United States Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1995
Commission File No. 1-123
_________
BROWN-FORMAN CORPORATION
(Exact name of Registrant as specified in its Charter)
Delaware 61-0143150
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
850 Dixie Highway 40210
Louisville, Kentucky (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code (502) 585-1100
________
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ____
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date: December 1, 1995
Class A Common Stock (voting) 28,988,091
Class B Common Stock (nonvoting) 40,008,147
<PAGE>
BROWN-FORMAN CORPORATION
Index to Quarterly Report Form 10-Q
Part I. Financial Information
Item 1. Financial Statements Page Number
Condensed Consolidated Statement of Income
Three months ended October 31, 1995 and 1994 3
Six months ended October 31, 1995 and 1994 3
Condensed Consolidated Balance Sheet
October 31, 1995 and April 30, 1995 4
Condensed Consolidated Statement of Cash Flows
Six months ended October 31, 1995 and 1994 5
Notes to the Condensed Consolidated Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 - 9
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 10
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BROWN-FORMAN CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(Expressed in thousands except per share amounts)
Three Months Ended Six Months Ended
October 31, October 31,
1995 1994 1995 1994
==== ==== ==== ====
Net sales $518,206 $474,554 $928,676 $844,835
Excise taxes 76,303 69,739 134,680 129,803
Cost of sales 193,278 180,718 342,010 307,943
-------- -------- -------- --------
Gross profit 248,625 224,097 451,986 407,089
Selling, general, and
administrative expenses 99,307 88,281 187,633 172,121
Advertising expenses 59,325 48,547 117,223 95,688
-------- -------- -------- --------
Operating income 89,993 87,269 147,130 139,280
Interest income 569 422 1,316 681
Interest expense 5,151 5,847 10,664 11,344
-------- -------- -------- --------
Income before income 85,411 81,844 137,782 128,617
taxes
Taxes on income 32,217 32,794 52,437 51,441
-------- -------- -------- --------
Net income 53,194 49,050 85,345 77,176
Less preferred stock
dividend requirements 118 118 236 236
-------- -------- -------- --------
Net income applicable
to common stock $53,076 $48,932 $85,109 $76,940
======== ======== ======== ========
Weighted average number
of common shares
outstanding in thousands 68,996 68,996 68,996 68,996
Per common share:
Net income $ .77 $ .71 $ 1.23 $ 1.12
======= ======= ======= =======
Cash dividends paid $ .2480 $ .2267 $ .4960 $ .4734
======= ======= ======= =======
See notes to the condensed consolidated statements.
<PAGE>
BROWN-FORMAN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Expressed in thousands)
October 31, April 30,
1995 1995
(Unaudited)
Assets
Cash and cash equivalents $ 39,242 $ 62,474
Accounts receivable, net 324,873 234,165
Inventories:
Barreled whisky 159,829 163,200
Finished goods 141,506 122,690
Work in process 72,881 58,991
Raw materials and supplies 40,607 37,042
---------- ----------
Total inventories 414,823 381,923
Other current assets 18,526 19,348
---------- ----------
Total current assets 797,464 697,910
Property, plant, and equipment, net 262,217 252,217
Intangible assets, net 258,022 262,475
Other assets 81,987 72,957
---------- ----------
Total assets $1,399,690 $1,285,559
========== ==========
Liabilities
Commercial paper $ 50,000 $ 50,000
Accounts payable and accrued expenses 241,909 221,347
Current portion of long-term debt 6,123 5,514
Accrued taxes on income 1,957 --
Deferred income taxes 9,047 8,747
---------- ----------
Total current liabilities 309,036 285,608
Long-term debt 273,330 246,842
Deferred income taxes 127,549 114,420
Postretirement benefits 51,478 50,776
Other liabilities and deferred income 41,240 42,066
---------- ----------
Total liabilities 802,634 739,712
Stockholders' Equity
Preferred stock 11,779 11,779
Common stockholders' equity 585,277 534,068
---------- ----------
Total stockholders' equity 597,056 545,847
---------- ----------
Total liabilities and
stockholders' equity $1,399,690 $1,285,559
========== ==========
Note: The balance sheet at April 30, 1995 has been taken from
the audited financial statements at that date, and condensed.
See notes to the condensed consolidated statements.
