INFORMATION REQUIRED IN PROXY
STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities
Filed by the Registrant
x
Filed by a Party other than the Registrant
o
Check the appropriate box:
o
Preliminary
Proxy Statement
x
Definitive
Proxy Statement
o
Definitive
Additional Materials
o
Soliciting
Material under Rule 14a-12
BROWN-FORMAN CORPORATION
Payment of Filing Fee (Check the appropriate box):
| x | No fee required. |
| o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
| (1) | Title of each class of securities to which transaction applies: |
| (2) | Aggregate number of securities to which transaction applies: |
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
| (4) | Proposed maximum aggregate value of transaction: |
| (5) | Total fee paid: |
| o | Fee paid previously with preliminary materials. |
| o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
| (1) | Amount Previously Paid: |
| (2) | Form, Schedule or Registration Statement No.: |
| (3) | Filing Party: |
| (4) | Date Filed: |
June 28, 2002
Dear Brown-Forman Stockholder:
It is my pleasure to invite you to attend our Annual Stockholders Meeting:
|
Thursday, July 25, 2002
9:30 A.M. (Eastern Daylight Time) 626 West Main Louisville, Kentucky |
Please note the new location for this year’s meeting. Brown-Forman has recently renovated the historic 626 West Main Building and I think you will enjoy seeing it. Please park in the garage located at the corner of 7th and Market. As you leave the garage, turn left and go one-half block to Main Street. Turn right, cross the street and you will see ushers for the meeting. Please bring your parking ticket so it can be validated.
I hope to see you on July 25. All Class A Stockholders are urged to complete and return to us the attached Proxy (voting) Card, whether or not you can attend in person. Your vote is very important to us.
| Sincerely, | ||
|
NOTICE OF ANNUAL MEETING OF
Brown-Forman Corporation will hold its annual meeting for holders of our Class A
Common Stock at
626 West Main, Louisville, Kentucky, at 9:30 A.M., Louisville
time (EDT), on Thursday, July 25, 2002
.
We are holding this meeting to:
You can vote at the meeting if you held Class A Common Stock of record on our
books at the close of business on June 17, 2002. Holders of Class B Common Stock
may attend the meeting but may not vote. We will not close the stock transfer
books. Class A stockholders can vote either in person or by proxy, which means
you designate someone else to vote your shares.
For Class A stockholders, whether or not you plan to attend the meeting, PLEASE:
Submitting a proxy will not affect your right to vote your shares if you attend
the meeting in person and decide to vote differently. Only holders of Class A
Common Stock may vote at the meeting. We are not asking for Proxy Cards from
holders of Class B Common Stock.
We enclose a copy of our Annual Report for the fiscal year ended April 30, 2002,
for you to review.
TABLE OF CONTENTS
QUESTIONS AND ANSWERS
[This page intentionally left blank.]
INTRODUCTION
PURPOSE.
The Board of Directors of Brown-Forman Corporation is sending you this
Proxy Statement to solicit proxies for use at the Annual Stockholders Meeting,
which will be held Thursday, July 25, 2002, at 9:30 a.m. Louisville time (EDT)
at 626 West Main, Louisville, Kentucky. The Board requests you to sign and
return the enclosed Proxy Card.
Beginning on June 28, 2002, we will solicit proxies by mail. In addition, our
employees may solicit proxies by mail, phone, fax, the Internet or in person. We
will pay all solicitation costs. We will reimburse banks, brokers, nominees, and
other fiduciaries for their reasonable charges and expenses incurred in
forwarding our proxy materials to their principals.
VOTING STOCK.
We have two classes of common stock, Class A and Class B. Only
holders of Class A Common Stock may vote. As of the close of the record date,
June 17, 2002, we had outstanding 28,988,091 shares of Class A Common Stock.
VOTING RIGHTS.
If you were a Class A stockholder on June 17, 2002, and the books
of our transfer agent reflect your stock ownership, you may cast one vote for
each share recorded in your name. You may vote your shares either in person or
by proxy. To vote by proxy, please mark, date, sign, and mail the Proxy Card
enclosed with this Proxy Statement.
Giving a proxy will not affect your right to vote your shares if you attend the
meeting and want to vote in person. You may revoke a proxy at any time before it
is voted by sending our Secretary written notice of your revocation. We will
vote all shares represented by effective proxies in accordance with the terms
stated in the proxy.
