Securities and exchange commission


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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, 2006

Commission file number 002-26821
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

Title of Each Class on Which Registered

------------------- ----------------------

Class A Common Stock (voting) $0.15 par value New York Stock Exchange
Class B Common Stock (nonvoting) $0.15 par value New York Stock Exchange
Securities registered pursuant to

Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as

defined in Rule 405 of the Securities Act. Yes [X] No [ ]
Indicate by check mark if the registrant is not required to file reports

pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
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. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an

accelerated filer, or a non-accelerated filer. See definition of "accelerated

filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.

(Check one):

Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ]
Indicate by check mark whether the registrant is a shell company (as defined in

Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
The aggregate market value, as of the last business day of the most recently

completed second fiscal quarter, of the voting and nonvoting equity held by

nonaffiliates of the registrant was approximately $3,800,000,000.
The number of shares outstanding for each of the registrant's classes of

Common Stock on May 31, 2006 was:

Class A Common Stock (voting) 56,829,151

Class B Common Stock (nonvoting) 65,874,221
DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's 2006 Annual Report to Stockholders are incorporated

by reference into Parts I, II, and IV of this report. Portions of the Proxy

Statement of Registrant for use in connection with the Annual Meeting of

Stockholders to be held July 27, 2006 are incorporated by reference into Part

III of this report.

PART I

Item 1. Business
Brown-Forman Corporation ("we," "us," or "our" below) 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 the

Commonwealth of Kentucky in 1901.
We primarily manufacture, bottle, import, export, and market a wide variety of

alcoholic beverage brands. We also manufacture and market new and used oak

barrels, and Hartmann Luggage. Our principal beverage brands are:
Jack Daniel's Fetzer

Southern Comfort Bolla

Finlandia Five Rivers

Gentleman Jack Fontana Candida

Jack Daniel's Single Barrel Jekel

Jack Daniel's Ready-to-Drinks Bel Arbor

Canadian Mist Sonoma-Cutrer

Early Times Bonterra

Old Forester Virgin Vines

Pepe Lopez Gala Rouge

Tuaca Sundial

Woodford Reserve Durbanville Hills*

Amarula* Korbel*

Appleton* Mariah*

Don Eduardo* Michel Picard*

Chambord Liqueur**

* Brands represented in the U.S and other select markets by Brown-Forman

** Acquired May 31, 2006

Our primary spirits brand is Jack Daniel's, which is the fourth-largest premium

spirits brand and the largest selling American whiskey brand in the world

according to volume statistics recently published by a leading trade

publication. Our other leading brands are Southern Comfort, the second-largest

selling liqueur in the United States, and Canadian Mist, the third-largest

selling Canadian whisky worldwide, according to the recently published volume

statistics referenced above. Our largest wine brands are Fetzer Vineyards and

Bolla, two of the leading premium wine brands in the United States generally

selling in the $6-9 per bottle price range according to information published by

a leading consumer market research firm. That same firm cites Korbel as the

largest selling premium champagne in the retail channel in the United States. We

believe the statistics used to rank these products are reasonably accurate.
Geographic information about net sales and long-lived assets is in Note 13 of

the Notes to Consolidated Financial Statements on page 64 of our 2006 Annual

Report to Stockholders, which information is incorporated into this report by

reference.
Our strategy is to market high quality products that satisfy the preferences of

consumers of legal drinking age and to support those products with extensive

international, national, and regional marketing programs. These programs are

intended to extend consumer brand recognition and brand loyalty.
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We own numerous valuable trademarks that are essential to our business.

Registrations of trademarks can generally be renewed indefinitely as long as the

trademarks are in use. We have authorized, through licensing arrangements, the

use of some of our trademarks on promotional items for the primary purpose of

enhancing brand awareness.
Customers
In the United States, we sell spirits and wines either through wholesale

distributors or directly to state governments in those states that control

alcohol sales. The contracts that we have with many of our distributors have

formulas which determine reimbursement to distributors if we terminate 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 our ability to terminate distributor contracts. Outside the United

States, we typically distribute our products by selecting the best local

distributor for our brands in each specific market. Our principal export markets

are the United Kingdom, Germany, Spain, Italy, Australia, France, South Africa,

Canada, Japan, and China.
Ingredients and Other Supplies
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. Currently,

none of these raw materials is in short supply, and there are adequate sources

from which they may be obtained.
Due to aging requirements, production of whiskeys is scheduled to meet demand

three to six years in the future. Accordingly, our inventories are larger in

relation to sales and total assets than would be normal for most other

businesses.
The principal raw materials used in the production of wines are grapes and

packaging materials. Grapes are primarily purchased under contracts with

independent growers and, from time to time, are adversely affected by weather

and other forces which may limit production. We believe that our relationships

with our growers are good.
Competition
The industry is highly competitive and there are many brands sold in the

consumer market. Trade information indicates that we are one of the largest wine

and spirit suppliers in the United States in terms of revenues.
Regulatory Environment
The Alcohol and Tobacco Tax and Trade Bureau of the United States Treasury

Department regulates the wine and spirits industry with respect to production,

blending, bottling, sales, advertising and transportation of industry products.