<PAGE>
BROWN-FORMAN CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Expressed in thousands; amounts in brackets are reductions of cash)
Six Months Ended
October 31,
1995 1994
Cash flows from operating activities:
Net income $ 85,345 $ 77,176
Adjustments to reconcile net income
to net cash provided by (used for)
operations:
Depreciation 18,098 18,395
Amortization of intangible assets 4,452 4,457
Deferred income taxes 13,429 4,364
Other (8,653) 3,116
Changes in assets and liabilities:
Accounts receivable (90,708) (58,590)
Inventories (32,899) (28,756)
Other current assets 822 (12,090)
Accounts payable and accrued expenses 20,562 15,648
Accrued taxes on income 1,957 6,108
-------- --------
Cash provided by operating
activities 12,405 29,828
Cash flows from investing activities:
Additions to property, plant, and
equipment, net (28,098) (16,064)
Other (179) (847)
-------- --------
Cash (used for) investing
activities (28,277) (16,911)
Cash flows from financing activities:
Commercial paper 2,683 35,605
Proceeds from long-term debt 30,000 --
Reduction of long-term debt (5,585) (5,738)
Cash dividends paid (34,458) (32,898)
-------- --------
Cash (used for) financing
activities (7,360) (3,031)
-------- --------
Net (decrease) increase in cash and
cash equivalents (23,232) 9,886
Cash and cash equivalents, beginning
of period 62,474 30,540
-------- --------
Cash and cash equivalents, end of
period $ 39,242 $ 40,426
======== ========
See notes to the condensed consolidated statements.
<PAGE>
BROWN-FORMAN CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------
The condensed consolidated statements have been prepared in
accordance with the company's customary accounting practices as
set forth in the company's 1995 annual report on Form 10-K and
have not been audited. In the opinion of management, all
adjustments (which include only normal recurring adjustments)
necessary for a fair presentation of this information have been
made.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. It is suggested that these condensed consolidated
financial statements be read in conjunction with the financial
statements and notes thereto included in the company's April
30, 1995 annual report on Form 10-K. To conform to the current
year presentation, certain reclassifications have been made to
prior year condensed consolidated statements.
2. INVENTORIES
-----------
The company uses the last-in, first-out method for
determining the cost for substantially all inventories. If the
last-in, first-out method had not been used, inventories would
have been $77,017,000 and $70,497,000 higher than reported at
October 31, 1995, and April 30, 1995, respectively.
3. ENVIRONMENTAL
-------------
The company, along with other responsible parties, faces
environmental claims resulting from the cleanup of several
waste deposit sites. The company has accrued its estimated
portion of these cleanup costs and expects other responsible
parties and insurance coverage to cover the remaining costs.
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.
4. CONTINGENCIES
-------------
In the normal course of business, various suits and claims
are brought against the company, some of which seek significant
damages. Many of these suits and claims take years to
adjudicate and it is difficult to predict their outcome. In
the opinion of management, based on advice from legal counsel,
none of these suits or claims will have a material adverse
effect on the company's financial position or results of
operations.
Item 2. Management's Discussion and Analysis of Financial
- ------- -------------------------------------------------
Condition and Results of Operations
-----------------------------------
The following Discussion and Analysis of Financial
Condition and Results of Operations should be read in
conjunction with the company's April 30, 1995 annual report to
stockholders. The results of operations for the six months
ended October 31, 1995, are not necessarily indicative of the
operating results for the full year.
Results of Operations
- ---------------------
Second Quarter Fiscal 1996 Compared to Second Quarter Fiscal 1995
- -----------------------------------------------------------------
A summary of operating performance follows (expressed in
thousands, except percentage and per share amounts):
THREE MONTHS ENDED
OCTOBER 31, %
1995 1994 CHANGE
---- ---- ------
Net Sales
- ---------
Wines & Spirits $364,261 $307,507 18.5
Consumer Durables 153,945 167,047 (7.8)
-------- -------- ----
Total $518,206 $474,554 9.2
Operating Income $89,993 $87,269 3.1
- ----------------
Net Income $53,194 $49,050 8.4
- ----------
Earnings Per Share $ 0.77 $ 0.71 8.4
- ------------------
Effective Tax Rate 37.72% 40.07%
- ------------------
Sales of the company's wines and spirits segment increased
18.5% for the quarter. This increase was led by Jack Daniel's
and by Tropical Freezes, an innovative line of frozen cocktails
that has enjoyed strong consumer trial since introduction this
past spring. Additional growth was provided by increased sales
of the company's premium table wines and Southern Comfort.
Revenues from the company's consumer durables segment declined
7.8% for the quarter. The decrease was attributable to poor
results for Lenox collectibles and a difficult retail operating
environment. Lenox Collections, the direct marketing arm for
the company's collectibles, has been especially hurt by lower
response rates as well as higher operating expenses.
Operating income benefited from increased beverage sales,
partially offset by higher advertising investments for Brown-
Forman's beverage products in international markets. Selling,
general, and administrative expenses have also increased as a
result of the company's overseas expansion initiative.
Net interest expense declined reflecting lower debt
levels. This decline was partially offset by higher rates for
commercial paper borrowings compared to fiscal 1995. A decline
in the effective tax rate reflects benefits from foreign
operations.