A quorum to conduct business at the meeting consists of a majority of the
outstanding Class A shares. To be elected, a director must receive a majority of
the votes present at a meeting at which there is a quorum. Likewise, a majority
of the shares represented at the meeting must approve any other matters brought
to a vote at the meeting. We will count shares voted as “abstaining” as present
for purposes of determining the number of shares represented at the meeting, but
as votes withheld in the election of a director or on any other matter coming
before the meeting. If a broker holding your shares in a street name indicates
to us on a Proxy Card that he or she lacks discretionary authority to vote your
shares, we will not consider your shares as present or voting for any purpose.
3
ELECTION OF DIRECTORS
At the Annual Meeting, you and our other shareholders will elect ten directors.
All of our directors are standing for re-election. Once elected, a director
holds office until the next annual election of directors or until his or her
successor has been elected and qualified, unless he or she first resigns or
reaches retirement age. The persons named as proxies will vote the enclosed
proxy
FOR
the election of all nominees below, unless you direct them on the
Proxy Card to withhold your vote as to all or some of the nominees. If any
nominee becomes unable to serve before the meeting, the persons named as proxies
may vote for a substitute.
Here are the director nominees, their ages as of April 30, 2002, the years they
began serving as directors, their business experience for the last five years,
and their other directorships:
4
DACE BROWN STUBBS*
, age 55, director since 1999. Private investor.
The Audit Committee monitors and oversees the Company’s internal controls and
the financial reporting process, including recommending to the Board the hiring
of independent accountants. It met three times during fiscal 2002.
The Compensation Committee sets the compensation of our Chairman/CEO and
President and administers short and long term bonus awards for a group of our
most highly paid officers. It met twice in fiscal 2002.
The Board has no standing nominating committee.
DIRECTORS’ MEETINGS.
The Board met seven times during fiscal 2002. Each current
director attended at least 75% of the aggregate number of Board and applicable
committee meetings held in fiscal 2002.
5
STOCK OWNERSHIP
VOTING STOCK OWNED BY “BENEFICIAL OWNERS.”
This table shows each “beneficial
owner” of more than 5% of our Class A Common Stock, our only class of voting
stock, as of April 30, 2002. The Securities and Exchange Commission defines
“beneficial ownership” to include shares over which a person has sole or shared
voting or investment power, as well as all shares underlying options that are
exercisable within sixty days. Under this definition, “beneficial owners” may or
may not receive any economic benefit (such as receiving either dividends or sale
proceeds) from the shares attributed to them.
Using this definition, some shares
shown below are owned by more than one person.
Some “beneficial owners” share
voting and investment powers as members of advisory committees of certain trusts
of which corporate fiduciaries are the trustees. Counting each share only once,
the aggregate number of shares of Class A Common Stock beneficially owned by the
people in this table is 20,917,177 shares, or 72.2% of the outstanding shares of
that class.
6
STOCK OWNED BY DIRECTORS AND EXECUTIVE OFFICERS.
The following table shows the
“beneficial ownership” as of April 30, 2002, by each director nominee, by each
Named Executive Officer (as defined on page 11), and by all directors and
executive officers as a group, of our Class A and Class B Common Stock.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
Executive officers,
directors, and “beneficial owners” of more than 10% of our Class A Common Stock
must file reports of changes in ownership of our stock pursuant to Section 16(a)
of the Securities Exchange Act of 1934. We have reviewed the reports and written
representations we received from these persons. Based solely on this review, we
believe that during fiscal 2002 these persons reported all transactions on a
timely basis.
7
AUDIT COMMITTEE
AUDIT COMMITTEE REPORT
Composition.
The Audit Committee consists of three non-employee directors. In
accordance with the rules of the New York Stock Exchange, the Board of Directors
has determined that each Committee member is independent, financially literate
and has financial management expertise.
Function.
As described more fully in its charter, the Committee’s responsibility
is to monitor and oversee the financial reporting process, the system of
internal controls, the audit process, and the corporation’s program for
compliance with applicable governmental laws and regulations. To place the
Committee’s role in perspective, management is responsible for the Company’s
internal controls, the financial reporting process, and the corporation’s
program for compliance. The external auditors are responsible for performing an
independent audit of the Company’s financial statements in accordance with
generally accepted accounting principles and issuing a report on this. The
Committee reviews the work of management and the external auditors on behalf of
the Board of Directors.
