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 January 31, 1996
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: January 31, 1996
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 January 31, 1996 and 1995 3
Nine months ended January 31, 1996 and 1995 3
Condensed Consolidated Balance Sheet
January 31, 1996 and April 30, 1995 4
Condensed Consolidated Statement of Cash Flows
Nine months ended January 31, 1996 and 1995 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 Nine Months Ended
January 31, January 31,
1996 1995 1996 1995
-------- -------- ---------- ----------
Net sales $451,093 $431,112 $1,379,769 $1,275,947
Excise taxes 66,584 67,759 201,264 197,562
Cost of sales 168,028 152,212 510,038 460,155
-------- -------- ---------- ----------
Gross profit 216,481 211,141 668,467 618,230
Selling, general, and
administrative expenses 89,156 93,799 276,789 265,920
Advertising expenses 61,741 49,203 178,964 144,891
------- -------- ---------- ----------
Operating income 65,584 68,139 212,714 207,419
Interest income 733 497 2,049 1,178
Interest expense 5,165 5,758 15,829 17,102
-------- -------- ---------- ----------
Income before income taxes 61,152 62,878 198,934 191,495
Taxes on income 23,045 25,186 75,482 76,627
-------- -------- ---------- ----------
Net income 38,107 37,692 123,452 114,868
Less preferred stock
dividend requirements 118 118 353 353
-------- -------- ---------- ----------
Net income applicable
to common stock $ 37,989 $ 37,574 $ 123,099 $114,515
======== ======== ========== ========
Weighted average number
of common shares outstanding
in thousands 68,996 68,996 68,996 68,996
Per common share:
Net income $ .55 $ .55 $ 1.78 1.66
-------- -------- -------- --------
Cash dividends paid $ .2600 $ .2480 $ .7560 $ .7214
======== ======== ======== ========
See notes to the condensed consolidated statements.
<PAGE>
BROWN-FORMAN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Expressed in thousands)
January 31, April 30,
1996 1995
(Unaudited)
Assets
Cash and cash equivalents $ 55,293 $ 62,474
Accounts receivable, net 234,098 234,165
Inventories:
Barreled whisky 159,977 163,200
Finished goods 140,160 122,690
Work in process 77,039 58,991
Raw materials and supplies 44,325 37,042
---------- ----------
Total inventories 421,501 381,923
Other current assets 19,073 19,348
---------- ----------
Total current assets 729,965 697,910
Property, plant and equipment, net 276,677 252,217
Intangible assets, net 258,644 262,475
Other assets 71,920 72,957
---------- ----------
Total assets $1,337,206 $1,285,559
========== ==========
Liabilities
Commercial paper $ 50,000 $ 50,000
Accounts payable and accrued expenses 200,834 221,347
Current portion of long-term debt 6,023 5,514
Accrued taxes on income 4,390 --
Deferred income taxes 9,047 8,747
Dividends payable 18,057 --
---------- ----------
Total current liabilities 288,351 285,608
Long-term debt 220,357 246,842
Deferred income taxes 131,382 114,420
Postretirement benefits 51,955 50,776
Other liabilities and deferred income 46,285 42,066
---------- ----------
Total liabilities 738,330 739,712
Stockholders' Equity
Preferred stock 11,779 11,779
Common stockholders' equity 587,097 534,068
---------- ----------
Total stockholders' equity 598,876 545,847
---------- ----------
Total liabilities and
stockholders' equity $1,337,206 $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)
Nine Months Ended
January 31,
1996 1995
-------- --------
Cash flows from operating activities:
Net income $123,452 $114,868
Adjustments to reconcile net income
to net cash
provided by (used for) operations:
Depreciation 27,858 28,438
Amortization of intangible assets 6,678 6,676
Deferred income taxes 16,937 17,298
Other (2,298) (3,070)
Changes in assets and liabilities:
Accounts receivable 8,249 55,190
Inventories (28,575) (25,195)
Other current assets 470 (1,171)
Accounts payable and accrued
expenses (33,720) (30,016)
Accrued taxes on income 4,179 (3,815)
-------- --------
Cash provided by operating
activities 123,230 159,203
Cash flows from investing activities:
Additions to property, plant, and
equipment, net (42,526) (23,280)
Investment in affiliate, net of cash (8,216) --
Other (465) (1,123)
-------- --------
Cash used for investing
activities (51,207) (24,403)
Cash flows from financing activities:
Commercial paper (51,005) (54,229)
Proceeds from long-term debt 30,000 --
Reduction of long-term debt (5,685) (11,541)
Cash dividends paid (52,514) (50,127)
-------- --------
Cash used for financing
activities (79,204) (115,897)
-------- --------
Net increase (decrease) in cash and cash equivalents (7,181) 18,903
Cash and cash equivalents, beginning of period 62,474 30,540
-------- --------
Cash and cash equivalents, end of period $ 55,293 $ 49,443
======== ========
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 $82,635,000 and $70,497,000 higher than reported at
January 31, 1996, 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 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.
<PAGE>
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 nine months
ended January 31, 1996, are not necessarily indicative of the
operating results for the full year.
