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 July 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: August 30, 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 July 31, 1996 and 1995 3
Condensed Consolidated Balance Sheet
July 31, 1996 and April 30, 1996 4
Condensed Consolidated Statement of Cash Flows
Three months ended July 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 - 8
Part II. Other Information
Item 1. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 9
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 millions except per share amounts)
Three Months Ended
July 31,
1996 1995
---- ----
Net sales $ 424 $ 410
Excise taxes 59 58
Cost of sales 153 149
----- -----
Gross profit 212 203
Selling, general, and administrative expenses 93 88
Advertising expenses 63 58
----- -----
Operating income 56 57
Interest income 1 1
Interest expense 5 6
----- -----
Income before income taxes 52 52
Taxes on income 20 20
----- -----
Net income 32 32
Less preferred stock dividend requirements -- --
Net income applicable to common stock $ 32 $ 32
===== =====
Weighted average number of common
shares outstanding 69 69
===== =====
Per common share:
Net income $ .47 $ .46
===== =====
Cash dividends paid $ .26 $.248
===== =====
See notes to the condensed consolidated statements.
<PAGE>
BROWN-FORMAN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Expressed in millions)
July 31, April 30,
1996 1996
---- ----
(Unaudited)
Assets
- ------
Cash and cash equivalents $ 23 $ 54
Accounts receivable, net 246 257
Inventories:
Barreled whisky 167 167
Finished goods 181 169
Work in process 48 59
Raw materials and supplies 43 38
------ ------
Total inventories 439 433
Other current assets 31 24
------ ------
Total current assets 739 768
Property, plant and equipment, net 284 281
Intangible assets, net 258 259
Other assets 73 73
------ ------
Total assets $1,354 $1,381
====== ======
Liabilities
- -----------
Commercial paper $ 50 $ 50
Accounts payable and accrued expenses 196 223
Current portion of long-term debt 6 6
Accrued taxes on income 14 3
Deferred income taxes 21 21
Dividends payable 18 --
------ ------
Total current liabilities 305 303
Long-term debt 187 211
Deferred income taxes 128 127
Postretirement benefits 52 52
Other liabilities and deferred income 51 54
------ ------
Total liabilities 723 747
Stockholders' Equity
- --------------------
Preferred stock 12 12
Common stockholders' equity 619 622
------ ------
Total stockholders' equity 631 634
------ ------
Total liabilities and
stockholders' equity $1,354 $1,381
====== ======
Note: The balance sheet at April 30, 1996 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 millions; amounts in brackets are reductions of cash)
Three Months Ended
July 31,
1996 1995
---- ----
Cash flows from operating activities:
Net income $ 32 $ 32
Adjustments to reconcile net income to net
cash provided by (used for) operations:
Depreciation 10 9
Amortization of intangible assets 2 2
Deferred income taxes 2 6
Other (4) (6)
Changes in assets and liabilities:
Accounts receivable 11 5
Inventories (7) (9)
Other current assets (6) (4)
Accounts payable and accrued expenses (27) (31)
Accrued taxes on income 12 11
---- ----
Cash provided by operating activities 25 15
Cash flows from investing activities:
Additions to property, plant and
equipment, net (12) (14)
Other (1) --
---- ----
Cash used for investing activities (13) (14)
Cash flows from financing activities:
Commercial paper (25) (33)
Proceeds from long-term debt -- 30
Cash dividends paid (18) (17)
---- ----
Cash used for financing activities (43) (20)
---- ----
Net decrease in cash and cash equivalents (31) (19)
Cash and cash equivalents, beginning of period 54 62
---- ----
Cash and cash equivalents, end of period $ 23 $ 43
==== ====
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 1996 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, 1996 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 $86 million and $85 million higher than reported at
July 31, 1996, and April 30, 1996, 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, 1996 annual report to
stockholders. The results of operations for the three months
ended July 31, 1996, are not necessarily indicative of the
operating results for the full year. Included in this
Management's Discussion and Analysis are certain forward-
looking statements reflecting management's expectations. The
accuracy of these forward-looking statements may be affected
significantly by certain risks and uncertainties described
herein and in the company's Annual Report on Form 10-K for the
year ended April 30, 1996.
Results of Operations
- ---------------------
First Quarter Fiscal 1997 Compared to First Quarter Fiscal 1996
- ---------------------------------------------------------------
A summary of operating performance follows (expressed in
millions, except percentage and per share amounts):
THREE MONTHS ENDED
JULY 31, %
1996 1995 CHANGE
---- ---- ------
Net Sales
- ---------
Wines & Spirits $ 324 $ 298 9
Consumer Durables 100 112 (11)
----- -----
Total $ 424 $ 410 3
Operating Income $ 56 $ 57 (2)
- ----------------
Net Income $ 32 $ 32 1
- ----------
Earnings Per Share $0.47 $0.46 1
- ------------------
Effective Tax Rate 38.0% 38.6%
- ------------------
Sales of the company's wines and spirits segment increased
9% for the quarter, led by worldwide sales gains for Jack
Daniel's Tennessee Whiskey. First quarter results were also
aided by sales gains for Brown-Forman's premium wine brands.