In addition, the Committee reviews reports from the internal audit department of
the Company, which investigates the adequacy of internal financial controls. The
Committee hears reports from the Company’s legal department on compliance with
the Company’s internal Code of Conduct and governmental laws and regulations.
The Committee met three times during the year, during which the committee
members had discussions with management and the external auditors. Management
has represented to the Committee that the Company’s consolidated financial
statements were prepared in accordance with generally accepted accounting
principles. The Committee discussed those statements with management and the
external auditors, including discussions with the external auditors in executive
session with representatives of management excluded.
The Committee discussed with the external auditors matters required to be
discussed by the Statement on Auditing Standards No. 61 (Communication with
Audit Committees), as amended. The external auditors provided to the Committee
the written disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees). The Committee discussed with
the external auditors their independence and ability to conduct the audit.
Auditor Fees.
The following is a summary of fees billed to the Company by PricewaterhouseCoopers
LLP for the fiscal year ended April 30, 2002:
8
All Other Fees included preparation of tax returns for expatriate employees, tax
returns and tax advisory services for foreign subsidiaries, audits of employee
benefit plans, statutory audits where those are required by foreign
jurisdictions and various consulting services.
The Audit Committee has reviewed the non-audit services provided by the outside
auditor and has determined that those services are compatible with the auditor’s
independence.
Conclusion.
Based on the foregoing, we recommended to the Board of Directors
that the Company’s audited financial statements be included in the Company’s
Annual Report on Form 10-K for the fiscal year ending April 30, 2002.
9
STOCKHOLDERS
•
elect a board of ten directors to hold office until the next annual stockholders meeting; and
•
transact any other business appropriate for the meeting.
•
sign and date the enclosed Proxy Card; and
•
return it promptly in the enclosed envelope.
Louisville, Kentucky
June 28, 2002
By Order of the Board of Directors
Michael B. Crutcher, Secretary
QUESTIONS AND ANSWERS
1
INTRODUCTION
3
Purpose
3
Voting Stock
3
Voting Rights
3
ELECTION OF DIRECTORS
4
Committees
5
Directors’ Meetings
5
STOCK OWNERSHIP
6
Voting Stock Owned by “Beneficial Owners”
6
Stock Owned by Directors and Executive Officers
7
Section 16(a) Beneficial Ownership Reporting Compliance
7
AUDIT COMMITTEE
8
Audit Committee Report
8
EXECUTIVE COMPENSATION
10
Compensation Committee Report
10
Summary Compensation Table
12
Option Grants under the Omnibus Compensation Plan
13
Aggregated Option Values at End of Fiscal 2002
13
RETIREMENT PLAN DESCRIPTIONS
14
DIRECTOR COMPENSATION
15
FIVE-YEAR PERFORMANCE GRAPH
16
OTHER INFORMATION
17
Transactions with Management
17
Appointment of Independent Accountants
17
Other Proposed Action
17
Stockholder Proposals for 2003 Annual Meeting
17
Q:
What is the purpose of this Proxy Statement?
A:
By law, we must give our stockholders certain basic information so they
can vote knowledgeably at our annual stockholders meeting.
Q:
Who may vote?
A:
Persons who held our Class A Common Stock as of the close of business
on June 17, 2002. Class B Common stockholders cannot vote.
Q:
What am I voting on?
A:
The election of all members of our Board of Directors. You may also
vote on any other matter that is properly brought before the meeting.
Q:
What is the Proxy Card for?
A:
By completing and signing the Proxy (voting) Card, you authorize the
individuals named on the card to vote your shares for you.
Q:
What if I submit a Proxy Card and then change my mind on how I
want to vote?
A:
No problem. You may revoke your proxy by writing to us or by
attending the meeting and casting your vote in person.
Q:
Who are the nominees for directors?
A:
We have ten directors. All of them are running for re-election. We
describe each director briefly in this Proxy Statement.
Q:
Whom may I call with a question about the Annual Meeting?
A:
For information about your stock ownership or for other stockholder
services, please call Linda Gering, our Stockholder Services Manager, at
502-774-7690. For information about the meeting itself, please call
Michael B. Crutcher, our Corporate Secretary, at 502-774-7631.