Six Months Fiscal 1996 Compared to Six Months Fiscal 1995
- ---------------------------------------------------------
A summary of operating performance follows (expressed in
thousands, except percentage and per share amounts):
SIX MONTHS ENDED
OCTOBER 31, %
1995 1994 CHANGE
---- ---- ------
Net Sales
- ---------
Wines & Spirits $662,049 $565,044 17.2
Consumer Durables 266,627 279,791 (4.7)
-------- --------
Total $928,676 $844,835 9.9
Operating Income $147,130 $139,280 5.6
- ----------------
Net Income $ 85,345 $ 77,176 10.6
- ----------
Earnings Per Share $ 1.23 $ 1.12 10.6
- ------------------
Effective Tax Rate 38.06% 40.00%
- ------------------
Sales of the company's wines and spirits segment increased
17.2% for the first six months as a result of the successful
introduction of Tropical Freezes and sales growth of Jack
Daniel's, Southern Comfort, and the company's premium table
wines. Revenues from the company's consumer durables segment
were down 4.7% compared to last year. Lower response rates at
Lenox Collections and a difficult retail operating environment
contributed to the sales decline.
Operating income increased due to improved beverage sales,
offset partially by higher advertising in overseas markets and
for the introduction of Tropical Freezes in the U.S. Selling,
general, and administrative expenses are also higher due to
overseas expansion efforts. Based on first half results, full
year earnings for the consumer durables segment are forecast to
be modestly below last year.
Net interest expense declined in the first six months due
primarily to lower debt levels. This decline was partially
offset by higher rates for commercial paper borrowings compared
to fiscal 1995. Benefits from foreign operations caused the
company's effective tax rate to decline, a trend which is
expected to continue in the second half of the year.
Because of weakness in the consumer durables segment and
continued investment in the company's key brands, the growth
rate for earnings for the rest of the year is expected to be
lower than the 11% experienced in the company's first half.
Financial Condition at October 31, 1995 Compared to Financial
- -------------------------------------------------------------
Condition at April 30, 1995
- ---------------------------
The company's activities in the first half ended October
31, 1995 resulted in a net decrease in cash and cash
equivalents. Cash provided by operating activities was down
58% from the same period last year due largely to an increase
in days sales outstanding resulting from higher international
sales. Additions to property, plant, and equipment increased
over last year and reflect the company's plans to upgrade and
expand the production facilities in the wines and spirits
segment. During the first half of the fiscal year, the company
issued $30 million of ten-year medium term notes, proceeds of
which were used for debt retirement and other general corporate
purposes. Total net working capital increased 18% from
April 30, 1995 to $488 million.
Dividends
- ---------
The Board of Directors increased the quarterly cash
dividend 4.8% from $.248 to $.260 per share on Class A and
Class B common stock payable January 1, 1996. As a result, the
indicated annual cash dividend per share rose from $.992 to
$1.04 per share.
Environmental
- -------------
The company, along with other responsible parties, faces
environmental claims resulting from the cleanup of several
waste deposit sites. The company has accrued its estimated
portion of these cleanup costs and expects other responsible
parties and insurance coverage to cover the remaining costs.
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.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a)Exhibits:
Exhibit
Number Exhibit
------ -------
27 Financial Data Schedule
(b)Reports on Form 8-K:
1.) There were no reports on Form 8-K filed during the
quarter ended October 31, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
BROWN-FORMAN CORPORATION
(Registrant)
/s/Steven B. Ratoff
Date: December 8, 1995 By:_______________________________
Steven B. Ratoff
Executive Vice President and
Chief Financial Officer
(On behalf of the Registrant and
as Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
company's October 31, 1995 Quarterly Report Form 10-Q and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> OCT-31-1995
<CASH> 39,242
<SECURITIES> 0
<RECEIVABLES> 324,873<F1>
<ALLOWANCES> 0
<INVENTORY> 414,823
<CURRENT-ASSETS> 797,464
<PP&E> 557,133
<DEPRECIATION> 294,916
<TOTAL-ASSETS> 1,399,690
<CURRENT-LIABILITIES> 309,036
<BONDS> 273,330
<COMMON> 585,277
0
11,779
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,399,690
<SALES> 928,676
<TOTAL-REVENUES> 928,676
<CGS> 476,690<F2>
<TOTAL-COSTS> 476,690<F2>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,664
<INCOME-PRETAX> 137,782
<INCOME-TAX> 52,437
<INCOME-CONTINUING> 85,345
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 85,345
<EPS-PRIMARY> 1.23
<EPS-DILUTED> 1.23
<FN>
<F1>Accounts receivable is shown net of allowance for doubtful accounts.
Allowance for doubtful accounts has not changed materially from the
April 30, 1995 balance.
<F2>Cost of goods sold and total costs include excise taxes of $134.680
million.
</FN>
</TABLE>