Gains within the wines and spirits segment were partially
offset by lower sales of Tropical Freezes. Prior year sales of
Tropical Freezes benefited from high levels of consumer trial
and the establishment of trade inventories during its very
successful national introduction. Revenues from Brown-Forman's
consumer durables segment declined 11% for the quarter,
primarily as a result of lower sales at Lenox Collections, the
company's direct marketing division. Excluding Lenox
Collections, sales at Brown-Forman's consumer durables segment
were flat, as weak sales of china and crystal to department and
specialty stores offset gains in the company's retail outlets.
Operating income gains from increased sales of wines and
spirits were more than offset by investments in newer overseas
markets and by lower sales and margins from the consumer
durables segment.
Net interest expense declined, reflecting lower debt levels
and lower average rates for commercial paper borrowings
compared to fiscal 1996.
<PAGE>
The effective tax rate declined reflecting a lower mix of
earnings from the consumer durables segment. The company
expects the full year tax rate to be slightly above last
year's.
Financial Condition at July 31, 1996 Compared to Financial
- ----------------------------------------------------------
Condition at April 30, 1996
- ---------------------------
The company's activities in the first quarter ended July 31,
1996 resulted in a net decrease in cash and cash equivalents,
using funds to pay down $25 million of outstanding commercial
paper. Cash provided by operating activities was up 62% from
the same period last year due largely to lower accounts
receivable at the consumer durables segment. Additions to
property, plant, and equipment continue to reflect the
company's plans to upgrade and expand production facilities in
the wines and spirits segment. Total net working capital
decreased 7% from April 30, 1996 to $434 million.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- ------ -----------------
Expansion Plus, Inc. v. Brown-Forman Corporation, et al.,
(United States District Court for the Southern District of
Texas, Houston Division, Civil Action No. H-94-3498.)
As previously reported, in 1988, Brown-Forman purchased a start-
up credit card processing business from Expansion Plus, Inc.
("EPI"), which Brown-Forman developed into a much larger
business and sold in 1993 for $31,250,000. Several months
after the sale, EPI claimed that Brown-Forman never acquired
full title to the credit card processing business, was
obligated to return all or part of it to EPI, and that the sale
of the business to a third party represented a conversion of
assets owned by EPI.
In October, 1994, EPI filed a tort action against Brown-Forman
and the purchaser of the business alleging conversion of
property, tortious interference with contractual relationships,
misappropriation of trade secrets and breach of a confidential
relationship and seeking damages of $31,250,000 plus punitive
damages in an amount ten times actual damages.
On May 21, 1996, a Magistrate Judge entered a Memorandum and
Recommendation that all of EPI's tort claims against Brown-
Forman be dismissed. EPI has since filed Objections to the
Magistrate's Recommendation and moved to amend its complaint to
include a breach of contract claim against Brown-Forman. The
District Judge will review and accept, modify or reject the
Recommendations and decide whether to allow EPI to amend its
complaint. The trial, previously scheduled for September,
1996, has been postponed indefinitely.
In the opinion of management, and based upon the advice of
legal counsel, the disposition of this suit will not have a
material adverse effect on the company's consolidated financial
position or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
- ------ ---------------------------------------------------
At the Annual Meeting of Stockholders of the company held July
25, 1996, the following matter was voted upon:
Election of Barry D. Bramley, Geo. Garvin Brown III, Owsley
Brown II, Donald G. Calder, Owsley Brown Frazier, Richard P.
Mayer, Stephen E. O'Neil, William M. Street, and James S.
Welch to serve as directors until the next annual election
of directors, or until a successor has been elected and
qualified.
For Withheld
--- --------
Barry D. Bramley 27,901,447 3,973
Geo. Garvin Brown III 27,901,976 3,444
Owsley Brown II 27,898,151 7,269
Donald G. Calder 27,902,109 3,311
Owsley Brown Frazier 27,902,076 3,344
Richard P. Mayer 27,902,109 3,311
Stephen E. O'Neil 27,901,106 4,314
William M. Street 27,902,009 3,411
James S. Welch 27,901,080 4,340
<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 July 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)
Date: September 5, 1996 By: /s/ Steven B. Ratoff
_____________________________
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 July 31, 1996 Form 10-Q and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> JUL-31-1996
<CASH> 23
<SECURITIES> 0
<RECEIVABLES> 246<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 439
<CURRENT-ASSETS> 739
<PP&E> 544
<DEPRECIATION> 287
<TOTAL-ASSETS> 1,354
<CURRENT-LIABILITIES> 305
<BONDS> 187
<COMMON> 619
0
12
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,354
<SALES> 424
<TOTAL-REVENUES> 424
<CGS> 212<F2>
<TOTAL-COSTS> 212<F2>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4
<INCOME-PRETAX> 52
<INCOME-TAX> 20
<INCOME-CONTINUING> 32
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32
<EPS-PRIMARY> 0.47
<EPS-DILUTED> 0.47
<FN>
<F1>Accounts receivable is shown net of allowance for doubtful accounts.
Allowance for doubtful accounts has not changed materially from the
April 30, 1996 balance.
<F2>Cost of goods sold and total costs include excise taxes of $59 million.
</FN>
</TABLE>