This section describes the purpose of this Proxy Statement, who can vote, and
how to vote.
This section gives biographical information about our directors and describes
the committees on which they serve and their attendance at meetings.
JERRY E. ABRAMSON,
age 55, director since 1999. Of Counsel, Frost Brown Todd LLC
since January 1999; Mayor of Louisville, Kentucky (1986 to 1998).
BARRY D. BRAMLEY,
age 64, director since 1996. Non-Executive Chairman, Lenox,
Incorporated (a subsidiary of Brown-Forman) since 1998; Non-Executive
Chairman of Cornwell Parker, PLC, High Wycombe, England (1998 to 2000);
Chairman and Chief Executive Officer of British- American Tobacco Company
Ltd., London, England (1988 to 1996); Director of BAT Industries, PLC,
London, England (1988 to 1996). Other directorships: Anglia Maltings
(Holdings), Ltd.
GEO. GARVIN BROWN III*
, age 58, director since 1971. Chairman of Trans-Tek, Inc. since 1988.
OWSLEY BROWN II*
, age 59, director since 1971. Our Chief Executive Officer since
1993 and our Chairman since 1995; our President from 1987 to 1995. Other
directorships: NACCO Industries, Inc.
DONALD G. CALDER
, age 64, director since 1995. President and CFO, G.L. Ohrstrom & Co., Inc., a
private investment firm, since 1997; Vice President of Ohrstrom & Co. (1996 to 1997); Partner of
predecessor partnership, G.L. Ohrstrom & Co. (1970 to 1996). Chairman and CEO of Harrow
Industries (1997 to 1999). Other directorships: Carlisle Companies Incorporated, Roper
Industries, Inc. and Central Securities Corporation.
OWSLEY BROWN FRAZIER*
, age 66, director since 1964. Our former Vice Chairman (1983 to 2000).
Other directorships: Papa Johns International, Inc.
*
Geo. Garvin Brown III and Dace Brown Stubbs are siblings. Dace Brown
Stubbs and Geo. Garvin Brown III are first cousins of Owsley Brown II
and Owsley Brown Frazier, who are themselves first cousins. Due to
their positions as directors, their family relationships, and their
beneficial ownership of our Class A Common Stock, each may be
considered a “control person” of Brown-Forman.
RICHARD P. MAYER
, age 62, director since 1994. Former Chairman and Chief Executive Officer of
Kraft General Foods North America (now Kraft Foods Inc.) (1989 to 1996).
STEPHEN E. O’NEIL
, age 69, director since 1978. Principal, The O’Neil Group (1991 to present).
Other directorships: Alger American Fund, Inc.; Alger Fund, Inc.; Castle Convertible Fund, Inc.;
NAHC, Inc.; and Spectra Fund, Inc.
WILLIAM M. STREET**
, age 63, director since 1971. Our President since November,
2000; our Vice Chairman from 1987 to 2000; President and Chief Executive
Officer, Brown-Forman Beverages Worldwide (a division of Brown-Forman) since
1994. Other directorships: National City Bank of Kentucky.
COMMITTEES.
The Board has an Audit Committee, which in fiscal 2002 was composed of outside
directors Richard P. Mayer (chairman), Jerry E. Abramson and Stephen E. O’Neil. We also have
a Compensation Committee, which in fiscal 2002 was composed of outside directors Stephen E.
O’Neil (chairman), Richard P. Mayer and Donald G. Calder.
**
Because of Mr. Street’s position as a director and executive
officer, as well as his beneficial ownership of our Class A
Common Stock, he may be considered a “control person” of
Brown-Forman.
This section describes (a) people who own beneficially 5% or more of our voting
stock and (b) how much stock our directors and executive officers own. Under the
SEC’s definition of “beneficial ownership,” some shares are shown as owned by
more than one person and are therefore counted more than once.
*
Less than 1%.
1
Owned by The O’Neil Foundation, of which Mr. O’Neil is President. Mr. O’Neil disclaims beneficial ownership
of these shares.
2
In computing the aggregate number of shares and percentages owned by
all directors and executive officers as a group, we counted each share
only once.
This section is a report from the Audit Committee of the Board of Directors. It
explains the role of the Audit Committee and sets forth the fees paid to our
external auditor.