Also, each state regulates advertising, promotion, transportation, sale, and

distribution of such products.
3
Under federal regulations, whiskey must be aged for at least two years to be

designated "straight whiskey." We age our straight whiskeys for a minimum of

three to six 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. We believe we are in compliance with these

regulations.
For information on the effects of compliance with federal, state, and local

environmental regulations, refer to Note 15, "Environmental Matters," on page 64

of our 2006 Annual Report to Stockholders, which information is incorporated

into this report by reference.
Employees
As of April 30, 2006, we employed about 3,750 persons, including approximately

400 employed on a part-time or temporary basis. We believe our employee

relations are good.
Available Information
You may read and copy any materials that we file with the SEC at the SEC's

Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information

on the Public Reference Room may be obtained by calling the SEC at

1-800-SEC-0330. In addition, the SEC maintains an Internet site that contains

reports, proxy and information statements, and other information regarding

issuers that file with the SEC at http://www.sec.gov.
Our Web site address is www.brown-forman.com. Please note that our website

address is provided as an inactive textual reference only. Our annual reports on

Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any

amendments to these reports are available free of charge on our Web site as soon

as reasonably practicable after we electronically file those reports with the

Securities and Exchange Commission. The information provided on our Web site is

not part of this report, and is therefore not incorporated by reference unless

such information is otherwise specifically referenced elsewhere in this report.
On our Web site, we have posted our Corporate Governance Guidelines, our Code of

Conduct that applies to all directors and employees, and our Code of Ethics that

applies specifically to our senior financial officers. We have also posted on

our Web site the charters of our Audit and Compensation Committees. Copies of

these materials are also available free of charge by writing to our Corporate

Secretary, Michael B. Crutcher, 850 Dixie Highway, Louisville, Kentucky 40210 or

e-mailing him at Michael_Crutcher@b-f.com.

Item 1A. Risk Factors
You should carefully consider the following factors that could materially affect

our business, as well as the other information set forth in this report. In

addition, in our periodic filings with the SEC, press releases and other

statements, we discuss estimates and projections regarding our future

performance and business outlook. Such "forward-looking statements", by their

nature, involve known and unknown risks, uncertainties and other factors that in

some cases are out of our control. These factors could cause our actual results

to differ materially from our historical experience or our present expectations

and projections. The following is a non-exclusive discussion of such risks and

uncertainties.
4
OUR BUSINESS MAY BE ADVERSELY AFFECTED BY UNFAVORABLE ECONOMIC CONDITIONS IN THE

UNITED STATES AND ABROAD.
Our business is subject to changes in global economic conditions. The bulk of

our business is in the United States and our business prospects generally depend

heavily on the health of the U.S. economy. Earnings could be adversely affected

by lower consumer confidence and decreased bar, hotel and travel spending

resulting from terrorist attacks and related subsequent events, including the

U.S. response, major natural disasters, widespread outbreak of infectious

diseases such as avian influenza, other hostile acts, retaliation, or threats of

any of these. Earnings could also be hurt by the United States' current war in

Iraq, or if the United States goes to war against another country deemed to be

harboring terrorists or otherwise a threat to U.S. interests.
If global economic conditions deteriorate, or if there is an increase in

anti-American sentiment in the principal countries to which we export our

beverage products, including the United Kingdom, Germany, Italy, Spain,

Australia, France, Poland, China, and Japan, our sales could materially

decrease. The long-term outlook for our beverage business anticipates continued

success of Jack Daniel's Tennessee Whiskey, Southern Comfort, Finlandia Vodka,

and our other core wine and spirits brands. This assumption is based in part on

favorable demographic trends in the United States and many international markets

for the sale of wine and spirits. Current expectations for our global beverage

business may not be met if these demographic trends do not translate into

corresponding sales increases.
OUR INTERNATIONAL OPERATIONS SUBJECT US TO RISKS ASSOCIATED WITH FOREIGN

CURRENCY EXCHANGE RATES.
Sales of our brands in international markets are conducted in local currency.

Thus, profits from our overseas business could be adversely affected if the U.S.

dollar strengthens against other currencies, especially the British Pound, Euro

and the Australian Dollar, because the local currency received from the sale of

our products would translate into fewer U.S. dollars. To the extent we are

unable to effectively manage our exposure to such fluctuations, our financial

results will likely suffer.
RISING ENERGY COSTS COULD AFFECT OUR FINANCIAL RESULTS.
If energy costs continue to rise, our transportation, freight and other

operating costs, such as distilling, will likely increase. We may not be able to

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