agreement that expires in fiscal
1998 and $130,000,000 in revolving credit agreements that expire in fiscal 1995.
At April 30, 1994, the company had no outstanding borrowings under these
agreements. The most restrictive of the agreement's covenants requires the
company to maintain a minimum level of net worth. At April 30, 1994, net worth,
as defined in the agreement, exceeded the required level by $271,347,000. At
April 30, 1994, the company also had available for issuance $250,000,000 of debt
securities under a shelf registration filing with the Securities and Exchange
Commission.
15. CONTINGENCIES
Various suits and claims (asserted and unasserted) arising in the ordinary
course of business are pending or threatened against the company. These include
product liability suits against the company that allege injury from the
consumption of alcoholic beverages and suits that allege employment
discrimination based on the plaintiffs' age. While some of these suits and
claims seek significant financial recoveries from the company, based on a
considered evaluation of all known and threatened litigation, and on the advice
of counsel, management believes that the ultimate resolution of these matters
will not have a material adverse effect on the company's financial position or
results of operations.
16. QUARTERLY RESULTS (UNAUDITED)
The 1994 and 1993 unaudited quarterly results are presented on the highlights
page.
- - -------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
BROWN-FORMAN CORPORATION
We have audited the accompanying consolidated balance sheets of Brown-Forman
Corporation and Subsidiaries as of April 30, 1994, 1993, and 1992, and the
related consolidated statements of income, stockholders' equity and cash flows
for the years then ended. These financial statements are the responsibility of
the company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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 includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Brown-Forman
Corporation and Subsidiaries at April 30, 1994, 1993, and 1992, and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.
As discussed in Notes 2, 5, and 6 to the consolidated financial statements, in
1994 the company adopted changes in its methods of accounting for postretirement
benefits other than pensions, postemployment benefits, and contributions.
/s/ Coopers & Lybrand
- - ----------------------------
Louisville, Kentucky
June 10, 1994
36
<PAGE>
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
_______________
SUBSIDIARIES
<TABLE>
<CAPTION>
Percentage of
Voting State or
Securities Jurisdiction
Name Owned of Incorporation
---- ------------- ----------------
<S> <C> <C>
Jack Daniel Distillery,
Lem Motlow, Prop., Inc. 100% Kentucky
Fetzer Vineyards 90.1% California
Lenox, Incorporated 100% New Jersey
Dansk International Designs Ltd. 100% (1) New York
Mt. Eagle Corporation 100% Delaware
Canadian Mist Distillers, Limited 100% Ontario, Canada
The Jos. Garneau Co., S.A. 100% (2) Switzerland
Thoroughbred Plastics Corporation 100% Kentucky
Early Times Distillers Company 100% Delaware
Brown-Forman International F.S.C., Ltd. 100% U.S. Virgin Islands
L-H Limited 100% United Kingdom
Longnorth, Limited 100% (2) Ireland
Clintock, Limited 100% (2) (3) Ireland
Chissick Limited 100% (2) (3) Ireland
Lantone, Limited 100% (2) (3) Ireland
</TABLE>
The above companies are included in the consolidated financial statements. The
names of certain subsidiaries have been omitted which, if considered in the
aggregate as a single subsidiary, would not constitute a significant subsidiary.
(1) A wholly-owned subsidiary of Lenox, Incorporated.
(2) Includes qualifying shares assigned to Brown-Forman Corporation.
(3) A wholly-owned subsidiary of Longnorth, Limited.
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Brown-Forman Corporation on Form S-3, (File No. 33-52551) of our report which
includes an explanatory paragraph for the company's adoption of changes in its
methods of accounting for postretirement benefits other than pensions,
postemployment benefits, and contributions, dated June 10, 1994, on our audits
of the consolidated financial statements and financial statement schedules of
Brown-Forman Corporation as of April 30, 1994, 1993, and 1992, and for the years
ended April 30, 1994, 1993, and 1992, which report is included in this Annual
Report on Form 10-K.
/s/ Coopers & Lybrand
- - ----------------------------
Louisville, Kentucky
July 19, 1994