•
Audit Fees: $570,450.
•
Financial Information Systems Design and Implementation Fees: $0.
•
All Other Fees: $1,256,588.
RICHARD P. MAYER, CHAIRMAN
STEPHEN E. O’NEIL
JERRY E. ABRAMSON
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT
Function and Philosophy.
The Compensation Committee consists of three
non-employee directors. The Committee sets the overall direction for the
Company’s pay programs for all salaried employees: first, to offer sufficient
compensation to attract, motivate and retain high-quality talent; and second, to
tie bonus achievement to the Company’s successful financial performance. The
Committee sets compensation at levels that are somewhat above the mid-market
level for companies of our size to attract and retain the type of executives who
will provide the strong leadership our Company needs for success.
The Compensation Committee, in cooperation with the Management Compensation
Review Committee, applies this philosophy to the Company’s nine senior
executives, who are referred to as Executive Officers. The Executive Officer
group is divided into two subgroups:
The Compensation Committee sets the salaries and sets and administers the short
term and long term bonus for Mr. Brown and Mr. Street. For the seven other
Executive Officers for whom responsibilities are shared between the Compensation
Committee and the Management Compensation Review Committee, the Compensation
Committee acts as the final authority to set and administer the short term and
long term bonus.
The Committee met twice in fiscal 2002 for these purposes.
Mr. Brown and Mr. Street.
The Committee sets the salary and bonus targets based in part on what
the market is paying top executives at surveyed companies. The Committee reviews survey data
compiled by Hay Management Consultants, Hewitt Associates and Towers Perrin. These surveys
include salary and bonus data from such companies as H. J. Heinz, Hershey Foods Corporation,
Fortune Brands, and Wm. Wrigley Corporation.
The compensation mix of Mr. Brown and Mr. Street consists of salary (32%), annual bonus (24%),
and long term compensation (44%). In considering this mix, the Committee takes into account the
considerable personal holdings of Brown-Forman securities by Mr. Brown and Mr. Street. Salaries
are set with respect to the market data. The Committee develops performance targets for annual and
10
long term bonuses based on Business Value Added (BVA), which is the Company’s
after-tax income in excess of our estimate of the Company’s cost of capital.
Long term compensation consists of cash, which is paid based upon reaching BVA
goals over three years, and stock options, which vest after three years and are
exercisable within ten years.
Other Executive Officers.
The Committee sets the short and long term bonuses as
well as bonus performance targets for the Company’s seven other Executive
Officers for fiscal 2002, in each case after reviewing the salary and bonus
recommendations of the Management Compensation Review Committee which were based
on survey data appropriate to these positions.
Compliance with Tax Law Limits on Deductibility of Compensation:
Section 162(m)
of the Internal Revenue Code limits to $1 million the amount of annual
compensation an employer may deduct when paid to a Named Executive Officer
(those Executive Officers shown on the Summary Compensation Table). The law
does, however, allow employers to deduct compensation over $1 million if it is
“performance based” and paid under a formal compensation plan that meets the
Code’s requirements. The Company took appropriate steps in setting goals under
the Company’s Omnibus Compensation Plan to assure the deductibility of all
compensation paid to Named Executive Officers. The Committee expects the Company
to be able to deduct all fiscal 2002 compensation.
Conclusion:
The Committee believes that its overall executive compensation
program has been successful in providing competitive compensation to attract and
retain highly qualified executives, while at the same time encouraging a high
level of performance that creates additional shareholder value.
11
SUMMARY COMPENSATION TABLE
Explanatory Notes:
We award up to 50% of
long term
bonus compensation as stock options, with the
balance in cash to be paid at the end of each three-year performance period (it
will then appear on this table as a long term compensation payout). Stock option
values can increase or decrease; the present values (as of the grant date) of
the stock option awards in the Long Term Compensation Awards column appear in
the table on page 13.
12
OPTION GRANTS UNDER THE OMNIBUS COMPENSATION PLAN
The Omnibus Compensation Plan covers both short term and long term bonuses.
Stock options awarded in fiscal 2002 under this plan are described below.