Results of Operations
- ---------------------
Third Quarter Fiscal 1996 Compared to Third Quarter Fiscal 1995
- ---------------------------------------------------------------
A summary of operating performance follows (expressed in
thousands, except percentage and per share amounts):
THREE MONTHS ENDED
JANUARY 31, %
1996 1995 CHANGE
-------- -------- ------
Net Sales
- ---------
Wines & Spirits $317,179 $293,477 8.1
Consumer Durables 133,914 137,635 (2.7)
-------- --------
Total $451,093 $431,112 4.6
Operating Income $ 65,584 $ 68,139 (4.2)
- ----------------
Net Income $ 38,107 $ 37,692 1.1
- ----------
Earnings Per Share $ 0.55 $ 0.54 1.1
- ------------------
Effective Tax Rate 37.7% 40.1%
- ------------------
Sales of the company's wines and spirits segment were up
8% for the quarter, led by international growth of Jack
Daniel's Tennessee Whiskey and gains for the company's premium
wine brands. Jack Daniel's continues to show impressive growth
in many of its established international markets, and the
company is encouraged by consumer response to Brown-Forman's
recent initiatives in newer markets. Brown-Forman's wines are
benefiting from positive U.S. consumption trends for premium
table wine, due in part to continuing media reports about
scientific research indicating that regular moderate
consumption of alcohol helps reduce the risk of heart disease.
Revenues from Brown-Forman's consumer durables segment
declined 3% for the quarter. The decline was primarily
attributable to poor response rates experienced by the Lenox
Collections direct marketing division, as well as a generally
soft retail environment. Full year earnings for the consumer
durables segment are forecast to be below last year's level,
largely as a result of the poor performance of the company's
direct marketing division.
Operating income for the quarter was down 4% compared to
last year. Earnings gains attributable to Brown-Forman's
beverage brands were offset by disappointing results at Lenox,
as well as by continuing investments to establish new beverage
products and new international markets.
<PAGE>
Net interest expense declined 16% from last year's third
quarter due to lower net debt balances. A favorable effective
tax rate reflects benefits from foreign operations and a shift
in earnings toward operations that carry a lower relative tax
rate.
Nine Months Fiscal 1996 Compared to Nine Months Fiscal 1995
- -----------------------------------------------------------
A summary of operating performance follows (expressed in
thousands, except percentage and per share amounts):
NINE MONTHS ENDED
JANUARY 31, %
1996 1995 CHANGE
--------- ---------- ------
Net Sales
- ---------
Wines & Spirits $ 979,228 $ 858,521 14.1
Consumer Durables 400,541 417,426 (4.0)
---------- ----------
Total $1,379,769 $1,275,947 8.1
Operating Income $ 212,714 $ 207,419 2.6
- ----------------
Net Income $ 123,452 $ 114,868 7.5
- ----------
Earnings Per Share $ 1.78 $ 1.66 7.5
- ------------------
Effective Tax Rate 37.9% 40.0%
- ------------------
Sales of the company's wines and spirits segment were up
14% for the nine months ending January 31, led by the
successful introduction of Tropical Freezes, increased
worldwide sales of Jack Daniel's, and growth of the company's
premium wine brands. Revenues from the consumer durables
segment were down 4% for the period, primarily reflecting lower
response rates at the Lenox Collections direct marketing
division, as well as a difficult retail environment for
consumer durables in general.
Consolidated operating income was 3% better than last year
due to higher overseas sales of Jack Daniel's, growth of the
company's premium wine brands, and the successful introduction
of new beverage products. Favorable beverage performance was
somewhat offset by poor results for consumer durables, and
increased investments associated with expansion into
international markets.
Net interest expense continued to be favorable compared to
last year as a result of lower net debt balances. A decline in
the effective tax rate reflects benefits from foreign
operations and a shift in earnings toward operations that carry
a lower relative tax rate. The company expects that Brown-
Forman's full-year effective tax rate in fiscal 1996 will
approximate 38%.
For the remainder of fiscal 1996, any additional earnings
growth will likely be modest, reflecting continued investments
in the company's beverage brands and the current environment
for consumer durables.
<PAGE>
Financial Condition at January 31, 1996 Compared to Financial
- -------------------------------------------------------------
Condition at April 30, 1995
- ---------------------------
Cash provided by operating activities was down 31% from
the same period last year due largely to an increased mix of
international sales, which generally carry longer credit terms.
Additions to property, plant, and equipment increased over last
year and reflect the company's plans to upgrade and expand its
wines and spirits production facilities. The company issued
$30 million of ten-year notes in the first quarter of fiscal
1996, proceeds of which were used for debt retirement and other
general corporate purposes. Total net working capital
increased 2% from April 30, 1995 to $421 million, principally
reflecting additions to inventory in anticipation of future
sales growth.
Dividends
- ---------
On January 25, 1996 the company's Board of Directors
declared a regular quarterly cash dividend of $.26 per share on
both Class A and Class B Common Stock. In addition, a $.10 per
share cash dividend was also declared on the Preferred Stock.
Stockholders of record on March 7, 1996 will receive the cash
dividend on April 1, 1996. As a result, total cash dividends
paid per common share in fiscal 1996 will be $1.016, a 5%
increase over last year.
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>
PART II - OTHER INFORMATION
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 January 31, 1996.
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: March 6, 1996 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 January 31, 1996 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> 9-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> JAN-31-1996
<CASH> 55,293
<SECURITIES> 0
<RECEIVABLES> 234,098<F1>
<ALLOWANCES> 0
<INVENTORY> 421,501
<CURRENT-ASSETS> 729,965
<PP&E> 576,884
<DEPRECIATION> 300,207
<TOTAL-ASSETS> 1,337,206
<CURRENT-LIABILITIES> 288,351
<BONDS> 220,357
<COMMON> 587,097
0
11,779
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,337,206
<SALES> 1,379,769
<TOTAL-REVENUES> 1,379,769
<CGS> 711,302<F2>
<TOTAL-COSTS> 711,302<F2>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,829
<INCOME-PRETAX> 198,934
<INCOME-TAX> 75,482
<INCOME-CONTINUING> 123,452
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 123,452
<EPS-PRIMARY> 1.78
<EPS-DILUTED> 1.78
<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 $201.264
million.
</FN>
</TABLE>