We grant options with an exercise price of the fair market value of the
underlying stock on the date of grant. Generally, options become exercisable
three years after grant and must be exercised within ten years of grant. This
year, we granted options for approximately 320,000 shares of our stock for long
term bonus awards to management participants, and 8,446 shares in lieu of a cash
signing bonus for Mrs. Wood. As required by the Omnibus Compensation Plan, we
will buy all shares needed to exercise these options, so there will be no
dilution of the equity of existing stockholders. As part of a broad-based
incentive plan, we also granted options for approximately 36,000 shares to
salaried and hourly employees, including Named Executive Officers, who were new
employees of the beverage segment during fiscal 2002. These options were granted
at a premium exercise price and are not exercisable until May 1, 2006. The table
below summarizes the grants to the Named Executive Officers.
Aggregated Option Values at End of Fiscal 2002
The following table summarizes all option grants that have been made to the
Named Executive Officers through and including fiscal 2002.
13
RETIREMENT PLAN DESCRIPTIONS
Our executives participate in several different retirement and savings plans:
(1)
Retirement Plans:
We maintain both tax-qualified retirement plans and
non-qualified supplemental excess retirement plans. Most salaried employees
participate in the Salaried Employees Retirement Plan. This plan provides
monthly retirement benefits based on age at retirement, years of service and the
average of the five highest consecutive years’ compensation during the final ten
years of employment. Retirement benefits are not offset by Social Security
benefits and are normally payable at age 65. A participant’s interest in plan
benefits vests after five years of service. The following table shows the
estimated annual benefits (straight life annuity) payable upon retirement at
normal retirement age to participants at specified levels of compensation and
years of service:
For example, an executive retiring at age 65 with 10 years of service whose
average annual compensation for the five highest of the executive’s ten years of
service was $400,000, would receive an estimated $68,225 annually for the
remainder of the executive’s life.
Federal tax law limits the benefits that we might otherwise pay to key employees
under “qualified” plans such as the Salaried Employees Retirement Plan.
Therefore, for certain key employees, we also maintain a non-qualified
Supplemental Excess Retirement Plan (SERP). The SERP provides retirement
benefits to make up the difference between a participant’s accrued benefit
calculated under the Salaried Employees Retirement Plan and the ceiling imposed
by federal tax law. SERP participants may choose to get a discounted current
cash payment instead of a SERP retirement benefit. The SERP also provides
supplemental retirement benefits for certain key employees who join us in
mid-career, subject to special vesting requirements.
For the Named Executive Officers, covered compensation for fiscal 2002 for these
plans and service credited as of April 30, 2002, were as follows: Owsley Brown
II, $1,554,673 and 30 years; William M. Street, $1,107,071 and 30 years; Stanley
A. Krangel, $700,195 and 7 years; Michael B. Crutcher, $530,711 and 13 years;
and Phoebe A. Wood, $482,692 and 1 year.
(2)
Savings Plan:
Subject to a maximum the IRS sets annually ($11,000 for
calendar 2002), most participants in our Savings Plan may contribute between 1%
and 50% of their compensation to their Savings Plan accounts. Our match of
participants’ contributions is currently 4.25% (on the first 5% of the
employee’s contribution), and vests fully after four years of service.
14
This section is a report from the Compensation Committee of the Board of
Directors. The report explains our compensation philosophy, how compensation
decisions are made for our most senior executives, and how we comply with
Section 162(m) of the Internal Revenue Code (which governs our ability to deduct
the compensation of our most highly paid officers).
•
the Chairman/CEO Owsley Brown II and President William M. Street, and
•
seven other Executive Officers.
STEPHEN E. O’NEIL, Chairman
RICHARD P. MAYER
DONALD G. CALDER
The next section contains charts that show the amount of compensation earned by
our Named Executive Officers.
Annual
Long Term
Compensation
Compensation
Awards:
Payouts:
Class B
Long Term
All Other
Fiscal Year
Shares
Incentive
Compen-
Ended
Salary
Bonus (1)
Underlying
Payments(3)
sation(4)
Name and Principal Positions
April 30,
($)
($)
Options (#)
($)
($)
2002
867,973
0
(2)
31,263
501,404
12,285
2001
826,661
686,700
39,542
446,827
13,485
2000
779,021
792,000
27,557
415,846
12,960
2002
617,225
212,895
(2)
11,582
331,505
12,285
2001
570,178
489,846
27,229
290,325
13,417
2000
542,390
564,960
18,321
531,522
12,926
2002
412,500
0
1,705
837,500
8,296
2001
407,125
287,696
2,323
1,041,667
8,085
2000
387,000
253,703
1,848
193,692
7,710
2002
354,200
134,399
3,862
360,018
10,658
2001
333,950
176,511
4,850
189,098
11,073
2000
318,881
181,404
3,575
204,593
10,392
2002
435,521
150,543
17,337
n/a
46,887
2001
99,034
47,171
n/a
n/a
9,356
2000
n/a
n/a
n/a
n/a
n/a
(1)
Represents cash payments under the annual incentive plan.
(2)
Our annual bonus plans reward growth over the prior year. At the corporate
level there was no such growth; therefore, neither Mr. Brown nor Mr. Street
received an annual bonus for their corporate roles. However, because Mr.
Street devotes at least half of his time as CEO of the beverage segment, he
received a portion of his bonus for the growth of that unit during a
difficult fiscal 2002.
(3)
Represents cash payments under the long term incentive plan, and value
realized by exercise of stock options.
(4)
Represents our contributions to the
Savings Plan, our payment of group term life insurance premiums on behalf of the
Named Executive Officers, and for Mrs. Wood, moving expenses.
*
less than 1%
1
We used the Black-Scholes option pricing model to determine present
value. We assumed a risk-free interest rate of 4.9% and option life of
six years (to allow for voluntary early exercises and exercises that
may accelerate as a result of disability, termination, retirement, or
death). We also made stock price volatility and yield assumptions for
grants as follows: 29% and 1.9% respectively for grants at $68.33 and
$100.00; and 28% and 2.0% respectively for the grant at $64.65.
Number of
shares
Value
Number of shares underlying
Value of unexercised options at end of
acquired in
realized in
unexercised options
fiscal year *
fiscal 2002
fiscal 2002
by option
by option
Exercisable
Exercisable
Name
exercise
exercise
May 1, 2002
Unexercisable
May 1, 2002
Unexercisable
0
0
110,118
71,105
$
2,977,191
$
1,435,990
0
0
42,407
39,111
867,136
886,492
0
0
7,399
4,028
191,280
83,007
3,180
$
119,081
11,306
9,012
247,103
176,413
0
0
0
17,337
0
207,009
*
This value is the total difference between the outstanding options’
exercise price and $78.62, the closing price of our Class B Common
Stock on April 30, 2002.
This section describes retirement and savings plans for our executives.
DIRECTOR COMPENSATION
We do not pay our two employee directors (Mr. Brown and Mr. Street) additional
compensation for serving on our Board or its committees. We compensate our
directors who are not employees at an annual rate of $25,000, payable in equal
periodic installments, plus $2,000 per Board meeting and $2,000 per committee
meeting attended; committee chairmen receive an additional $1,000 for chairing
committee meetings. Directors may elect in advance of their one year term to
receive their retainer (but not meeting fees) in the form of an equivalent value
of stock options issued at the start of their terms. In addition, under the
Non-Employee Director Compensation Plan, each director who is not an employee
received options for $25,000 worth of Class B Common Stock (1,292 options with a
per share exercise price of $68.33 each).
1
We reimburse all directors for
reasonable and necessary expenses they incur in performing their duties as
directors, and we provide an additional travel allowance to directors who must
travel to Board meetings from outside the United States.
15
This section describes how we compensate our directors.
1
The present value of the options was determined using the Black-Scholes model described on page 13.
FIVE-YEAR PERFORMANCE GRAPH
This graph compares the cumulative total stockholder return on our Class B
Common Stock against four indexes which include that stock: the Standard &
Poor’s 500 Stock Index, the Dow Jones Consumer Non-Cyclical Index (110
companies) and the Dow Jones Food and Beverage Makers (38 companies). As a
diversified producer of both beverage alcohol products and consumer durables
including china, crystal, luggage, and silverware, our business does not fit
easily into specific industry indexes. We included the Dow Jones Consumer
Non-Cyclical Index as a diversified index, even though portions of our business
are cyclical. The Dow Jones Food and Beverage index provides you with the
opportunity to compare our performance against the performance of other
producers of consumer branded products (e.g., Campbell Soup, Hershey Foods
Corp., PepsiCo). Overall, we believe it is best to compare the cumulative total
stockholder return on our Class B Common Stock not to a single index, but rather
to trends shown by a review of several indexes.
These numbers assume that $100 was invested in our Class B stock and in each
index on April 30, 1997, and that all quarterly dividends were reinvested at the
average of the closing stock prices at the beginning and end of the quarter. The
cumulative returns shown on the graph represent the value that these investments
would have had on April 30 in the years since 1997.
16
This chart shows how Brown-Forman Class B Common Stock has performed against
four stock indexes over the last five years.
OTHER INFORMATION
TRANSACTIONS WITH MANAGEMENT
Jerry E. Abramson is Of Counsel with the Louisville law firm of Frost Brown Todd
LLC. We used this firm’s services in fiscal 2002 and expect to use this firm’s
services again in fiscal 2003.
Mr. Barry D. Bramley receives compensation for serving as the non-executive
Chairman of the Board of Directors of Lenox, Incorporated. As Chairman, Mr.
Bramley received an annualized retainer of $230,000 paid in monthly installments
during fiscal 2002, a long-term performance based bonus of $500,000 paid at the
beginning of fiscal 2002 in respect of prior period performance, as well as
reimbursement for all reasonable and necessary expenses incurred in performing
the duties of Chairman.
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Our Board has appointed PricewaterhouseCoopers, LLP as the independent certified
public accountants to audit our consolidated financial statements for the fiscal
year ending April 30, 2003. Through its predecessor, Coopers & Lybrand L.L.P.,
PricewaterhouseCoopers, LLP has served us in this capacity continuously since
1933. We know of no direct or material indirect financial interest that
PricewaterhouseCoopers, LLP has in us or any of our subsidiaries, or of any
connection with us or any of our subsidiaries by PricewaterhouseCoopers, LLP in
the capacity of promoter, underwriter, voting trustee, director, officer, or
employee.
A PricewaterhouseCoopers, LLP representative will attend the annual meeting,
will be given the opportunity to make a statement if he wants to, and will be
available to respond to appropriate questions.
OTHER PROPOSED ACTION
As of June 28, 2002, we know of no business to come before the meeting other
than the election of directors. If any other business should properly be
presented to the meeting, however, the proxies will be voted in accordance with
the judgment of the persons holding them.
STOCKHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
If you have a proposal you want to be considered at the 2003 Annual Meeting of
Stockholders and to be included in the proxy materials for that meeting, we must
receive it in writing by March 2, 2003.
17
PROXY
BROWN-FORMAN CORPORATION
THE UNDERSIGNED hereby appoint(s) Owsley Brown II, Michael B. Crutcher,
and William M. Street, and each of them attorneys and proxies, with power of
substitution, to vote all of the shares of Class A Common Stock of Brown-Forman
Corporation standing of record in the name of the undersigned at the close of
business on June 17, 2002, at the Annual Meeting of Stockholders of the
Corporation, to be held on July 25, 2002, and at all adjourned sessions thereof,
in accordance with the Notice and the Proxy Statement received, for the election
of directors of the Corporation, and upon such other matters as may properly
come before the meeting.
You are encouraged to specify your choices by marking the appropriate boxes, SEE
REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance
with the Board of Directors’ recommendations. The Proxies cannot vote your
shares unless you sign and return this card.
This proxy when properly executed will be voted in the manner directed below by
the undersigned stockholder(s). If no direction is given, this proxy will be
voted FOR the election of the directors named.
*For all nominee(s), except vote withheld from the following:
NOTE: Please mark, sign, date and return the proxy card promptly using the enclosed envelope. This proxy must be
signed exactly as the name or names appear above. If
you are signing as a trustee, executor, etc., please so indicate.
This section sets out other information you should know before you cast your
vote.
By Order of the Board of Directors
MICHAEL B. CRUTCHER
Secretary
Louisville, Kentucky
June 28, 2002
This Proxy Solicited on Behalf of the Board of Directors.
For Use by Holders of Shares of Class A Common Stock
Annual Stockholders’ Meeting, July 25, 2002
Please mark your votes
as in this example
FOR*
WITHHELD
1.
Election of
Directors
(see reverse)
2.
In their discretion, the Proxies
are authorized to vote upon such
other business as may properly come
before the meeting.
Change of Address
on Reverse Side
SIGNATURE(S)
DATE:
,2002
